Binance Smart Chain (BSC) is a blockchain network designed for running smart contract-based applications. BSC runs in parallel with Binance’s native Binance Chain (BC), which enables its users to get the best of both sectors: the high transaction capacity of BC and the smart contract functionality of BSC.
Additionally, Binance Smart Chain also implements the Ethereum Virtual Machine (EVM), which allows it to run Ethereum-based applications like MetaMask.
The platform aims to allow developers to build decentralized applications (DApps) and help users manage their digital assets cross-chain with low latency and large capacity.
Binance Smart Chain has made immense traction in early 2021 so far partly because of Ethereum’s congestion and gas fee issues, which has made developers and staking investors look for other options. The BSC community made the network even more appealing to newcomers as a cost-effective and stable alternative, by lowering its gas fee from 15 Gwei to 10 Gwei to counter Binance Coin (BNB)’s insane price surge to over $300 in February.
Here are some of the attributes of BSC:
While it runs in parallel with BC, Binance Smart Chain is a standalone blockchain. In other words, even if BC stops operating, BSC will continue to run its technical and business functions.
Smart contracts, which are Ethereum-compatible, are backed by BSC. Through this feature, developers can build or migrate DApps, tools, and other ecosystem components on the BSC network without much friction.
Supports Staking and Community-Based Governance
The platform runs on a proof-of-stake (PoS) consensus model, particularly, proof-of-staked-authority. BSC’s native token, the Binance Coin (BNB), can be staked to contribute to network security and vote on community governance protocols. Its PoS model also allows it to process transactions faster, putting it above networks that still implement full proof-of-work (PoW) models.
BC and BSC can communicate with each other without friction, despite BSC not being a layer 2 solution (as it is an independent blockchain, parallel to BC). This makes it seamless for users to move their cryptocurrencies between BC and BSC.
Binance Smart Chain combines both delegated PoS and proof-of-authority (PoA) to achieve network consensus and maintain blockchain security. PoA is known for its capacity to stop 51% of attacks, as well as its tolerance for Byzantine attacks.
In this model, elected validators take turns in confirming transactions on the network and are tasked to produce the blocks in a PoA manner, which puts the amount of their stake and their reputation in the community into consideration. To become a validator, users need to stake BNB.
This consensus model enables Binance Smart Chain to achieve around three-second block times. If a block proposed by the validator gets added to the chain, they receive the transaction fees incurred in that block as their reward.
A validator quorum is needed to secure the Binance Smart Chain network. The blockchain has 21 validators, elected by BNB stakers every day. Anyone can be a candidate for election as a validator, but only those who belong to the top 21 highest-staked nodes will be selected for the next validator set.
There is an “epoch” period for the platform, where validator sets can update the BSC network as needed. Every epoch period includes 240 blocks, which is around 20 minutes.
BSC also implements “slashing” to disincentivize bad actors from validating inaccurate transactions or double signing. Slashing is built to expose an attacker and make their attempts extremely expensive to execute.
Binance Coin (BNB)
BNB is the Binance native utility token, that can be used both for BSC and BC. BNB is mainly used to pay for transaction fees on the BC and Binance DEX platform, staking, and asset transfers. BNB can also be used to run smart contracts on its smart chain.
For those who plan to participate in network security or earn additional BNB rewards, BNB can be staked on a smart contract. And should users wish to, they can delegate their stake to a BSC validator of their choice and earn proportional rewards.
Moreover, validators can decide how much of the BNB they collected from gas fees get to be redistributed to their delegators.
Other Supported Tokens
BEP2 and the upcoming BEP8 standards are both BC and BSC-supported tokens. ERC-20 tokens, or BEP2E tokens, as they are called in the network, are supported on the BSC blockchain. There are various ways to further “enhance” ERC-20 tokens on the platform just by adding more identifiers on an asset, like token denomination, owner address, and decimal precision definition, among others. This process is called “token binding.”
In the BC platform, you’ll see tokens launched that are pegged to a counterpart native token (also called “Peggy coins”). These tokens are also backed on the Binance Smart Chain network. This enables developers to launch DApps that can facilitate cross-chain exchange without trust, just like what PancakeSwap was able to achieve on its platform.
The ascent of BSC in 2021 cannot be described without mentioning the PancakeSwap exchange. The BSC-based decentralized exchange has seen a huge growth in 2021, both for trading volume as well as its governance token CAKE, with total value locked on the exchange increasing from $150m on Jan. 23 to $2.5 billion as of the beginning of March 2021. PancakeSwap has become the second most popular DEX after Ethereum’s UniSwap as of publication time.
It involves BNB holders placing their “bonded” tokens in a staking pool. Then, they can delegate their tokens to a selected validator or candidate. They can re-delegate their tokens to another validator as soon as the election for the next validator set starts.
Elected validators have the power to distribute their blocking reward to their delegators.
To compete with Ethereum, BSC implements its staking logic on BC to support this feature. This means that token bonding or delegation happens on top of the BC network, not BSC.
Usage of Binance Smart Chain in various projects
Since the launch of Smart Chain in April, its development team has been developing and integrating it with various projects. The most important projects and announcements related to it can be mentioned as follows:
In May 2020, the Smart Chain team introduced their first test network, the Rialto. This experimental network demonstrated Smart Chain’s focus on empowering decentralized applications, the use of the Credit Acceptance Consensus (PoSA) algorithm, as well as the ability to stake and select BNB tokens for voting in the validators selection process. In addition, this test showed that it is possible to safely transfer tokens between two Binance Blockchain.
Following the launch of Rialto, Binance launched an update called Chapel for Smart Chain to replace the experimental network. This update improved the security of the Binance smart chain and brought new features to it.
Binance announced on July 23 that it had merged Smart Shain’s Experimental Network with Oracle Chainlink Decentralized Data. The merger will allow developers to access the future of the Binance smart contract platform and use real-world data for decentralized applications, contracts, protocols, and more. This alliance between the largest digital asset exchange today and the most widely used decentralized Oracle project will undoubtedly contribute to the development of blockchain protocols.
ANKR simplifies the staking process by providing an easy-to-use interface as well as the cloud space required to execute a Binance node. Note that ANKR is not necessary to become a node, but it will make the process easier.
Binance Smart Chain Concluding Thoughts
The Binance Smart Chain is a speedy and low-cost DApp platform. It’s no surprise that the number of daily unique active wallets has risen to 50,000 as of Feb. 9, 2021, and that its total transaction volume had reached $15 billion in January 2021.
As long as the most popular smart contract-based blockchain, Ethereum, continues to struggle with congestion, slow transaction speeds, and exorbitant transaction fees, we can expect to see the growing adoption of more affordable alternatives such as BSC, Polkadot and Cardano continue.