Crypto Altcoin BNB smokes Bitcoin and Ether with 1,300 per cent gain in 2021 Image Credit: Reuters

This year, the old guard of cryptocurrencies lost ground to tokens with greater returns. Researchers predict the trend may continue.

Among the three largest digital tokens by market value, Binance Coin, or BNB, significantly outperformed its two larger rivals Bitcoin and Ether. The coin - issued by global crypto exchange platform Binance - gained roughly 1,300 per cent in 2021. By comparison, market leader Bitcoin increased 65 per cent while Ether, the second-biggest token, rose 408 per cent.

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Market leader Bitcoin increased 65 per cent in 2021 while Ether, the second-biggest token, rose 408 per cent.

BNB is used widely on Binance, the world's biggest crypto exchange by volume. It is also the native currency of Binance Smart Chain, a blockchain platform that supports smart contracts for use in decentralised finance (DeFi) and other applications.

DeFi offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks, but instead uses smart contracts on a blockchain. So with BSC gaining adherents as a challenger to the Ethereum blockchain, that's helped fuel gains in the BNB token.

What is Binance coin BNB used for? Is it cheaper?
The coin is used as a utility token for the Binance exchange and allows users to pay for transactions and trading fees at a lower rate than they would be with other tokens. Binance uses the process of token 'burns', meaning they use the profit from token sales to repurchase more BNB and then burn (destroy) them.

It supports trading in more than 500 coins, including Bitcoin, Ethereum, Litecoin, and its own native BNB tokens. Although US-based users will pay slightly more on Binance, it's still much cheaper than using rival global cryptocurrency exchange platform Coinbase.

On average, you'll pay 0.50 per cent per Coinbase transaction plus extra convenience charges based on your payment method, so you might pay up to 4 per cent per transaction.

Other alternative coins, or 'Altcoins', saw major gains in 2021, benefiting from an explosion in investor interest for digital assets and an expansion of the crypto ecosystem. Solana and Fantom, coins connected with other blockchain platforms that support smart contracts, outpaced Binance Coin's returns, for instance.

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While Bitcoin showed strength in 2021, analysts have seen a constant stream of capital trickling down into Altcoins. The firm's analysts predict the strongest momentum in tokens related to the metaverse and GameFi, along with 'ETH-killers' targeting Ethereum.

In a simple way, we can define GameFi as the combination of video games (Gaming) and decentralised finance (DeFi). The technology used for this type of video game is blockchain technology, which allows players to be the sole and verified owners of the virtual elements of the game.

'ETH-killers'? The past year brought astronomical gains for the likes of Solana, Polygon, Terra, Fantom and Avalanche, which ate up half the slots in the top 10. These up-and-coming blockchains are commonly known as 'Ethereum killers', since they represent competition for the market leader.

Binance Coin BNB to overtake Ethereum in 2022?

Latest analysis on the prospects of Binance Coin BNB prices in 2022, indicate that while key stock benchmarks worldwide are trading near its all-time high, Binance coin BNB has plunged about 16 per cent over the last 30 days due to a sudden decline in Bitcoin prices.

Even after the drop, the BNB price is 1000 per cent up over the previous 354 days. Launched only a year ago, BNB's Binance Smart Chain is compatible with the Ethereum virtual machine. Binance chain transaction fee is much lower compared to the Ethereum chain.

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If these early-stage projects continue the initial success, then Binance coin BNB might soon overtake the Ethereum chain in total transactions.

If these early-stage projects continue the initial success, then Binance coin BNB and BSC might soon overtake the Ethereum chain in total transactions executing daily on its blockchain. Currently, each block on the Binance chain is confirmed in approximately 3 seconds.

In the past 24 Hours, more than 7 million transactions were executed on the Binance chain. The short terms prediction for BNB looks positive. The short-term indicators suggest a status of equilibrium between the forces that push the price of BNB up or down - so prices are seen steadying in the months to come.

Research further shows that Binance coin BNB price could first rally to $570-$575 (Dh2,093 to Dh2,111) and then rise to $620 (Dh2,277). However, prices are expected to average at at $500 (Dh1,836) for BNB.

If the price breaks above $575 (Dh2,111), BNB could first rally to $617 (Dh2,266) and then to range between $668.40 (Dh2,455) to $690.50 (Dh2,536.18), which will mean that the correction may be over for the significant gains BNB price made this year.

However, not all analysts share the same optimism. According to the website CryptoPredictions.com, Binance Coin’s rally is coming to a halt and will start to give negative returns and, hence, erode investors' wealth for the entire year of 2022.

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Is Binance Coin safe to invest in 2022?

Is Binance Coin safe to invest in 2022?

The reason why the price of Binance Coin BNB has soared in popularity due to Ethereum's high fees, but is Binance Coin a safe asset to invest in?

Binance has made huge strides in catching up with Ethereum in terms of trading volume. They also both have extremely similar applications built on top of them like decentralised exchanges and lending and borrowing platforms.

Evaulating crypto-assets for their quality as an investment opportunity can be a tough exercise. With something like Bitcoin or even Ethereum, it is easier to place value when analyzing their decentralisation.

Bitcoin, for example, has a high quantity of geographically distributed nodes and miners and has survived over 11 years of ups and downs. With Bitcoin, you can know with a high degree of certainty that no sole company, government, group or individual has control. Instead, the collective of its users determines its future, meaning that a free and open market only determines its price.

While Ethereum has half as many nodes as Bitcoin does, it is still orders of magnitude more distributed than Binance Coin. If you are interested in speculation and trying to make money, perhaps Binance Coin could be an opportunity as more and more leave Ethereum to search for cheaper transactions. If you are interested in building systems without central control, then an investment in Binance Coin would be adverse to that cause.

- With inputs from Bloomberg