After a sharp run up of 46% over the last three months, the Binance cryptocurrency exchange's coin, BNB, (BNB -1.11%) is back in the spotlight, and it's getting more attention from the market than it has in years. During the same period, the price of the storied meme coin Shiba Inu (SHIB 0.20%) has been mostly flat, which some investors interpret as a sign of consolidation that portends a bull run to come.
So which one of these coins is the better buy for the purpose of a long-term investment, the exchange's coin or the dog coin?
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BNB's flywheel is real, and working
Because BNB is the native token of the Binance cryptocurrency exchange, one of the sector's largest and most important, it has plenty of utility within Binance's network, the BNB Smart Chain. When traders on the Binance exchange hold and use BNB to pay their exchange fees, they get discounts and other rewards, so there's a population that's highly incentivized to buy and hold it even if its price is flat.
For those who don't want to actually trade on Binance, investors can delegate BNB to validators on the BNB Chain and receive staking rewards. So the coin has a built-in mechanism for generating a yield, as well as a built-in mechanism for at least a little bit of scarcity, and both of those contribute to its value.
On the scarcity side, there are another pair of mechanisms that help to boost the coin's price by reducing its float.
BNB's auto-burn is recurringly scheduled to permanently burn coins from the circulating supply each period using a transparent formula. The chain also implements a real-time fee-burn protocol that destroys a portion of the gas fees from all activity on the network. In other words, more on-chain usage means more coins burned, which tightens float and can support price over time.
Furthermore, BNB benefits from practical expansion of its own ecosystem.
The BNB community has launched opBNB, an layer-2 (L2) network built to scale throughput and reduce fees for applications, and BNB Greenfield, a decentralized data storage system intended to anchor new use cases. These efforts expand the addressable surface area for generating fees, which can then translate into additional burns as usage accumulates. So the main point here is that there's a platform that highly incentivizes users to hold BNB, and a few different ways to ensure that it's in scarcer supply over time.
There are risks associated with this coin, of course. BNB's fortunes are inextricably tied to the Binance brand and its regulatory posture, which has faced scrutiny in the past, including the prosecution and imprisonment of its CEO, Changpeng Zhao.
Shiba Inu's flywheel is questionable
Shiba Inu is a meme coin, which means that its pricing is nearly entirely dependent on market sentiment and hype surrounding the asset rather than on economic fundamentals. But it did attempt to develop a real value-generating flywheel, which bears mentioning.
Its developer team produced the Shibarium, a layer-2 (L2) network designed to make transactions cheaper and faster. But its gas token is not SHIB, so usage of the L2 does not automatically accrue fees to Shiba Inu itself. Burns of SHIB from L2 activity are theoretically possible, yet they are discretionary, and not linked to a specific recurring mechanism, so they aren't very reliable over the long term. For example, an official burn portal routed L2 fees to occasional SHIB burns, but the absolute amounts to date have been negligible versus the outstanding supply.
Community staking was once marketed as a big feature. In practice, that means holders cannot rely on a native mechanism to earn ongoing rewards with Shiba Inu today. Without any supply control or real utility, this meme coin is simply an old dog with no new tricks to show for its experience.
Therefore, if your goal is long-term wealth building, BNB is by far the more investable asset today. It probably will not go to the moon, and there are likely better picks out there. Even so, the idea of it is that usage begets fees and fees beget burns, and that process is obviously working.
