All the Ways I Use Binance
to Generate Passive Income
I’ve been invested in Binance since they launched in 2017. It is one of my favourite cryptocurrency exchanges that I have ever used, and I have used quite a few. In 2020, they really started adding a ton of ways to earn passive income on their platform. DeFi was just getting started on Ethereum at the time, and passive income was a huge topic in the crypto space in general. Since then, I’ve participated in a number of Binance’s offerings, and earned a good bit of money. This week, I played around with Binance Smart Chain (BSC), which is their DeFi hub. This letter tells you all the ways that I use Binance to generate passive income.
Binance Ecosystem Overview
Before we get started, it is important that you understand the various tokens and mechanisms within the Binance ecosystem.
Binance Coin (BNB)
Everything in the Binance ecosystem essentially runs on one token, BNB. This token was created in 2017, and has been growing in popularity ever since. It has now risen to be consistently within the top 5 cryptocurrencies out there. There are a variety of reasons why you would hold BNB, there are no shortage of ways to use it. Regardless, BNB has strong tokenomics built into it. The biggest thing it has going for it, is the BNB quarterly buy-and-burn. Every month, Binance takes all of the fees collected from users trading on the exchange and buys back BNB from the market, to ultimately burn them (permanently remove them from circulation). Burning the supply of a token is something pretty common in the crypto space as it increases scarcity and thus, perceived value in the token/project. Binance started with 200,000,000 BNB and now there are 154,000,000.
In order to interact with anything on Binance Smart Chain, you need BNB. Due to the recent explosion in projects migrating away from Ethereum1, Binance has received a ton of attention. This is good for BNB.
Binance USD (BUSD)
Binance USD or BUSD is a USD stablecoin. All this means is that BUSD is pegged to 1 USD. It seems like stablecoins are an integral part of any cryptocurrency ecosystem, BUSD is no exception. Stablecoins perform three main functions in the ecosystem:
Allow traders to take profits in a stable currency
Allow users to make payments with a stable currency
Allow users to take out debt against their other assets (like Bitcoin) in a stable currency
Binance Bitcoin (BTCB)
Just like how BUSD is pegged to 1 USD, 1 BTCB is pegged to 1 BTC. Raw Bitcoin cannot be transacted with on Binance Smart Chain. BTCB is the solution to giving users the ability to transact with Bitcoin on Binance Smart Chain. BTCB can be thought of as “synthetic Bitcoin”, or “wrapped Bitcoin”. These tokens aren’t themselves Bitcoin, but can be redeemed for Bitcoin at a 1 to 1 rate at any time. Think of it like a Bitcoin IOU.
Tau Bitcoin (τBTC)
Tau Bitcoin is yet another synthetic Bitcoin that lives on Binance Smart Chain. It is pegged to Bitcoin at a 1 to 1 rate. It is minted into existence through a token that is backed by Bitcoin hash power. That token is BTCST.
Bitcoin Standard Hashrate Token (BTCST)
This is a token that is backed by Bitcoin hashpower, 12% of the total hashpower to be specific2. The code behind the protocol is able to predict the amount of Bitcoin it is expected to receive, and so it rewards BTCST token holders with synthetic Bitcoin. More on BTCST and τBTC later.
Earning on Binance the Exchange
Now that you know about five of the key tokens in the ecosystem, we are free to talk about how these tokens can be used to generate passive income. Most of the earning opportunities involve locking up your tokens in exchange for a reward. This locking up is commonly known as “staking” but may also be called lending, or pooling.
Binance Launch Pool
The Binance Launch Pool is a way of introducing tokens of new projects into the Binance ecosystem. By locking up BTCB, BUSD, or BNB, you can earn a share of the total reward pool. The reward pool is typically given to Binance by the project administrator in order to jumpstart the ecosystem. It is important for the success of any project to have the tokens be held by a large number of individuals. The Binance Launch Pool is one way of distributing new tokens to a large number of users. Take a look at the below screenshots to see what I am talking about.
TLM
Now, I have no idea what TLM is, or whether or not it is going to be a good token. All I know, is that Binance has chosen to support it, and offer it to me through the Launch Pool. I will likely do some research on TLM throughout the next few weeks, as I will be earning daily rewards on TLM for the entire month of April. Typically speaking though, I just convert my earnings into BTC, BNB, or BUSD to increase my earning potential.
