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Here’s how Coinbase COIN and Binance BNB are different and similar

Coinbase and Binance are two of the largest cryptocurrency exchanges in the world. Yet, one raised money through a direct listing on Nasdaq and the other through an ICO. One has its COIN traded on Nasdaq, and the other its token BNB traded throughout the world. In this blog, we explain the difference and similarity between COIN and BNB.

Coinbase COIN vs Binance BNB: The difference

Stocks and tokens are different. Their main point of difference lies in what the asset (stocks or tokens) represents. And each asset represents two very different things.

A company’s stock or its share represents ownership. The stockholder is a part-owner of the company. If you hold a Coinbase share, you’re a part-owner of the cryptocurrency exchange. This means you have a stake in the profits the company makes, in the form of dividends. You have a say in how the company works, depending on the voting rights. And you’re paid back if the company goes kaput. The important thing is this – if you hold stock, you’re a part-owner of the company. 

A token is not a stock. Holding tokens like the BNB token, the FTT token, and the OKCoin does not mean you own part of Binance, FTX, or OKEx. In this case, tokens do not provide voting rights. And if an exchange goes under, it won’t pay back token holders. 

Tokens provide different value propositions, utility, and value accrual. For instance, BNB can be used to pay for transactions on Binance. The FTT token can be used as collateral for futures positions on FTX. This cannot be done using COIN. If you hold Coinbase’s COIN shares you can’t use this to lower trading fees on Coinbase or Coinbase Pro. This functionality exists with tokens but not with shares.

Stocks provide ownership. Tokens provide utility.

Coinbase COIN vs Binance BNB: The similarity

Stocks and tokens aren’t that different. One provides ownership and the other utility. This is only part of their value proposition. The other part is what determines their value. And that’s where COIN and BNB are fairly similar. 

Coinbase’s COIN shares are valued by the market. The crypto exchange’s reference price was $250. But on April 14, COIN listed 58% higher at $381. It rose to as high as $429 before slumping to $300. 

The rise in Coinbase’s price is because people were willing to pay more for its stock. Similarly, the price drop was because people who were holding COIN decided to sell for profits. This points to a market pricing of stocks in the market. A company’s stock price will rise if they expect it to be more valuable tomorrow than it is today. The stock price is always a function of the future potential of a company. What this means is a stock’s value is based on the (future) performance of the company.

This is similar, but not exactly the same as an exchange’s token. Tokens are tied to an exchange performance, just like stocks. But tokens do not denote ownership. So, BNB’s price is tied to the performance of Binance Coin, just like COIN’s price is tied to the performance of Coinbase.

Binance Coin in action

The rally in BNB’s price in the past few months is directly related to Binance’s new blockchain. In September 2020, the Binance Smart Chain went live, a parallel blockchain to Binance Chain, the native chain of the exchange. This allowed a direct link between Binance and a smart contract ecosystem. Binance Smart Chain also offers DeFi protocols like yield farming, decentralized exchanges, and liquidity pools.

BNB can be used on the exchange Binance, the native chain – Binance Chain, and the new Binance Smart Chain. It can be used to pay transaction fees, staked for network security, and used to run smart contracts. All this means BNB is the currency to run several functions within Binance. Since these several functions (Binance Chain, Binance Smart Chain) have been gaining popularity, it is adding to BNB’s price.

What this means is COIN’s value is directly related to Coinbase’s performance. Similarly, BNB’s value is directly related to Binance’s performance.

Stocks provide ownership. Tokens provide utility. But they both provide value.

COIN and TOKEN – not that different

Stocks and tokens are very different and similar. They are different in what they denote (ownership or utility), what say they have in the company’s management, and when a company is getting liquidated. But they are similar in their value proposition tied to the company.

If you do venture into either COIN, BNB, or other digital assets, we suggest you build an investment thesis. This will help you figure out your investing goals, timelines, and risks. You can read more about this here

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