Some tech enthusiasts think that cryptocurrencies are the money of the future. True, cryptocurrencies have several advantages over fiat money and bank transactions. However, price volatility is one of the critical problems that hamper the mass adoption of these digital coins.
Usually, the price of a cryptocurrency can vary widely within a few hours or even within a few minutes. Such significant fluctuations are not practical to use digital coins for everyday payments such as BUSD Cryptocurrency.
The so-called ‘stablecoins’ have been created to tackle the aforementioned problem. A stablecoin is a cryptocurrency with a stable price. This stability is achieved by pegging the stablecoin’s price to the value of a stable asset like a fiat currency like the American dollar (USD) or a commodity like gold or silver. Binance USD (BUSD) is a dollar-backed stablecoin issued by Binance, one of the most popular centralized exchanges worldwide.
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The conversion rate between the USD and BUSD is 1:1. Since BUSD is a cryptocurrency, you can easily convert BUSD to ETH, BTC, and practically any other digital coin or token. Many crypto traders and investors use this digital asset to protect their investments and profits from volatility. However, other stablecoins are available, and some are backed by USD. What’s more, other stablecoins are entirely decentralized.
So, is it convenient to use BUSD for your crypto transactions? Or should you opt for a different stablecoin? Please find the answer in the following review.
Binance USD Overview
Binance USD is an ERC-20 token running on the Ethereum blockchain that supports the BEP-2 standard. The BUSD circulating supply is backed by USD funds deposited in bank accounts in the United States. A company named Paxos is the owner of these accounts. It is also the partner of Binance in this stablecoin project. Regulators have approved Binance USD in the United States along with GUSD (a stablecoin issued by Gemini Trust Company) and PAX (another stablecoin issued by Paxos).
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Redeeming BUSD coins is very easy. All users need to do is send their digital coins to an ERC-20 address owned by Paxos. These digital coins will be burned there, and the corresponding cash will be sent to the user’s bank account. Swapping Binance USD for another cryptocurrency follows the same procedure as exchanging BTC to TRX, BTC to ETH, or any other crypto pair.
BUSD Cryptocurrency Overview
Since this asset exists on a public blockchain (Ethereum), traders and investors can use BUSD as an alternative to fiat money. Also, it can be easily integrated with smart contracts and decentralized applications (DApps) running on the Ethereum network. Some possible uses include:
- International remittances worldwide within a few minutes at a lower cost than bank transactions
- Hedge against price volatility for crypto earnings
- Payment for goods and services on online stores
- Collateral and loan asset
- Long-term investment to earn interests.
To ensure that Binance USD is properly backed, authorities audit the Paxos accounts holding the collateral for BUSD. The USD reserves must be equal to the cryptocurrency circulating supply. Requests to buy or sell this digital asset cause cash movements in the Paxos’ accounts. Depending on the type of request, digital coins are minted or burned. Paxos can control the minting and burning of these assets for security reasons. However, to ensure decentralization, smart contracts also have some control of BUSD transactions.
However, regulators in the United States require Paxos to have the capability to freeze accounts and empty balances. Many crypto proponents regard this feature as centralization.
Chris Evan was born in Quebec and raised in Montreal, except for the time when he moved back to Quebec and attended high school there. He studied History and Literature at the University of Toronto. He began writing after obsessing over books.