There are a lot of stablecoins on the crypto market, but not all of them are actually stable and backed by real assets. Binance USD (USD) takes an honorable place in the ratings of the most popular cryptocurrencies: this is the most capitalized stablecoin, the issuer of which is the crypto exchange. We will tell you how BUSD works, why it is the safest stablecoin and how it differs from analogues.
What is BUSD
Binance USD (BUSD) is the stablecoin of Binance, the major crypto exchange in terms of trading volume. It is equal to the U.S. dollar in 1:1 ratio, so 1 BUSD costs $1. The project was launched in September 2019.
BUSD seems to be the safest stablecoin. It is approved by the NY Department of Financial Services (NYDFS). BUSD is subject to state banking law. Accordingly, the issuer of the coin cannot be subject to the standard bankruptcy procedure in case of insolvency. Instead, assets that reflect the value of BUSD in the treasury will be transferred to stablecoin holders. Such a scheme, according to representatives of the crypto exchange, makes Binance USD one of the safest stablecoins on the market.
The BUSD is issued by the regulated infrastructure blockchain platform Paxos Trust Company. The company regularly publishes stablecoin collateral reports. Binance, in turn, took responsibility for the branding issues.
BUSD holders have a number of benefits while working on Binance. Here are some of them:
🕳️ zero maker fee (a maker is a market participant who trades an asset in predetermined price and volume ranges to maintain the stability of demand in the markets) for all trading pairs with Binance USD;
💰 up to 10% annually in the Binance Earn earnings program;
🧑🌾 earning from new tokens farming on the Binance Launchpad, a platform for launching crypto startups;
📈 expanded access to the wide range of tools for margin and futures trading on Binance Futures.
Also, stablecoin owners can earn money by blocking coins in liquidity pools.
BUSD on the market
BUSD reached the top 10 most capitalized cryptocurrencies in May 2022. Binance stablecoin took the place of another token – TerraUSD (UST) of the Terra crypto project. In May 2022, it got depegged and dropped to $0. Amid the collapse of Terra, BUSD leaked into the top 10.
BUSD is among the top 10 most capitalized cryptocurrencies in a screenshot from May and November 4, 2022. Source: CoinMarketCap.
TerraUSD used to be the most successful decentralized (algorithmic) stablecoin. Its scheme implied automatic adjustment of the stablecoin rate by algorithms, smart contracts and users themselves. After the Terra collapse, the top 10 was «occupied» by centralized stablecoins (coins run by companies).
In September 2022, the crypto exchange strengthened the BUSD position on the market through the forced conversion of USDC, USDP, and TUSD stablecoins to Binance USD. The decision, according to the company representatives, «will increase liquidity and capital efficiency for users». Also, Binance allowed that in the near future it may take place the conversion of the most capitalized stablecoin Tether into the BUSD.
BUSD rate stabilization mechanism
The Binance USD keeps the peg balanced using arbitrage, that is, the difference in price that motivates BUSD owners to buy or sell coins. It means that BUSD now always costs 1 dollar, but it fixes quickly, because when the rate rises above $1, market participants starts to sell BUSD to earn money. For example, Binance USD rose up to $1.10. In this case, you can earn 10 cents by selling your stablecoin. The more BUSD sold, the higher the income. The pressure from cryptocurrency sellers helps push the rate back to $1.
Binance USD chart. Source: CoinMarketCap.
When stablecoin falls under the $1, arbitrageurs can receive income from a profitable purchase of a coin. For example, the BUSD fell up to $0.9. John with a $10 budget noticed that. It seems that he can buy 11 BUSD and sell them for $11 after the rate stabilization. John’s total income is going to be $1. Buyers' demand for BUSD during the stablecoin depeg, with the price falling under $1, helps to bring it back to the original price settings.
