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Oxalus Insights

What Is BNB Smart Chain (BSC): 2022 Updates

Guides Oct 23 2022

In the early days of blockchain, Ethereum was the largest network with the most projects developed on it. However, with the development of Web3, a series of blockchains with different advantages were born to compete with Ethereum, the most prominent of which is BNB Chain.

Binance Coin or BNB Coin is the native token of the massive Binance ecosystem, developed by the largest cryptocurrency exchange by capitalization. One of the things that makes the Binance ecosystem unique is the fact that it is made up of BNB Beacon Chain and BNB Smart Chain (BSC), both of which run side-by-side and offer different features. In this article, we will take a closer look at the more popular ecosystem – BNB Smart Chain.

What is BNB Chain (BC)?

BNB Chain is a global, decentralized network with a large number of developers, validators, users, and HODLers. The BNB Chain includes:

  • The BNB Beacon Chain (previously Binance Chain) for governance (Staking and Voting)
  • The BNB Smart Chain (previously Binance Smart Chain), which is compatible with the Ethereum Virtual Machine (EVM).

Binance was officially established in 2017 with their token BNB, while Binance Chain and Binance Smart Chain (BSC) were introduced later. As Binance became popular, BSC also gained more and more interest due to the push of the DeFi trend at the time.

The BNB token has continuously grown since its launch as an ERC-20 token on the Ethereum network. By 2019, it moved to the Binance Chain and leveraged Binance to grow the BSC network, which was officially launched in September 2020. With the ambition to take BNB beyond the concept of Binance and reach its true potential, in February 2022 Binance officially combined Binance Chain and Binance Smart Chain to become BNB Chain.

The goal of BNB Chain is to increase interoperability and develop the underlying infrastructure of the “parallel virtual world of the world”, an attempt to enter Binance’s recent MetaFi, with the ambition to take BNB beyond outside of Binance. The commitments of BNB Chain to the community are as follows:

  • Open
  • Multi-chain
  • For creators and inventors
  • Permissionless
  • Forever decentralized
  • And bigger than Binance

According to Binance CEO ChanpengZhao (CZ), BNB (formerly known as Binance Coin) stands for “Build and Build”. In addition, BNB also acts as a governance token. BNB holders will have the right to make their voices heard and participate in the decentralized chain governance of BNB Chain.

What Is BNB Smart Chain (BSC)?

The first blockchain developed by Binance is not BSC, it is called Binance Chain. However, it has some limitations in terms of programmability. To solve these problems, a blockchain network called Binance Smart Chain is designed to use smart contract-based applications.

The platform’s goal is to allow developers to build decentralized apps (DApps) and to assist users in managing their digital assets cross-chain in a high-capacity, low-latency way. BSC has also implemented the Ethereum Virtual Machine, allowing it to execute Ethereum-based applications. It’s no surprise that the top DApps on BSC are all DeFi protocols, including PancakeSwap, Venus, or ApeSwap. In February 2022 Binance officially rebranded BSC to the BNB Smart Chain.

How Does BNB Smart Chain Work?

Binance Smart Chain uses the Proof of Staked Authority (PoSA) protocol, where participants stake their BNB to become validators. If they propose a valid block, they will receive fees from the transactions. Because there is no new supply for newly mined BNB, BNB will not suffer from inflation as Binance regularly burns coins.

BSC also adopts a dual-chain architecture, so users can seamlessly transfer assets from one blockchain to another. With this structure, users can take advantage of the fast transfers and transactions of the Binance Chain, while BSC serves the purpose of running powerful DApps. It’s a powerful extra feature because if one of the blockchains fails for some time, the other will still run.

Unlike the native tokens on the BNB Beacon Chain, the tokens on the BSC adopt the BEP-20 token standard. Thanks to cross-chain compatibility, digital assets between both chains such as BEP-2 and BEP-8 tokens from Binance Chain can be easily swapped with BSC’s BEP-20 tokens.

Advantages of BNB Smart Chain

Low Gas Fee

BSC currently charges an average of 5 Gwei per transaction, which is significantly less than Ethereum’s approximately 30-40 Gwei. Using Dapps on BSC will help you save your budget significantly.

Cross-chain Compatibility

BSC also supports cryptocurrencies from other blockchains, allowing users to store more types of tokens than most other blockchains. The tokens will have more value as they are compatible with multiple blockchains.

Transaction Speed

Currently, BNB Smart Chain maintains its position as one of the fastest blockchains in the world. In BNB Smart Chain, blocks are generated every 3 seconds, unlike Ethereum, which takes 13 seconds to generate a block.

EVM – Compatibility

BNB Smart Chain is a blockchain compatible with the Ethereum Virtual Machine (EVM), so BSC users have easy access to applications developed on the Ethereum network. In addition, it becomes easier and more cost-effective to migrate or initialize existing Ethereum applications onto EVM-compatible networks.

Trusted platform

BSC is developed by the world’s largest cryptocurrency exchange. Furthermore, the Proof of Stake Authority consensus helps to ensure the security and reliability of the network.

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Drawback of BNB Smart Chain

Deflationary Tokens

The total supply of BNB is gradually decreasing due to Binance’s coin-burning mechanism, resulting in fewer balances. Therefore, when there is an increase in demand but little supply, it can lead to an increase in the price of BNB, which will affect transaction costs.

Dependence on Ethereum

Currently, the most disruptive features in the industry are rooted in the Ethereum network. Therefore, if BNB Smart Chain does not actively create something new, BSC will not be able to surpass ETH to take the leading position.

Centralization

Currently, there are only 21 validators in the BSC network, so it is still too centralized. Centralized systems are vulnerable to system failures, attacks, regulatory compliance, and even hacking.

BNB Smart Chain vs BNB Beacon Chain

BNB Beacon Chain is the Binance’s first blockchain. The BNB Beacon Chain helps govern the BNB chain by allowing users to stake or vote. It is a decentralized and transparent blockchain with low transaction fees. BNB Beacon Chain also allows you to securely store your cryptocurrencies and create trading pairs with other cryptocurrencies. Unfortunately, the BNB Beacon Chain does not have the flexibility to support developers running smart contracts in that network. BNB is also designed to facilitate asset transactions within the Binance Chain network, thus cannot be used in any other blockchain than Binance. These are the factors that made Binance develop a new network called BSC.

BNB Smart Chain is a blockchain developed for compatibility with the Ethereum virtual machine (EVM), which makes it easy for developers to migrate their projects from Ethereum. BNB Smart Chain was developed to build an enabling environment for the development of high-performance DApps. Moreover, it is built to be cross-chain compatible with BNB Beacon Chain to ensure stable operation. It also allows the application of smart contracts, which has made it more convenient for users in terms of transaction fees and offers lower transaction fees in an agreement.

The Future Of BNB Smart Chain

Not only focusing on the development of MetaFi, but BNB Chain has also announced several more technological advancements expected for the rest of 2022, including BSC Application Sidechains and new BSC partition chains. MetaFi’s goal is to build and promote new, functional ecosystems based on digital assets that enable mass adoption of the metaverse. Combining these different blockchain projects creates a fully parallel ecosystem serving users from all over the world. With BNB Chain, creators, developers, and entrepreneurs will have the opportunity to build the infrastructure that powers the world’s MetaFi of the future.


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