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Date: 2024-06-12

Binance - What is it?

Binance is a "crypto" exchange designed to provide "crypto / crypto" exchange capacity for the burgeoning "alt coin" market...

Originally based in China, and now firmly in Hong Kong, the system is the most popular in terms of providing users with the ability to exchange the likes of Bitcoin or Ethereum for some of the more obscure "coins" available today. It has over 6,000,000 users.

To fully understand where Binance fits into the "crypto" landscape, you have to realize that you cannot "trade" USD for most "alt" coins, especially those which are quite new or somewhat obscure.

For example, if you had just been a part of an ICO, or wanted to invest into something like Verge (XVG), you cannot do that through Coinbase, or any of the other large "fiat/crypto" exchanges. The reason for this is mostly profitability; those exchanges simply want to provide a direct point of access for anyone looking to send/receive "Bitcoin" - they don't really dabble in any other tokens, part from others that retain their value (Ethereum etc).

To this end, when you look at the likes of Verge, Harbor and a number of other "coins" that could be making massive gains in the following few months, you have to understand that you need to look at the underlying way in which the system is able to work. Binance provides a central way through which you're able to exchange BTC for almost any other token, allowing you to make more esoteric investments that may - or may not - pay off big time. We've found that Binance is a very reliable service, although it's come under scrutiny recently due to ownership issues. Considering this, it's definitely worth doing some homework before looking into the system as a whole...

What Is Binance?

Binance provides a "platform" through which you're able to "trade" various "crypto" tokens with other people. You don't do this directly; you basically exchange your BTC or "other" alt coin with Binance in exchange for a collection of "Binance Coins". Your crypto tokens are then placed into a central pool, which is then exchanged with someone else for their "Binance Coins".

The system works extremely well, and apart from a number of potenetial security breaches, has served its 6,000,000+ users with continued service. Unfortunately, this does not mean that it's an effective system or one you should trust.

The underlying problem with Binance is a question of trust. If you trust the system enough to allow it to take your tokens and transfer them to someone else, you'll be able to make significant gains from it. However, this does take a significant amount of understanding on your part.

The big problem is that it's based in Hong Kong (not in the US). Whilst not an issue in itself, the core problem with the system is that it has no central authority with which to raise concerns - it basically is a free-for-all, allowing anyone to sign up and begin trading.

This is why many "governments" are trying to regulate the systems - to ensure they are not used by gangs, organized crime and the swathes of other miscreants to try and grow their illicit trade around the world. For this reason, Binance's lack of self-regulation has made it an increasing target for regulators in the likes of China and Japan.

Again, nothing has actually happened with the system to date... but with its growing user base and ability to trade some of the most obscure "crypto" tokens, people have identified it as one of the biggest targets for the regulators...

How To Use It

As mentioned, "Binance" is used for "crypto / crypto" trades.

The reason it does not accept "fiat" currencies is simply because of the complications associated with that sort of business. The minute you accept "real" money for your services, you are not only liable to a particular country's jurisdiction but also their tax laws etc.

This is not to say Binance has avoided any of these; it's just not a feasible economic model.

The likes of CoinBase work as a "retailer" of Bitcoin - buying the "coins" at a low price from another company, and essentially "selling" them on for a larger profit. This makes them a legitimate business, and can therefore report their income / profit to the IRS and SEC with impunity.

The problem with Binance is that it doesn't act as a "retailer"; more a "conduit" for any of the other "alt" coins which may provide users with the ability to exchange their purchased - or earned - tokens for more valuable "currency". Doing this gives you the ability to determine exactly what you're doing...