Binance Coin’s (BNB) market capitalization outperforms Santander and UBS – what’s next?

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2021 was an impressive year for Binance Coin (BNB), having recovered more than 900% so far.

One of the main drivers of BNB’s growth has been the ongoing congestion on the Ethereum network. As that battle continued, Binance Smart Chain (BSC) emerged as an alternative, meeting the needs of the rapidly growing decentralized financial sector (DeFi).

When the BNB reached a market cap of $ 64 billion, it outperformed traditional banks like Santander, Bank of Montreal and UBS. Meanwhile, some analysts point to the estimated value and impact of the upcoming direct listing of Coinbase (valuation of $ 100 billion) as a catalyst for the BNB price hike.

A common narrative in recent weeks is that the direct listing of COIN also adds value to the centralized exchange tokens. Analysts also speculate that other US-based regulated exchanges like Kraken and Gemini will likely follow Coinbase’s path and try to raise funds through a stock offering.

To understand the potential of BNB, one must first understand the differences between stocks (shares). After this has been clarified, the possible drivers for the appreciation of the NBB can be analyzed.

The BNB does not represent any Binance shares

With the BNB token, holders receive a discount on trading fees. This is required for those who wish to participate in the sale of the Binance Launchpad token. As the BNB gained in liquidity, it also became a base pair for other cryptocurrencies on the Binance exchange.

Over time, other applications emerged as the Binance Smart Chain gained traction. For example, BNB can pay network fees and serve as a utility token in the ecosystem that includes decentralized apps (dApps) and games.

Periodically, Binance burns (destroys) some of the non-circulating BNB tokens based on the exchange’s total trading volume. The effectiveness of this strategy faded over time as investors understood that these destroyed tokens never made it into circulation.

The Binance Smart Chain Network uses a Proof of Stake Authority that eliminates the need for miners or expensive transaction fees. The platform has retained its compatibility with the Ethereum Virtual Machine (EVM) and has a similar token and smart contract structure.

Many tokenized (or tied) cryptocurrencies have gained relevance in Binance’s networks, allowing users to bypass miner fees. Another benefit of Binance Smart Chain’s BEP-20 model is the staging and farming capabilities across its extensive network of decentralized applications, including the PancakeSwap DEX and Venus lending platform.

Decentralized financing Total value Blocked ranking. Source: DeBank

As shown above, Binance Smart Chain has gained ground over other DeFi protocols in terms of total locked value. New use cases for the BNB token emerged that took center stage as agriculture, liquidity pools, and base pairs used the token across the network.

Banks are reliable dividend providers, but DeFi could overtake the system

Equity shareholders are entitled to a portion of the net income of a publicly traded company. This amount varies between quarters as the Board of Directors may decide to repay debts or to add some of this money to reserves. However, banks are known as cash cows and are therefore usually a reliable source of dividend payouts.

Santander (SAN) dividends paid over the past 12 months divided by current stock price return rose 3.7%, and Bank of Montreal (BMO) shareholders received a similar return. Switzerland-based UBS yields fell in 2020, but historically averaged 5%.

Bank shareholders effectively have voting rights in general meetings, and minority groups could block actions that would harm them financially. On the other hand, these shareholders are 100% dependent on the bank’s net profit and growth.

The NBB, on the other hand, could survive without the direct influence of the Binance exchange. If Binance Smart Chain reaches independent developers and validators in the future, its ecosystem could continue to thrive. In theory, if token loses its dependency as the ecosystem grows, it will become less centralized.

If done correctly, the BNB’s market capitalization could exceed that of the entire traditional banking system. Before this can happen, however, these networks and decentralized applications must gain acceptance and demonstrate that they can withstand the demands of mainstream investors and bank customers.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.