Binance Smart Chain

• Ayushi Abrol
• June 22, 2024

What is Binance Smart Chain?

After completing a year and a half of successful running of Binance chain, in 2020, Binance introduced BSC or Binance Smart Chain. It was surprising that Binance, rather than just upgrading their already available blockchain platform to the next level, chose to make a whole new one. When questioned about the same, they replied that if the already existing Binance chain was upgraded, it would have eventually worn down the speed of the Binance Chain, and hence making a new one was the best they could try. This newly introduced sibling of the Binance chain had the same features and functions as Ethereum and platforms like Tron and EOS (dApp platforms).

Binance took a chance and succeeded; they created a parallel blockchain that was highly compatible with Ethereum, one of the most popular and top dApps available today. Since Binance Smart Chain is derived initially from Go Ethereum (Geth), some adjustments were made to distinguish it from the original Ethereum (dApp). In contrast to Ethereum’s current Proof of Work (PoW), they chose a Proof of Staked Authority consensus mechanism. With PoSA, the time and cost of transactions have been reduced.

What is Binance Chain (BC)?

The exchange introduced the Binance Chain to the crypto world in April 2019, and the main focus of the Binance Chain was to provide a decentralized and ultra-fast trading option. Along with the launch of the Binance Chain, they also launched DEX to give higher outputs.

What Binance intended to change by introducing the Binance chain was the poor user experience provided by other DEXs. Binance wanted to give the best user experience and lay out the users with professional transactions. But Binance Chain has not yet reached its most updated version. So, as of now, Binance Chain only provides a decentralized trading option. But that doesn’t mean that Binance Chain is limited to this only; they have other services, some of which are listed below:

• Binance allows the exchange of digital assets, including their native currency BNB.
• Tokens can be minted, burned, locked/unlocked, or frozen/unfrozen to regulate supply and issuance.
• Release of new tokens according to the BEP-2 standard. The BNB token, a BEP-2 token on the BC blockchain, is an example.

Moreover, the Binance chain uses the BFT (Byzantine Fault Tolerance) Tendermint, one of the most popular chains of the cosmos blockchain.

 

Attribute of BSC

Independent Blockchain

Even though it is a sibling blockchain of the Binance Chain, that doesn’t mean that Binance Smart Chain has anything to do with it. Binance innovative chain is a standalone blockchain and does not connect with Binance Chain other than from the same parent Binance Exchange. So even if the Binance chain is shut down or stops working, Binance Chain will work without any interference or technical glitches.

Ethereum Compatible

Binance Smart Chain’s smart contracts support and are compatible with Ethereum dApp. As a result, the BSC network enables developers to create and migrate DApps, tools, and other ecosystem components without experiencing any difficulties.

Native Compatibility

There is no communication restriction between BC and BSC even though Binance smart chain is not a layer two solution. This non-restriction is there because Binance smart chain is a parallel blockchain to Binance Chain and independent from BC. As a result of this feature, the users can transfer their cryptocurrencies from the Binance chain to Binance smart chain and vice versa.

Supports Staking and Community-Based Governance

The platform uses a proof-of-stake consensus model, specifically a proof-of-staked-authority (PoSA) model. In addition to participating in network security and voting on community governance protocols, Binance (BNB), the native token of BSC, can be staked in the form of BNB. Proof-of-Stakes (PoS) can also process transactions faster, making them more competitive with networks that still use full proof-of-work schemes.

Validator Quorum 

For securing the network of the Binance smart chain, a validator quorum is a necessity. The blockchain has 21 validators in total, which the stakes of BNB will elect every 24 hours, which means that every 24 hours, you can see new validators taking their place. There is no special qualification needed for a validator; anyone can be a validator, but under a restriction, only those people who come under the top 21 will be allowed to become one of the validators. This cycle will repeat again and again every 24 hours.

Platform validators may update the BSC network during the “epoch” period—an epoch period to consist of 240 blocks which will take approximately 20 minutes. Additionally, BSC has implemented “slashing” to disincentivize malicious actors to approve or double sign inaccurate transactions. Attackers who use a slashing attack expose themselves and make their attempts extremely costly.

Proof-of-Staked-Authority

To maintain blockchain security and achieve network consensus, BSC combines delegated PoS (Proof-of-Stake) and PoA (Proof-of-Authority), the best way to secure the platform. As well as being able to fend off 51% attacks, PoA is known for its openness to Byzantine attacks. Furthermore, elected validators will check each transaction and confirm it only after moving the transaction to ensure the transactions are better secured. The validators also help produce the block in a Poof-of-Authority (PoA) manner. If a person wants to become a validator, they should stake BNB. The validator receives the transaction fees incurred by the block if the block pushed forward by them is added to the chain.

