TL;DR
BUSD is a cryptocurrency pegged to the U.S. dollar—and it’s designed for stability. Holders can swap their tokens for fiat and vice versa.BUSD is a regulated stablecoin, backed by US Dollars. This means that there is a 1:1 BUSD to USD ratio. That is how it maintains its peg. In other words, for every BUSD in existence there needs to be a USD to back it up.
BUSD was designed to act a stablecoin, allowing crypto traders to hold onto a low-volatile coin without exiting a volatile crypto market.
Introduction
The BUSD token is used by Binance as a stablecoin. It enables the exchange’s traders to purchase and trade cryptocurrencies with greater confidence, knowing that BUSD is pegged to the value of USD. In other words, if you are looking the added price stability yet a way to quickly infuse capital into the crypto market BUSD might be your best friend.
Further, BUSD is a token that’s perfectly suited for the crypto space. BUSD is well established among the trading pairs on Binance. So whether you want to buy, sell or trade your digital currency, it’s likely you’ll come across this token in the process.
However, what exactly is BUSD?
What Is BUSD?
BUSD is a stablecoin created by Paxos, the company behind the PAX Gold stablecoin and the Stablecoin as a Service product. BUSD’s price is pegged to $1 US Dollar, but it is backed with US dollars at a 1:1 ratio. This gives users security that their BUSD tokens are 100 percent backed by USD.
The BUSD stablecoin is pretty close to perfect. It was created by Paxos and Binance,a centralized exchange with a lot of reputation. This token is a dollar-pegged cryptocurrency. Unlike many other stablecoins, it is regulated by the New York State Department of Financial Services (NYDFS).
On the technical side of things, BUSD is a fiat-backed stablecoin that maintains a one-to-one dollar peg. The total supply of BUSD is backed by one U.S. dollar held in custody by Paxos and acts as its reserves in FDIC-insured U.S. banks or backed by U.S. Treasuries. When the price of the U.S. dollar rises or falls, the price of BUSD also does, in equal amounts. This is the fundamental idea behind stablecoins.
Additionally, as of May 2022 BUSD is the 9th largest crypto coin by market cap, with a value of $17,000,000,000. There are currently 17 billion BUSD tokens circulating but that can change based on demand for it.
Why Is BUSD Important?
BUSD offers crypto investors the flexibility to maintain their crypto portfolio in a coin that maintains a price stability during high market volatility. They can move their money into this stablecoin without leaving the crypto space.
Further, BUSD offers investors and inviduals the opportunity to send money transfers across the world at nominal fees. This is good if you want to send a certain amount across the global and have it settle in real time.
Further, BUSD has close to a 10% share in the stablecoin market. This means that BUSD is widely available and used for crypto trades.
It primarily purpose continues to serve as a safe haven for investors to place their crypto, without the worry of having to deal with market volatility.
How Does BUSD Work?
As mentioned earlier, BUSD is pegged to the USD on a 1:1 ratio. For every BUSD in existence an equal amount of USD must back it up. This gives investors some safety and security in knowing that BUSD will mimic the price movements to its underlying pegged source, the USD.
Further, BUSD is an ERC-20 token that was issued on the Ethereum blockchain. However, a Binance-Peg BUSD also exists on the BNB Smart Chain. The way Binance achieves this is by minting a BEP-20 BUSD token that corresponds to a BUSD token that is held on its reserves in an Ethereum based wallet. Each BUSD (BEP-20) token corresponds to a BUSD (ERC-20) token held in its reserves.
BUSD holders on the BNB Smart Chain can swap their tokens for their Ethereum based counterpart. This can be done in token bridge networks like MultiChain.
Features of BUSD
BUSD can be used for many things in the crypto field. Here are some popular features for this coin:
Price Stability (backed by 1:1 ratio of USDs).
Can be used on multiple networks, including Binance and Ethereum.
Gives you access to decentralized markets.
Can be used to transfer money at faster and lower costs.
Unlike most stablecoins, BUSD releases regular audits showing their reserve amount.
Use Cases for BUSD
Based on our series with stablecoins, they all have a similar theme, which is to provide stability during volatile markets. Here are some other use cases for BUSD:
Arbitrage Trading
The BUSD and Binance-Peg BUSD are two top stablecoins in their respective markets. They may provide arbitrage opportunities when prices differ between different exchanges because of the liquidity pools behind them. These liquidity pools may be able to quickly fill gaps in supply and demand, allowing arbitragers to take advantage of price discrepancies.
Avoiding Price Fluctuations
It is no secret that the crypto market is quite volatile. In fact, so much so that we've seen project increase over 1000% then lose almost all its value. BUSD provides crypto investors with the opportunity to hedger their portfolio in a stablecoin without having to remove their liquidity off the crypto space.
Lock In Gains Without Exiting The Crypto Space
Due to the high volatility of this market, it is essential for investors to look towards a safe haven for their gains. BUSD provides that option without having to convert your crypto into fiat currency and withouth having to leave the market.
How Is BUSD Regulated?
One of the key differences for this stablecoin is that unlike the many out there that exists, BUSD is regulated. Due to this, it has to comply with certain regulations and go through audits. An accounting firm completes these audits in order to comply with regulations. These audits are done on a regular basis and confirm that there is a 1:1 rerserve ratio.
Along with making sure the token is fully collatarized, the NYDFS makes sure that Paxos control the creation and burning of USD tokens. In a similar vein, Paxos also has the right to freeze accounts and remove funds due to illegal activity. The New York Banking law is applicable to the stablecoin.
If one looks closely to the token's smart contract, you would note a section that says SetLawEnforcementRole. This snippet of code allows Paxos to do the aforementioned things in order to uphold NYDFS regulations. This applies to the Ethereum based BUSD tokens.
How To Buy BUSD?
You can buy BUSD on Binance.
Log In/ Create An Account
If you haven’t done so already you can create an account with Biannce. Keep in mind Binance is a KYC platform so you need to provide some form of ID. If you have an account already you can just log in.
Search For RUNE
Once logged in click on trade and search for "BUSD" in the search box.
Select Amount and Buy
Once you find the token select the amount you want to purchase and select confirm the order.
Final Thoughts
The value of BUSD is stable, thanks to its audited reserves. BUSD is a stablecoin that provides traders and investors with a safe and reliable store of value. It provides users with cover against the volatility often seen in crypto projects, allowing them to protect their funds against losses or market fluctuations. Designed to work with BNB Smart Chain, BUSD is an excellent stablecoin to use in the crypto space.
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