Cryptocurrencies are risk assets, and the recent market crash shows how volatile they can be. While crypto assets are now more popular than ever, many investors are still skeptical about joining the industry, considering the unpredictable nature of the market.
The first stablecoin was launched in 2014 to minimize the volatility of crypto assets. Since then, at least 200 different stablecoins have been developed, but not all stablecoins are built equally.
Stablecoins are cryptocurrencies whose values are pegged to a non-crypto asset or basket of assets, such as fiat and gold, to stabilize the price. For instance, a stablecoin tied to the U.S. dollar at 1:1 is expected to stay at $1 at all times. Unfortunately, not all stablecoins can maintain their peg during extreme market conditions due to a lack of sufficient reserve.
Since May, we have seen several stablecoins depegged from their supposed pegged value, causing investors to lose billions of dollars. Despite this, a few stablecoins have managed to weather all storms, and the Binance USD (BUSD) is a good example.
What is BUSD?
Binance USD (BUSD) is a stablecoin founded by two of the biggest names in the crypto space – Binance and Paxos. It was launched in 2019, and its value is pegged to the U.S. dollar at 1:1, meaning that for every unit of BUSD, one U.S. dollar is held in reserve.
BUSD is designed to maintain stable value in the highly volatile crypto market. It allows investors and traders to take on several high-risk investment products with more financial protection from market uncertainties.
Binance USD has been able to perform well and establish itself as the third-largest stablecoin and the sixth-largest crypto asset by market capitalization. As a result, more users are choosing to add BUSD to their CeFi and DeFi investment portfolios.
Features of BUSD
BUSD offers several features that make it one of the most popular stablecoins in the market.
Audited and 100% Cash Reserves
Considering the controversy surrounding stablecoin reserves, the founders of BUSD have gone to great lengths to ensure that the stablecoin is an above-board crypto product. Binance USD is one of the few stablecoins in the world that is backed 100% with actual cash and cash equivalent reserves in different FDIC-insured bank accounts held and managed by Paxos, a leading New York-based blockchain-focused financial institution.
It is also one of the few stable cryptocurrencies that provide monthly audited reports of its reserves. This allows users to independently verify the consistency of BUSD’s supply and the USD reserves at specific periods.
Regulation
BUSD adheres to some of the most stringent compliance standards to provide maximum protection for investors. The stablecoin was green-listed in 2020 by the New York State Department of Financial Services (NYDFS).
Being regulated by the NYDFS entails that all activities involving BUSD operations are carefully overseen by the financial regulator, including the reserves, asset custody, and management. This assures users that their crypto assets are secure at all times.
CeFi and DeFi Bridge
BUSD functions as a bridge between the centralized finance (CeFi) and decentralized finance (DeFi) ecosystems by providing users with a level of monetary freedom that is not obtainable with fiat currencies.
In addition, it provides a higher level of security to users from threats more commonly associated with the DeFi space while offering an attractive annual percentage yield (APY) on DeFi protocols. With BUSD, users can participate in DeFi-native services like yield farming with increased protection from uncertainties than other more volatile crypto assets.
Additional Perks of Using BUSD
Zero Maker Fees
BUSD holders enjoy zero fees on the Binance exchange when they place orders using their BUSD. With more than 300 BUSD spot and margin trading pairs on the platform, users can place complete trades for free using the stablecoin.
Deep Liquidity
For traders, BUSD provides high liquidity in the Binance ecosystem. They can easily trade, invest, and conduct other transactions on the Binance trading platform using BUSD. It also makes it easy for traders to trade newly-listed tokens as soon as they are available on Binance’s exchange.
Purchase NFTs on Binance NFT Marketplace
BUSD gives you access to the world of NFTs. Once you have the stablecoin in your Binance account or wallet, you can access thousands of digital collectibles listed on the Binance NFT marketplace.
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