BTCST
This next token is one that I actually held onto. It is a very intriguing project that I decided to dive deeper into this week. As you can see from the screenshot, if you had idle BTC, BNB, or BUSD, you were able to earn BTCST during the month of February.
Binance Liquidity Mining
Liquidity is extremely important for any healthy market.
Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. — Investopedia
If I have idle assets, I can loan them to the open market, and allow bots to “make the market” with my funds. In return, I get compensated with whatever profits those bots make, as well as fees generated from the market itself. This is known as liquidity mining. This can be done on Binance Smart Chain as well, but Binance has made it super simple to do this on their Exchange. See screenshot.
As you can see, my assets are generating me profits from participating in the market. The returns vary on a daily basis, but based on my calculations, these returns net me something like 120% per year (APY).
Earning with Binance Smart Chain
Here is where things get a lot more technical. In order to properly take advantage of the offerings on Binance Smart Chain, you really should know what you’re doing. A total loss of funds may result in not fully understanding your transactions. Don’t hesitate to reach out to me at ready@gofullcrypto.com for guidance.
This week I dove more deeply into one of the projects on Binance Smart Chain. That project was Bitcoin Standard Hashrate Token or BTCST. I am innately driven to find projects that are in some way, shape, or form, building on Bitcoin. So this project caught my eye as the tagline on their website reads BTCST Brings Bitcoin to DeFi. Any earning done on Binance Smart Chain is non-custodial in nature. This means the entire time I am earning, I am in full and complete control over my assets. That doesn’t mean my assets are not susceptible to loss, it just means that I keep my keys.
What got me interested in BTCST is that it is a token that is “backed by hashpower”. That is, if you’re holding BTCST, you are entitled to a certain amount of Bitcoin rewards from the hashpower allocated by the participating mining farms. Those rewards are paid out in the form of τBTC, which is just like BTCB. As mentioned earlier in this newsletter, it is a 1 to 1 peg of Bitcoin, and can be redeemed at any time for BTC.
This project is in its early stages, and so, there are inflated rewards (400% - 750%APY) for the first couple weeks of the project’s existence. Let’s take a look.
I’ve engaged with three of the five opportunities above.
BTC —> τBTC: This is the one that had me most intrigued for its high ROI. Anytime I see a ROI this high, I get skeptical. I decided to read the whitepaper to learn more about the project, and why the ROI was so high. I found out that the ROI is only this high for the first couple of weeks, while they get the project started. The project is “seeding” tokens to its participants. I’m not sure what the rewards will drop to after the initial stage, but they will drop.
I had some Bitcoin sitting on Binance, so I sent it to my Binance Smart Chain wallet (which automatically converts BTC to BTCB). Then I was able to stake my BTCB for τBTC.
I am taking the rewards from opportunity number 1 and 2, and re-staking them for more rewards in the third opportunity. As you can see from the table, the rewards for all 3 opportunities are paid out by the block, in τBTC. This means I am able to compound my investment by reinvesting all rewards back into opportunity 3.
I’m honestly not too sure what to expect long term from this project. I’ve been waiting for an opportunity to enter DeFi through a project that resonates with me, and has cheap participation fees. The high gas fees on Ethereum was the main reason for not diving head first into DeFi. Now that Binance Smart Chain is offering high quality DeFi projects, I have decided to take the plunge. I will monitor this investment of mine, and divest if I detect any funny business afoot.
The Tools you Need
I had to play around with a couple of tools that I’d never used before in order to accomplish the above tasks. Here are some of the guides I stumbled upon in order to help me on my journey.
I used the Binance Chain Wallet browser extension to interact with Binance Smart Chain for most of the transactions
I used MetaMask to interact with Binance Smart Chain after following this guide. Some transactions could not be performed with the Binance Chain Wallet.
I used Pancake Swap to turn BNB into BTCST
I used Google Authenticator for 2 Factor Authentication when withdrawing assets from the Binance Exchange
All regular best practices should be used when creating new wallets on Binance Chain Wallet and Metamask. (Don’t reveal your private key, always backup your 12 word phrase, send a little amount first and then send the rest.)
All The Best,
Keegan Francis
Projects Migrating Away from Ethereum - https://dappradar.com/blog/moving-away-from-ethereum-as-defi-goes-multi-chain-defi
BTCST Hashpower Backing - https://www.coindesk.com/tau-protocol-debuts-hashrate-token-staking-for-bitcoin-rewards