A Closer Look at BUSD: The Growing Stablecoin in Crypto Market

Throughout 2022, the crypto market has been in a painful bear market, making most investors turn to stablecoins for protection. With over a hundred stablecoins available, which one should investors choose? This article takes a closer look at BUSD, the sixth highest ranking cryptocurrency and third highest ranking stablecoin, with a market cap of $22 billion.

What is BUSD?

BUSD or Binance USD, launched in September 2019, is a stablecoin launched in partnership with Paxos, a regulated blockchain infrastructure platform that offers crypto custodial services. Like other top stablecoins USCC and USDT, BUSD is pegged one to one with USD, centrally issued, and backed 100% by US dollars or cash equivalents. Contrary to its name, USD is issued by Paxos, not Binance. However, Binance is its face, and users enjoy additional perks such as zero trading fees for certain trading pairs on its platform, access to Binance's launch pad, and higher interest compared to other stablecoins via participating in their Binance Earn program.

How Does BUSD Work?

Paxos acts as the custodian of BUSD's reserves, and BUSD is regulated by the New York State Department of Financial Services. Paxos releases audited reserve reports every month to ensure the reliability of the stablecoin by overseeing BUSD's reserves, custodianship, and management. BUSD can be purchased through Binance or on the Paxos platform, and US dollars are deposited into the Paxos reserve, and BUSD is minted in return. BUSD is redeemable one to one with US dollars, and if customers wish to exchange their BUSD for US dollars from Paxos, an equal amount of BUSD tokens will be destroyed and removed from circulation.

Where Can You Use BUSD?

BUSD is natively issued by Paxos only on the Ethereum blockchain, so it can be used with dApps within Ethereum's ecosystem. However, Binance independently wraps Ethereum-native BUSD and issues a separate token called Binance Peg BUSD on several other blockchains, such as BNB chain, Polygon, Avalanche, and more. Note that Binance Peg BUSD is a Binance product and is not issued by Paxos, nor regulated by the NYDFS.

Conclusion:

BUSD has grown 2100% in just two years and is currently the third highest ranking stablecoin with a market cap of $22 billion. Paxos oversees the reliability of the stablecoin, and BUSD is redeemable one to one with US dollars. BUSD can be used within Ethereum's ecosystem or through Binance Peg BUSD on other blockchains. While algorithmic stablecoins have depeged from the dollar in the past, BUSD's backing by US dollars makes it a relatively safe and popular choice for investors.