Working of the Binance Smart Chain

It is possible to create and distribute test net tokens that can represent multiple types of assets if they are compatible with the Bep-20 standard. The term token refers to distributed block assets, ranging from real-world assets such as real estate to distributed block assets. As the BSC version of the ERC-20 introduced by Ethereum (ETH) in 2017, BEP-20 tokens are considered the BSC version of ERC-20. Binance smart chain has many features one can use. From these wide ranges of parts, some of the best ones are listed below:

Cross-Chain Compatibility

The Binance smart chain was built as a parallel blockchain to the Binance chain. Even though Binance smart chain is independent of the Binance chain, it works on a dual chain architecture. The double chain feature helps send and receive the assets from one blockchain to another without messing it up. Cross-chain compatibility is one of the features that have helped the Binance chain to be able to transfer assets faster than other blockchains. Binance smart chain can also support powerful decentralization apps. For example, Binance Chain Wallet, available on Chrome and Firefox, is probably the simplest way to move tokens between chains (e.g., BEP-2 to BEP-20 or vice versa).

Consensus

Using the Proof-of-Stake consensus algorithm, you can achieve a block time of three seconds. It uses a concept known as Proof of Staked Authority (or PoSA), in which participants stake their Bitcoins in exchange for the right to validate transactions. As soon as a valid block proposal is approved, they will receive the transaction fees from all transactions included in the block.

Pegged Coins

Pegged coins have gained much attention from defi experts in the past few years. Coins become valuable when linked to other assets, multi-chain currencies, or cryptocurrencies. Gold and fiat currencies are examples of precious metals with which to attach them.

Staking

One of the initial benefits of BNB (Build and Build), formerly Binance Coin, token holders was that they could stake their tokens. Wallets used for the cross-chain are supported directly by the binance smart chain. In today’s market, staking is among the most popular and the most commonly used DeFi and Metaverse options. When users stake their Build and Build (BNB), they will be receiving their rewards faster than usual. And especially with Binance Smart Chain’s ultra-fast transactions of assets and bitcoins, staking has been made easier. And this is one of the main reasons binance smart chain is becoming more and more popular every day.

NFT Design and Support

BSC has a strong presence in the NFT market. The NFTs are a component of blockchain systems that have been gaining popularity for their ability to add a scarcity layer to digital assets. The price of some NFTs ranges from tens to hundreds of thousands of dollars.

How is Binance Smart Chain different from Ethereum?

Binance smart chain is built compatible with Ethereum; because of this, the features and functions of the binance smart chain are similar to that of Ethereum. But that doesn’t mean that BSC is the ditto copy of Ethereum. On the contrary, they have their own some differences, which are listed out below:

•  Validator staking requirement for Ethereum is stake 32 ETH, whereas, for binance smart chains, it is the stake of at least a 10000 BNB to become eligible.
• The branding of Ethereum is not under its company’s name, but for BSC, the branding is under the company name Exchange Binance.
• Centralization in the case of validator numbers is larger in the case of the Binance smart chain and less in the case of Ethereum.

Advantages of Binance Smart Chain

• Low gas fees

BSC currently charges 5 Gwei on average for transactions, significantly less than Ethereum’s 40 Gwei. Compared to Ethereum, running a dApp on BSC is 8x more affordable.

• Cross-chain compatibility

The Ethereum virtual machine (EVM) is not the only thing that BSC supports. It also supports pegged coins from other blockchains, allowing users to create a variety of tokens they can use on the network. Tokens have more value because they are compatible with multiple blockchains.

• Transaction speed

As of now, Binance smart chain is one of the world’s fastest blockchains. BSC is well known for its lightning-fast transactions. In a Binance smart chain, the blocks are made every 3 seconds, unlike Ethereum, which takes 13 seconds to create a block.

• EVM- compatibility

The Binance network gains easy access to a vibrant developer and user community by forking the Geth Ethereum client. Aside from the fact that BSC’s dApps are the cheapest ones to run, it’s also easier to transfer, create and send existing Ethereum apps over. Ethereum’s dApps, in comparison, are faster and more efficient.

• Credible platform

Its credibility runs across all of its platforms, including BSC, one of the most popular exchanges. Furthermore, the exchange vetting every validator on the network, which ensures the security and reliability of the blockchain development, participates in the PoSA consensus.

Drawbacks of Binance Smart Chain

• Deflationary Tokens

The coins are undergoing coin burn mostly every day, which has led to fewer balances. Therefore, when a situation comes where there is a growing demand but the supply is less, there could be a supply squeeze. This will affect the transaction costs.

• Overdependence on Ethereum

Binance took too much inspiration from Ethereum that outside Ethereum features, they can’t develop anything else that is not present in Ethereum. So if Binance smart chain doesn’t improvise in ways Ethereum hasn’t, then BSC will always remain under the shadow of Ethereum.

• Centralization

Centralization is one of the main disadvantages of Binance, and the PoSA has caused Binance a very big central point of failure. 

Final Words

Binance Smart Chain has become the most popular blockchain in the world within a few years. The blockchain Binance smart chain has more than thirteen million transactions in a day and has crossed records because Ethereum has only done around 1.7 million transactions on the same day. Even with the new upgrade that Ethereum is trying to bring in this year, it is highly doubted whether this upgrade will be enough to beat Binance smart chain. There is more to Binance than what we have discussed and always more to learn defi. But this small article would have gotten you all you need to understand about BSC. Also if you want to be a defi expert you must take up a Blockchain Course.