Binance USD Stablecoin (BUSD)
BUSD is a classic stablecoin pegged to the US dollar in a 1:1 ratio. The main purpose of this asset is to provide users with the opportunity to protect their savings from volatility by exchanging them for stablecoins, while remaining within the blockchain.
The mechanism of this stablecoin is quite simple. 1 BUSD is worth 1 US dollar. Whenever users buy BUSD exchanges through Paxos, their tokens are burned and they receive fiat. If for some reason the price of BUSD drops below $1, arbitrage traders will come to the rescue. They buy a significant amount of coins to exchange them for fiat, increasing the demand for BUSD and thus stabilizing the price.
It is important to note that BUSD operates under New York State regulations, which were imposed by both Binance and Paxos. Therefore, naturally, all actions that can happen with a stablecoin are carefully controlled, including creation and burning. Therefore, this gives both Paxos and Binance the right to freeze accounts that show any illegal activities.
BUSD stable token
BUSD was launched in September 2019. This is the result of a collaboration between Paxos and Binance.
Binance is the famous largest cryptocurrency exchange in the world. The project's mission is to give people the freedom to earn, store and share the money they own, regardless of their location.
Paxos Trust is a blockchain company that specializes in trading, custody and licensing. Its main goal is to provide crypto solutions to global financial institutions. Paxos emphasizes the security of all services offered. For example, they claim that all assets listed on the platform have been thoroughly assessed and analyzed.
Benefits of BUSD
- Mobility of funds. With BUSD it is very easy to send money around the world, avoiding banking delays.
- Flexibility. Stablecoins are designed to protect assets from the volatility of the crypto market without the need to exchange them for fiat.
- Audit Paxos conducts regular audits to prove that the BUSD to dollar ratio remains the same.
- Convenient for trading. BUSD helps you lock in profits between trading operations. This can be a good way to wait for your next trading position without wasting time exchanging to fiat and then back to crypto.
Disadvantages of BUSD
- Lack of anonymity. Binance does not allow any anonymous actions, therefore It is important to keep in mind that you must be verified before you can use it.
- Account freeze. Binance and Paxos are regulated, so if the activity is deemed alarming for any reason, the user's account may be frozen.
