What is BUSD? Is Busd The Same as USD?

Binance USD (BUSD) is one of the famous stablecoins in the market. In this article, we will learn about Binance USD (BUSD).

What Is Busd? Is Busd The Same As Usd?_65b97b91eefba.webp

What is BUSD?

BUSD is fiat-collateralized Stablecoins. BUSD is 100% backed by fiat and equivalent assets. It has a centralized management and buyback mechanism to maintain the stability of token prices in the market. This is one of the most widely used stablecoins on the market.

Relationship between Paxos and Binance in launching BUSD

Binance, the world’s largest cryptocurrency exchange founded by Changpeng Zhao in 2017, has partnered with New York-based blockchain technology company Paxos to issue stablecoin BUSD.

Paxos provides services and technology that enable institutions to easily issue stablecoins. Using this service, Binance issues without focusing too much on technicalities. Instead focus on building the brand and ecosystem.

Thanks to Binance’s strong ecosystem. BUSD grew quickly into one of the leading stablecoins. This is an effective cooperation model between a leading cryptocurrency exchange and a blockchain technology company.

How does BUSD work?

what is busd is busd the same as usd 65b97b91f1ffd

Stablecoin BUSD acts as a certificate redeemable for US dollars. It operates outside the blockchain ecosystem.

The simple price keeping mechanism is that each token is equivalent to 1 USD in the reserve fund managed by Paxos. Users can exchange for US dollars through Paxos. Parity between supply and dollar reserves helps keep prices stable.

When the price falls below $1, arbitrageurs buy in bulk and exchange for US dollars through Paxos. Help push the price back to $1. This is a mechanism to maintain value stability compared to the dollar.

BUSD Pros & Cons

what is busd is busd the same as usd 65b97b91f418a

Here are some pros and cons:

Pros

BUSD is a collateral-backed stablecoin. Are legal currencies and assets of equivalent value. The price anchoring mechanism is relatively simple and stable. BUSD performs well even in difficult market conditions.

BUSD is widely used in the Binance ecosystem, including the Binance exchange and the BSC blockchain. With its huge ecosystem and large user base, Binance is growing rapidly, becoming one of the most popular stablecoins.

Application on the Binance platform helps increase liquidity and transaction speed. The partnership between Binance and Paxos creates a solid foundation for the development of BUSD in the cryptocurrency ecosystem.

Cons

One of the biggest risks of fiat-pegged stablecoins like BUSD is the issue of decentralization. BUSD requires foreign currency reserves off the blockchain. And this reserve fund is controlled by only a few organizations. Users are forced to trust these organizations to operate transparently and fairly.

Furthermore, issuers have the discretion to blacklist a wallet address. Prevent transactions from that wallet. This can be useful to prevent hackers. But it shows the concentration of power of the issuer in deciding who is allowed to use stablecoins.

This lack of decentralization is in stark contrast to the decentralization philosophy of cryptocurrencies. As a result, many people are concerned about the long-term sustainability and safety of stablecoins. Because it depends too much on the reputation of the issuing organization.

Related: What are Stablecoins? Learn All about Stablecoins.

BUSD storage wallet and exchange

Where to store BUSD?

BUSD is widely used in the standard ERC20 token and BEP20 token. You can use Wallets that support these standards to store and use.

Where to buy BUSD?

There are a few different ways to buy . You can find some options here. Another option is to buy on the secondary market. Binance has many trading pairs including BUSD. You can trade other cryptocurrencies and fiat currencies on the exchange, or use a debit or credit card to buy.

Another method is to access AMMs and swap other tokens to BUSD. Alternatively, you can go to the Paxos website and convert US dollars directly, Paxos will take your fiat currency, add it to the reserve and then mint the new BUSD for you.

Frequently asked questions

Who created BUSD?

Binance partnered with Paxos to create.

Is BUSD safe and truly “stable”?

Each BUSD you hold corresponds to 1 USD in your bank account to ensure that the holder can always redeem at any time at a 1:1 ratio. Review Paxis monthly audit reports here.

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