Binance is the world’s largest cryptocurrency exchange based on trading volume and one of the most popular exchanges out there today. Its cryptocurrency Binance coin (BNB) is third in market cap after Bitcoin and Ethereum. The Binance Smart Chain was launched by Binance in 2019 to facilitate decentralized trading through Binance DEX, the decentralized exchange. The platform aims to allow developers to create DApps and assist users to manage their digital assets with minimal latency and high capacity. Here we will take a look at what Binance Smart Chain is, how it works, and what you can do with the Binance Smart Chain.
What is Binance Smart Chain?
Binance Smart Chain was launched in September 2020 and facilitates developers to create their own dapps using smart contracts. Binance’s native chain isn’t capable of providing such functionalities, but the Binance Smart Chain was developed to implement similar kinds of rapid transactions while also consider increasing the features and abilities. It is also compatible with the Ethereum Virtual Machine and is competent to operate Dapps ported over from Ethereum.
Binance Chain and Binance Smart Chain are designed to work in unison, but they are different blockchains. Binance Smart Chain is not a layer two or off-chain scalability solution, but an independent blockchain and will function properly even if the Binance Chain went offline. But, Binance has designed secure cross-chain compatibility between the two chains. Assets can be instantly transferred between the BC and BSC, thus combining the fast trading abilities of the Binance chain with the smart contract functionality of the Binance smart chain.
How does Binance Smart Chain work?
Binance Smart Chain employs a unique consensus algorithm called Proof-of-Staked Authority, a combination of proof-of-stake and proof-of-authority algorithms. Validators on the network stake a specific amount of BNB coin and then earn transaction fees when they validate approved blocks on the chain. The chain manages to achieve a block time of approximately 3 minutes. Because of the cross-chain compatibility between the Binance chain and the Binance Smart Chain, Binance Chain’s BEP-2 and BEP-8 tokens can be swapped for Binance Smart Chain’s BEP-20 tokens. The simplest method to move tokens between the chains will be through the Binance Chain Wallet, available as extensions on Chrome and Firefox.
Features of Binance Smart Chain
- Strong and developing digital asset ecosystem powered by Binance DEX, a promising decentralized exchange
- Minimal transaction fees that could be as low as 1 cent
- Increased performance with a network capable of maintaining a block time of 3 seconds
- Cross-chain DeFi tools that improve DeFi interoperability
- Highly supportive Binance ecosystem that funds and develops many DeFi projects
- A thriving ecosystem of millions of crypto enthusiasts on Binance.com and Binance DEX
- Most of the significant crypto projects are already collaborating with BSC
Advantages of using Binance Smart Chain
1. Cheap transactions
The low fees for transactions and on-chain operations could be decisive in making developers and users move from Ethereum and other smart blockchains to the Binance Smart Chain. At peak times, the transaction fees and times in BSC could be significantly better than Ethereum. Also, the gas fees on BSC are almost always constant. The average transaction fee has always been around $0.15 since the beginning. Gas fees could be very high even for simple transactions at peak times in Ethereum. The cheap transaction costs on BSC is one of the biggest advantages of BSC.
2. Faster adoption rates
While decentralization is the aim of BSC, the centralized nature of Binance certainly has some advantages. Because Binance has an already established user base, the Binance Smart Chain will get far more exposure. This will enable significantly faster adoption than the natural development of a blockchain project not supported by a big name like Binance. The number of unique addresses and the total number of transactions has exponentially risen in a short period of time.
3. Bridging allows easy token migration
Developers have built numerous cross-chain bridges so the Binance Smart Chain users can transfer tokens from one blockchain network to another with ease. The Binance Bridge presently supports over 40 tokens and lets users easily transfer assets such as USDT, ETH, and several other tokens to and from Binance Smart Chain.
The brand name of Binance provides several advantages. Along with the increased exposure, Binance’s support also gives a huge quantity of technical, talent, and financial resources. In October 2020 Binance committed $100 million from its treasury to create the BSC Accelerator Fund. These funds will be used to finance protocols, wallets, explorers, other tools, and infra for their budding blockchain projects.
Here we have looked in detail at the Binance Smart Chain, its working, features, and advantages. It is still in its infancy. With the launch of the smart chain and its support fund for DeFi apps, Binance is going all-in on decentralized finance. The company considers DeFi as an opportunity to create better blockchain solutions. Binance Smart Chain has all the potential to be a mainstay in the DeFi scene.
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