cryptojournalist
Binance recently cleared up confusion about its upcoming BFUSD token, after some crypto users mistakenly thought it was a new stablecoin. The confusion started when rumors spread that BFUSD would offer a high yield, similar to what was promised by the now-defunct Terra stablecoin.
So, What Is BFUSD?
Binance confirmed that BFUSD isn’t a stablecoin. Instead, it’s a reward-bearing asset for margin trading, specifically for futures. This means users can earn rewards without having to lock up their funds, and it will be used as collateral for margin trading. BFUSD is still not available yet, but it’s designed to work with Binance’s futures platform.
How Does BFUSD Work?
BFUSD will be stored in a special “UM wallet” on Binance, where users will receive daily rewards or “airdrops.” These rewards will be sent to another wallet called the “UM Futures Wallet.” How much BFUSD you can hold depends on your VIP level on the Binance platform, which is based on your social ranking.
Why the Concern?
When news of BFUSD’s high yield first broke, many people immediately compared it to Terra’s failed stablecoin, UST, which promised high returns before it collapsed. In 2022, UST’s value crashed from $1 to less than a cent, causing a huge market panic. This led to fears that BFUSD might face the same fate. Binance quickly reassured users that BFUSD is not a stablecoin and works very differently.
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