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Binance Smart Chain was launched in 2019, Binance Smart Chain is a blockchain platform developed by the popular centralized cryptocurrency exchange to support the decentralized exchange Binance DEX, which allows users to trade directly with each other. It also supports Binance Coin (BNB), which started on Ethereum but was converted through a token exchange.
Binance Chain launched relatively quickly and was optimized for fast trading, but lacked the extensive functionality needed to support a wider range of decentralized applications (dapps).
However, due to the limitations inherent in blockchain systems, the chain is not very flexible – smart contracts in a system optimized for fast trading can significantly overload the network (Ethereum Blockchain).
Scalability remains one of the most challenging obstacles to blockchain development. And this is where Binance Smart Chain comes in.
What is Binance Smart Chain?
Binance Smart Chain (BSC) is best described as a blockchain that runs alongside Binance Chain. Unlike Binance Chain, BSC offers smart contract functionality and compatibility with the Ethereum Virtual Machine (EVM). The design goal was to keep Binance’s broadband network intact while at the same time introducing smart contracts into its ecosystem.
Basically, the two blockchains work side by side. It should be noted that BSC is not a so-called Layer 2 or Offline scaling solution. It is an independent blockchain that could work even if Binance Chain was down. However, the two chains are very similar in terms of design.
Since BSC is EVM compliant, it has been released with support for the extensive Ethereum and DApps toolbox. In theory, this allows developers to easily port their projects from Ethereum. For users, this means that applications like MetaMask can be easily configured to work with BSC. Seriously, it’s just about improving a few parameters. See Using MetaMask for Binance Smart Chain to get started.
What can you do with the Binance Smart Chain?
Binance Smart Chain is truly for decentralized app developers, whether they are looking for a platform to build a new app or want to portray the Ethereum project. With a dual-chain system, EVM support, and Binance backing, the company hopes to bring developers into its ecosystem, creating value for all stakeholders.
As Binance founder Changpeng “CZ” Zhao said, the company sees Binance Smart Chain as a way to bridge the gap between centralized and decentralized finance. Binance has set up a $ 100 million fund to support Decentralized Finance (DeFi) projects that run on the blockchain, including up to $ 100,000 for some individual projects.
How does Binance Smart Chain work?
Consensus
Binance Smart Chain provides approximately 3 seconds of block time with a Proof-of-Stake consensus algorithm. In particular, it uses what is called the Proof of Staked Authority (or PoSA) when contributors play BNB to become validators. If they offer a valid block, they will receive commissions for the transactions included in it.
Note that unlike many protocols, the new BNB does not support block subsidies as BNB is not inflationary. In contrast, BNB’s supply decreases over time as the Binance team regularly burns coins.
Cross-chain compatibility
The Binance Smart Chain was conceived as an independent system, but complementary to the existing Binance chain. A dual-chain architecture is used, the idea is that users can seamlessly transfer assets from one blockchain to another. Thus, one can enjoy fast trading on Binance Chain, and powerful decentralized applications can be built on BSC. With this interoperability, users have access to a large ecosystem that can accommodate many use cases.
BEP-2 and BEP-8 Binance Chain Tokens can be exchanged for BEP-20 Tokens, the new standard introduced for Binance Smart Chain. Have you read the introduction to ERC-20 tokens? Then you will already be familiar with the BEP-20 format. It uses the same features as its Ethereum counterpart.
To move tokens from one chain to another (for example, from BEP-2 to BEP-20 or vice versa), perhaps the easiest way is to use the Binance Chain wallet available in Chrome and Firefox. See Using a Wallet to Expand Binance Channels section for more information.
What’s special about Binance Smart Chain?
The cross-compatibility between Binance Chain and Binance Smart Chain offers an intriguing tandem of opportunities for developers, allowing them to leverage the respective strengths of the two blockchains to maximize the functionality and performance of their decentralized applications.
In addition, EVM compatibility means that decentralized applications can be ported from Ethereum and then potentially improved and expanded on the Binance smart chain. There are many new blockchains looking to steal some of the thunder from Ethereum through EVM support, including Avalanche and Telos, and Binance is adding its name to this list with Smart Chain.
Binance has the advantage of massive name recognition in the space, not to mention significant funding and liquidity given its thriving exchange and ecosystem.
What’s the Future of Binance Smart Chain?
This is the start of the Binance Smart Chain, which launched in early September 2020 after the concept was unveiled earlier this year. Backed by Binance – arguably the most dominant company in the cryptocurrency industry – Binance Smart Chain is poised to establish itself as a convenient alternative for a decentralized financial market, largely based on Ethereum.
Interestingly, the launch of the Binance Smart Chain and the determined effort to woo DeFi developers runs counter to Binance’s core business of a centralized exchange. As more developers build DeFi apps on BSC, and users continue to follow, we can expect the ecosystem to grow horizontally, adding a wider range of different types of decentralized apps to the network.
With Binance’s $100 M initial developer fund backed by BSC and high network adoption in the first three months, it’s hard to imagine the current growth trajectory to slow anytime soon.
While Binance Smart Chain is unlikely to become an Ethereum killer, its engagement with a pioneering smart contract platform coupled with low transaction fees and fast transaction times may be the right ingredient to do so. That the channel is becoming the leading DApp platform in the market alone.
