Binance Smart Chain is a new platform that is developed to lower transaction costs and provide a space to create DApps and other DeFi products.
Binance Smart Chain (BSC) is a blockchain network which aims to run smart contract-based applications. BSC works in parallel with Binance’s native Binance Chain (BC), that make it possible to users to get the advantages of both worlds, including high transaction capacity of BC and the smart contract functionality of BSC. Furthermore, Binance Smart Chain also performs with the Ethereum Virtual Machine (EVM), which enables it to run Ethereum-based applications like MetaMask. This platform aims to make the opportunity for developers to build decentralized applications (DApps) and allow users to manage their digital assets cross-chain with low latency and large capacity.
Binance Smart Chain has received wide attention in early 2021 due to Ethereum’s congestion and gas fee issues, which caused developers and staking investors to look for other cheaper options. The BSC community accordingly lowered its gas fee from 15 Gwei to 10 Gwei and countered the jump in Binance Coin (BNB) price to over $300 in February; therefore, they made the network a better choice to new users as a cost-effective and stable alternative.
What Is Binance Chain (BC)?
As the name suggests, Binance Chain (BC) is a blockchain developed by Binance. It aims to provide a decentralized exchange (DEX) for crypto assets. BC follows the Tendermint Byzantine Fault Tolerance (BFT) consensus and delegated proof-of-stake (DPoS). It is developed based on the forks of Tendermint and Cosmos SDK.
What Is Binance Coin (BNB)?
Binance Coin (BNB) is the main token introduced by BC, and was first introduced in July 2017, initially as an ERC-20 token. Like some other blockchains, here the transactions on BC burn BNB tokens; a fee schedule is considered roughly in this regard every three months. The initial maximum supply of 200 million BNB is already considered and burns may continue until this supply reaches 100 million.
BNB, as the main token, is used as the gas fees for transactions on BC, issuance costs for new assets, minting and burning costs and more. BNB also powers the BSC, and is used to delegat staking by authority validator. Binance users also may take the advantage to use BNB to pay for trading fees on the exchange.
What Is Binance Smart Chain (BSC)?
BSC could be defined based on the following features.
Independent Blockchain
While it runs in parallel with BC, Binance Smart Chain is considered a standalone blockchain which means that BSC will operate its technical and business functions even if BC stops running.
Ethereum-Compatible
BSC supports Smart contracts, which are Ethereum-compatible. Developers can use this feature to build or migrate DApps, tools and other ecosystem components on the BSC network with no trouble.
Supports Staking and Community-Based Governance
This platform operates on a proof-of-stake (PoS) consensus model, specifically, proof-of-staked-authority. Binance Coin (BNB) as BSC’s token is strengthened to contribute to network security and vote on community governance protocols. The PoS model used also allows the process of transactions faster, putting it above networks that still implement full proof-of-work (PoW) systems.
Native Interoperability
It is assured that BC and BSC freely communicate with each other without friction, however BSC is not a layer 2 solution (notice that it is an independent blockchain, parallel to Binance Chain). This confidently allows users to move their cryptocurrencies between BC and Binance Smart Chain .
Proof-of-Staked-Authority
BSC combines authorized PoS and proof-of-authority (PoA) to achieve network consensus and maintain blockchain security. PoA is known for its capacity to countract 51% of attacks, and also tolerate Byzantine attacks.
This model includes elected validators who take turns in confirming transactions on the network and are responsible to produce the blocks in a PoA method; this improves their stake and their reputation in the community. A user has to stake BNB in order to become a validator. The model permits BSC to gain three-second block times. If a block proposed by the validator gets added to the chain, the transaction fees incurred in that block are delivered to them as reward.
Validator Quorum
A validator quorum must secure the BSC network. BNB stakers elect 21 validators for the blockchain every 24 hours. Anyone has the chance to be chosen as a validator, but the next validator set only includes those who belong to the top 21 highest-staked nodes.
“Epoch” period for the platform allows validator sets to update the BSC network as required. Every epoch period consists of 240 blocks, which gives around 20 minutes.
BSC makes use of “slashing” to omit malicious actors from validating inaccurate transactions or double signing. Slashing is designed to expose an attacker and make their attempts extremely expensive to execute.
Binance Coin (BNB)
The Native token of Binance is called BNB, which can be used both for Binance Smart Chain and BC. BNB is mainly used to pay for transaction fees on the BC and Binance DEX platform, staking and asset transfers. BNB is also used to apply smart contracts on BSC.
If you wish to participate in network security or make additional BNB rewards, there is the possibility to stake BNB on a smart contract. Furthermore, users ask a BSC validator to help with their choice and earn proportional rewards. Validators may also decide about the amount of BNB they collected from gas fees to be redistributed to their delegators.
Staking BNB
Staking BNB requires the holders to place their “bonded” tokens in a staking pool. Then, they can choose a validator or candidate to delegate their tokens to. They can re-delegate their tokens to another validator as soon as the election for the next validator set begins. Elected validators are able to distribute their blocking reward to their delegators.
BSC makes use of its staking logic on BC to remain compatible with Ethereum. This means that token bonding or delegation happens on top of the BC network, not BSC.
Conclusion
Crypto users enjoy working with Binance Smart Chain as it is a speedy and low-cost DApp platform. It is interesting to know that the number of daily unique active wallets was up to 51,000 in September 2021 and the total transaction volume reached $15 billion in recent time.
While some famous blockchains such as Ethereum are still struggling with congestion, slow transaction speeds and exorbitant transaction fees, we can expect to see the increased adoption of more affordable alternatives like BSC, Polkadot and Cardano.
