Binance Smart Chain (BSC)
Binance Smart Chain (BSC), launched in September 2020, is a blockchain that adds programmability and interoperability to the Binance Chain (BC) platform. It has 1.3m active users on a typical day and more than 1150 dApps in the ecosystem. It was created to run in parallel to BC and facilitate the implementation of smart contracts for tokens. It also includes a brand-new staking system for BNB, one of the most popular cryptocurrencies in the world with a market cap of 87.80 billion.
Binance Smart Chain is based on a 21-validator system with Proof of Staked Authority (PoSA) consensus, which allows for faster block times and reduced fees.
Unlike BC, BSC supports smart contracts and is compatible with the Ethereum Virtual Machines called EVMs. In principle, this should make it simple for developers to migrate their applications or projects from Ethereum to BSC.
The dual-chain design of BSC lets users create digital assets and decentralized apps (dApps) on one blockchain and trade them on the other utilizing the blockchain's fast trading speed. It takes around 3 seconds to complete a transaction.
Although BSC and BC are quite similar in design and operate side by side, Binance Smart Chain is a standalone blockchain that could continue operating even if Binance Chain went offline.
Now, let's move on to the pros and cons of the Binance Smart Chain blockchain.
- The most significant incentive for developers and users to migrate from Ethereum and other smart blockchains to the BSC is the low cost of transactions and on-chain activity. The same transfer on Ethereum, for example, might cost over 1,000 times more than on BSC during periods of substantial Ethereum network congestion. Furthermore, BSC's gas prices are relatively constant, as shown in the chart below.
- Cross-chain compatibility is a great feature of BSC. It not only works with the Ethereum virtual machines (EVMs), but it also accepts pegged currencies from a variety of other blockchains. For example, AnySwap is the cross-chain Decentralized Exchange (DEX) on BSC. This allows users to generate several tokens to use on the platform. Token liquidity, value, and utility are all enhanced by cross-chain interoperability.
- BSC is one of the fastest smart contract blockchains due to its transaction speed. It generates blocks every three seconds, whereas it takes 13 seconds on Ethereum, implying that it is at least four times quicker.
- EVM compatibility is a tremendous advantage for developers. By forking the Geth Ethereum client, BSC becomes known to Solidity developers, giving the Binance network quick access to an existing dev and user community. Furthermore, because it is less expensive to run dApps on BSC, it is simple to move projects over from Ethereum.
- Finally, BSC services are available in a variety of languages. The Binance UI, for example, is available in 16 languages. PancakeSwap, one of the most popular BSC apps, offers more than 30 languages. This makes it easier for those who don't speak English to understand the blockchain.
- BSC, like the BC, is centralized. Proof of Staked Authority (PoSA) consensus mechanism is employed, which necessitates the usage of 21 validators to keep the chain operating. Most of the top validators on the Binance Chain are owned by Binance, either directly or indirectly. System failures, regulatory compliance mandates, and even hackers attacks are more likely with centralized systems. Even if Binance the platform was shut down or banned by a government, the blockchain will continue to operate. However, huge chunks and features of the network may be missing. We cannot sure what will work and what won’t, but it is safe to say that this is a risk for projects on the chain considering the increased scrutiny that Binance is under.
- Binance went to considerable efforts to replicate the Ethereum network, making migrating Ethereum-based dApps to BSC a breeze. As a result, there hasn't been much innovation in BSC beyond what's currently accessible on Ethereum. Binance will always be in the shadow of Ethereum until it invests in local innovation on the BSC network.
- It is complicated and resource-consuming to become a network validator on BMC. Binance authorizes all network validators on the BSC. Even though the present size of the ledger is just approximately 50GB, there is already a 500GB storage space demand. Despite this, the amount of space required to store the entire sequence of blocks is rapidly increasing due to the short block period. In comparison, nearly ten years old, Bitcoin's blockchain takes up just 320GB of space.
Projects on Binance Smart Chain
With the rise of DeFi, GameFi and NFTs, there is a pressing demand for scalable blockchains. This is because blockchains such as Ethereum are costly and unable to scale. Since 2017, the Ethereum platform has often experienced network congestion, record-high gas prices, and other difficulties.
As a result, investors, developers, and project founders have turned to Binance Smart Chain as an alternate. BSC is faster and less costly than Ethereum. Developers are using it for various development projects, including the construction of Binance Smart Chain tokens, exchanges, wallets, and more.
On the BSC, the Venus protocol is one of the most promising projects. Venus is an algorithmic money market system that provides the BSC with a decentralized lending and credit system. The BSC's low costs and quick transfers make money marketplaces like Venus more appealing for token creators than Ethereum-based platforms.
PancakeSwap is one of the most popular Automated Market Maker (AMM) DEX on BSC. PancakeSwap provides swapping BEP-20 tokens security and efficiency, which is why it has outperformed Uniswap in terms of transaction volume. PancakeSwap is unquestionably less expensive and quicker (average transaction time of 5-seconds) than Uniswap.
The Binance Smart Chain network is home to a slew of diverse protocols and platforms. The network has 1,150+ projects covering DeFi, GameFi, NFTs, Metaverse, and numerous other categories. The DEX transaction volume exceeded $300 billion, with DeFi TVL at $27 billion.
BSC has worked to enhance its capabilities over the previous year. It is less expensive and quicker, enabling developers to construct high-performance applications on top of it.
Roadmap for the Future
To boost the use of digital assets and blockchain technology, Binance announced a $1 billion Crypto Mass Adoption Fund for Binance Smart Chain. There are four main key initiatives listed below:
- Liquidity Incentive Program: This $100 million program will stimulate further innovation and adoption by assisting projects in achieving long-term liquidity and user growth.
- Builder & Incubation Program: This $300 million program will help BSC startups (Builders/Developers) become more stable, dependable, and important elements of the crypto ecosystem.
- Talent Development: This $100 million will mentor developer communities, educate new crypto investors, and provide academic scholarships to universities, among other things, in order to raise a generation of crypto-native professionals who will spread across the industry and push blockchain adoption forward.
- Investment Program: This $500 million fund will invest directly in projects and startups and co-investment collaborations with industry leaders in various fields. It will help to accelerate mainstream adoption and bring disruption and innovation to legacy financial infrastructures and traditional industry sectors.
BSC's mentorship committee will use the $1 billion fund to help developer communities in technology research and development. A total of 100 innovative dApps/infrastructures built on top of BSC will receive mentorship and investment possibilities from leading VCs. The BSC community will also host regional and worldwide hackathons, cooperative bug bounty campaigns, and developer conferences leading into 2022.
If we see the BSC's rapid rise, the blockchain community does not appear to be prepared to pay a significant price for decentralized and censorship-resistant ecosystems right now. On the other hand, decentralized solutions may once again prove cost-effective in the long term. Furthermore, all Ethereum knockoffs, including BSC, rely on Ethereum innovation. There is no BSC without Ethereum or at least no new features.
BSC would have to build its own developer community independent of Ethereum in order to establish itself as a prominent smart contract platform. Only time will tell how the BSC will compete with other blockchains in the future, especially as Ethereum 2.0 makes the world's largest decentralized smart contract blockchain more inexpensive and scalable.