Despite being very different crypto-assets, Dogecoin (CRYPTO: DOGE) and BNB (CRYPTO: BNB) haven’t actually performed that differently. During the past three years, BNB is up by 255%, whereas the king of the meme coins is up by 277%.
Could either of these coins continue to deliver such outstanding returns during the next few years, making investors into millionaires in the process?
BNB sits at the center of two large funnels that drive demand, and it also faces two key constraints on its supply. When paired together, they create a mix of forces that tend to push up its price.
First, it functions as a utility asset for the Binance cryptocurrency exchange, providing trading fee discounts and other account perks that heavily incentivize traders on the exchange to buy and hold it more or less indefinitely in at least a small quantity.
Second, it’s the gas (user) fee token for the BNB Smart Chain (BSC) and its related Layer-2 (L2) chains, meaning that all activity on the blockchain is paid in BNB, which thus means that it’s necessary to hold some of it, no matter what you want to do on the network. In other words, more exchange users and more transactions on the BNB Chain both push incremental demand for the coin.
On the supply side, BNB’s auto-burn feature removes coins from the float — coins in public circulation — at regular intervals, based on price and block production, providing a structural offset to issuance and a modest tailwind to coin prices if demand is steady or rising. That mechanism is also paired with constant coin burning as part of every transaction’s gas fees. Although neither of these two drivers of a shrinking supply is likely to make anyone rich, they do contribute to the coin’s upward trajectory.
BNB Chain is among the busiest networks by daily active users, a useful proxy for demand for space on the blockchain and thus its gas fee-based burning. Furthermore, Binance itself remains one of the largest centralized exchanges (CEXes) by market share, which means it can add large numbers of newcomers and continue to expand the business. A larger, more active exchange increases demand for BNB.
But the coin is 100% reliant on Binance continuing to expand its exchange, as well as the BNB Smart Chain, to have any real growth over the long term. Thus far, Binance has followed through — but it’s fundamentally still a crypto exchange, not a fintech or other type of company that could target a vast addressable market for its services. Therefore, it is unlikely that BNB will make investors into millionaires, as the scale of growth that it would need to accomplish is probably not going to occur even on a long time horizon.
As you can guess, Dogecoin’s story is very different from BNB’s. It doesn’t have any real utility, and its tokenomics are less favorable.
The protocol issues 5 billion new coins per year, which means that supply is always growing, unlike BNB’s shrinking supply. Unless there is growing demand for Dogecoin, its supply growth is at odds with price appreciation.
The even bigger challenge is utility. Dogecoin does not natively support smart contracts on its base layer, which limits the growth of decentralized finance (DeFi) or complex decentralized apps (dApps) that might create persistent demand for the coin. There are proposals to bolt on new capabilities or provide interoperability with other chains, but those efforts are early, may be contentious, and are not guaranteed to be ready for rollout anytime soon, or ever.
To be fair, this coin is widely listed by crypto exchanges, is very well known, and has plenty of liquidity. Its notoriety and survival for more than a handful of years now means it probably won’t go to zero even though it has no anchors for its value. But its adoption bursts have historically been sporadic, and without a reinforcing economic loop, they inevitably fade. Even if Dogecoin minted millionaires in the past, it is thus not reasonable to bet on it repeating the feat in the future for anyone who buys it today.
So where does all of that leave investors?
Dogecoin can still surprise investors in spurts, and it might evolve into something greater eventually, but today it lacks a mechanism that adds value with usage. And that’s a dealbreaker.
Assuming a long holding period, BNB is the better builder of wealth because it benefits from activity in two growing areas, specifically Binance’s exchange and on-chain demand. It won’t make you a millionaire, but it might be worth owning.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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