You can find three BUSD standards on the market: ERC-20, BEP-2, and BEP-20. The second and third are associated with the launch of the Binance blockchain. Qualitatively, the standards differ little from each other, but when buying or transferring coins, it is important to understand in which network they work. Here is the cheat sheet:
🔗 BUSD ERC-20 is the Ethereum blockchain’s Binance stablecoin standard;
🔗 BUSD BEP-2 is the BNB Beacon Chain (former Binance Chain) stablecoin standard;
🔗 BUSD BEP-20 is the BNB Smart Chain (former Binance Smart Chain (BSC)) stablecoin standard.
We prepared an instruction for you on how to create a BUSD (BEP-20) wallet. Please make sure you follow it when registering a wallet for the first time.
What is BUSD based on
In the early documents of the crypto exchange, you can find out that BUSD is backed with dollars, and its amount mirrors the number of existing coins. By 2022, the description of the collateral supply has changed. Binance documents now state that the stablecoin is «backed by cash and cash equivalents, including US Treasury bills with a maturity of less than 90 days and overnight loans secured only by US Treasury securities».
BUSD VS other top stablecoins comparison
Despite that Tether outperforms Binance Coin and USD Coin in terms of the trading pairs’ amount and adoption, while BUSD and USDC bypass USDT in terms of security. Binance USD, in turn, wins USD Coin because of its parent company's extensive ecosystem that gives a lot of nice bonuses, which we have already mentioned above.
How to buy BUSD
Binance USD stablecoin is available on many popular platforms, but not all of them offer a purchase for national currency, at a favorable rate and without hidden fees. One of the most profitable choices for buying Binance USD is the time-tested itez platform.
Itez is a licensed crypto exchange with a favorable exchange rate and a user–friendly interface that allows you to buy cryptocurrency for fiat from a bank card. The platform provides high transaction speed and ultimate security.
On itez it is possible to pay for crypto with 30+ national currencies: you can buy USDT with Singapore Dollar, Swedish Krona as well as with the US Dollars, Euros, Vietnamese won, Indian rupee. The service works with other popular cryptocurrencies: BNB, TON, bitcoin, Ethereum, Tether, Matic, Tron, Ever.
How to get free BUSD
You can also get free Binance stablecoins using faucets, the platform that pays you for simple actions, such as captchas. Here are some websites:
Besides you can get free BUSD through the Binance contests. Here is the one run in august-september 2022. You can follow Binance's competitions through Twitter.
The next way of getting free BUSD is the participation in the airdrops and competitions of other projects. It doesn’t matter what currency you won as you can easily exchange it for BUSD. And don’t forget that the best rates are available on itez.
How to spend Binance USD
You can purchase almost everything with BUSD, from clothes and food, to phones and airline tickets:
🎁 To do that you can use Binance USD stablecoins to buy a Bitpay gift card and use it as a payment tool in a wide range of stores, including Adidas, Best Buy, and Clark’s.
👛 You can pay with BUSD directly from your crypto wallet. For instance, the function is available on the Travala travel platform. The service offers air tickets, estate rentals, and leisure activities.
💳 Also you can pay with BUSD through the fiat-crypto Binance card issued by Visa. It is really convenient as the system converts stablecoins to local fiat at the time of payment. Binance card payments are supported by over 60,000 Visa merchants.
📱 Another way to pay for goods and services with BUSD is through the contactless payment system Binance Pay which works the same way as the usual Apple Pay and Google Pay.
Recently, we published a detailed article on how to use cryptocurrency in everyday life. You may like to read it: there you will find even more ways to spend BUSD and other coins online and offline.
Is BUSD a good investment?
The BUSD future depends on the parent company’s success. As long as Binance actively develops services and tools that stablecoin can be a part of, presumably, its popularity will continue to grow, and now we do not see any obstacles to this.
BUSD seems stronger than its closest neighbors due to the broad parent company ecosystem. At the same time, Binance looks safer than its main competitor, Tether, as it is approved by the NY Department of Financial Services (NYDFS) and it is subject to state banking law, according to which the issuer cannot be subject to the standard bankruptcy procedure.
BUSD stablecoin can be used for a variety of purposes – both for everyday payments and for wallet diversification. And you can buy BUSD with a regular bank card for fiat at a favorable rate using itez service.
This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.