BNB
Changpeng Zhao: A Career Built in Exchanges
Before Binance, Changpeng Zhao — known universally as CZ — had spent years working inside the financial technology industry in roles that gave him direct exposure to how trading infrastructure operated. He worked at the Tokyo Stock Exchange building trading systems. He built high-frequency trading software for Bloomberg. He co-founded Fusion Systems, a company that built high-frequency trading infrastructure for brokerages in Shanghai.
In 2013, CZ encountered Bitcoin. The story he has told publicly involves selling his apartment to buy Bitcoin at around $600 per coin — a decision that reflected either extraordinary conviction or extraordinary risk tolerance, depending on how one views it. He then joined Blockchain.info as Head of Development, worked briefly at OKCoin, and left after philosophical differences about the exchange's direction.
By 2017, CZ was well-positioned to understand what a cryptocurrency exchange needed at the technical level — and what the existing exchanges were doing wrong. The 2017 bull market was bringing millions of new users into crypto who found existing exchanges slow, expensive, and poorly designed. CZ saw a gap.
The 2017 ICO and Binance's Launch
Raising $15 Million in a Matter of Minutes
In July 2017, Binance conducted an Initial Coin Offering for its BNB token. The ICO raised approximately $15 million — a sum that was large for the time but modest compared to some of the more extravagant fundraises happening in the same bull market cycle. The whitepaper was direct: BNB was a utility token that would power Binance's planned exchange, offering trading fee discounts to holders.
The discount structure was designed as a user acquisition tool. In the first year of the exchange's operation, BNB holders paying trading fees in BNB would receive a 50% discount. The discount stepped down in subsequent years — 25%, then 12.5%, then 6.25% — before disappearing entirely in the fifth year. This declining incentive structure was intended to drive early adoption while gradually transitioning users to intrinsic use cases for the token.
Binance the exchange launched on July 14, 2017. Within months, it had become one of the world's largest cryptocurrency exchanges by trading volume. The combination of a user-friendly interface, a wide selection of trading pairs, relatively low fees, and a team that responded rapidly to user feedback drove explosive growth during the 2017 bull market. By early 2018, Binance was reportedly generating more profit than Deutsche Bank.
Regulatory Pressure and Global Nomadism
Moving Headquarters
Binance's early legal domicile was in China, but the Chinese government's September 2017 ban on ICOs and cryptocurrency exchanges forced a rapid relocation. The company moved its headquarters to Japan, then Malta (which marketed itself as a "blockchain island" with crypto-friendly regulation), and subsequently maintained a deliberately ambiguous corporate structure spread across multiple jurisdictions.
This regulatory agility — or evasiveness, depending on one's perspective — allowed Binance to operate in markets before local regulatory frameworks caught up. It also eventually attracted significant regulatory scrutiny. Various jurisdictions issued warnings or restrictions on Binance's operations, and in 2023, Binance and CZ reached a landmark settlement with the US Department of Justice, pleading guilty to anti-money laundering violations and CZ agreeing to step down as CEO. The settlement included $4.3 billion in fines — one of the largest in financial history.
From Exchange to Ecosystem: Binance Chain and BSC
Building a Blockchain
By 2019, Binance had grown large enough to consider building its own blockchain infrastructure rather than relying on existing networks. The Binance Chain mainnet launched in April 2019, introducing a blockchain designed specifically for high-performance token trading. BNB became the native currency of Binance Chain, and Binance DEX — a decentralized exchange built into the chain — was launched alongside it.
Binance Chain was fast and cheap, but it sacrificed programmability for performance. It could not run arbitrary smart contracts. Developers wanting to build decentralized applications on Binance-adjacent infrastructure were out of luck.
The BSC Launch and Dual-Chain Architecture
In September 2020, Binance launched Binance Smart Chain (BSC) — an entirely separate blockchain designed to run in parallel with Binance Chain while supporting full EVM (Ethereum Virtual Machine) compatibility. The dual-chain architecture allowed BNB to flow between the two chains through a bridge mechanism: Binance Chain handled native token issuance and trading, while BSC handled smart contract execution.
The EVM compatibility was a deliberate strategic choice. By making BSC compatible with Ethereum's tooling, programming language (Solidity), and existing smart contract standards, Binance made it trivially easy for Ethereum developers to deploy their applications on BSC. Projects that faced high gas fees on Ethereum — which became severe during the 2020-2021 DeFi boom — could deploy identical code on BSC for a fraction of the cost.
The result was an explosion of BSC-based applications. PancakeSwap (a Uniswap-equivalent DEX), Venus Protocol (a Compound-equivalent lending platform), and dozens of other DeFi protocols launched on BSC within months. Daily transaction counts on BSC briefly exceeded Ethereum.
validator-model-centralization-tradeoffs">The Validator Model: Centralization Tradeoffs
BSC used a consensus mechanism called Proof of Staked Authority (PoSA), which combined staking (requiring validators to lock up BNB) with a limited validator set. Rather than thousands of validators like Ethereum's proof of stake system, BSC operated with 21 active validators at any given time.
The small validator set enabled the high throughput and low latency that made BSC attractive. It also meant that the network was substantially more centralized than its competitors. Most of the validators were entities with close relationships to Binance. Critics pointed out that Binance could theoretically influence BSC's validator set in ways that would be impossible on truly decentralized networks.
This tradeoff — performance and cost in exchange for decentralization — was acceptable to many users who prioritized cheap transactions over trustlessness. It was not acceptable to users whose primary criterion for using a blockchain was its resistance to censorship or control by any single party.
The BNB Token Burns
Deflationary Mechanism
One of the more sophisticated tokenomics features of BNB was the quarterly token burn program. Binance committed to using 20% of its quarterly profits to buy BNB on the open market and permanently destroy those tokens — reducing the circulating supply. The burns continued until 50% of the original 200 million BNB supply had been burned.
The burn mechanism served multiple purposes. It created a direct link between Binance's business success and BNB's supply, meaning that as the exchange became more profitable, more BNB was removed from circulation. This scarcity mechanism gave long-term BNB holders an economic interest in Binance's continued success that went beyond fee discounts.
Later, Binance introduced a real-time burn mechanism based on gas consumption on BSC — similar to Ethereum's EIP-1559 — that automatically burned BNB with each transaction on the chain. This merged the deflationary model with BSC's growing usage, creating a second vector through which BNB supply decreased over time.
BNB Chain: Rebranding and Evolution
In 2022, Binance rebranded the entire ecosystem. Binance Chain became BNB Beacon Chain, Binance Smart Chain became BNB Smart Chain, and the combined system was called BNB Chain. BNB itself was officially renamed from "Binance Coin" to "Build and Build" — an abbreviation that somewhat strained credulity but reflected a desire to position BNB as an ecosystem asset rather than simply an exchange token.
The rebranding coincided with broader efforts to decentralize BSC's governance and expand its validator set, responding to criticism about centralization. Whether these changes represented genuine decentralization progress or cosmetic adjustments remained a subject of debate, but they reflected a clear awareness that centralization risk was BNB Chain's most persistent vulnerability in the eyes of sophisticated users.
From a $15 million ICO in 2017 to one of the world's largest crypto ecosystems within five years, the Binance story demonstrates both the transformative potential of well-executed exchange business models and the regulatory and philosophical tensions that arise when a private company builds infrastructure that serves as public financial utility.