Introduction To Binance Smart Chain

Jan 5, 2021 5 min read
Introduction To Binance Smart Chain

Everything You Want To Know About The Binance Smart Chain

Hi Readers👩‍💻,

It’s been a while since we’ve published an introduction to one of the many interesting, exciting new networks and blockchains out there. So, that’s why today, we’d like to share everything we’ve found out about the Binance Smart Chain.

For those of you who are unfamiliar with Binance, let’s first have a quick look at what this company is all about. Binance started out as — and still is — a cryptocurrency exchange founded by Changpeng Zhao, an entrepreneur who previously created high-frequency trading software.

Binance is most probably the largest digital asset exchange in the world. The exchange is known for its continuous innovations, bringing new products to the market, and new options for purchasing and trading digital assets. But, Binance isn’t just a centralized exchange, it is a whole ecosystem of blockchain and financial products.

In April 2019, they launched the Binance Chain (not to be confused with the Binance Smart Chain). Binance Chain is a blockchain project that allows anyone to issue, use, and exchange digital assets on the blockchain, its native asset is BNB.

Binance DEX is the decentralized exchange that runs on top of the Binance Chain and simultaneously is its most used and well-known DApp.

Binance Chain is a basic design in terms of application, the main goal being to facilitate fast trading while being able to handle large numbers of transactions. Binance Smart Chain (BSC) is a parallel blockchain that delivers smart-contracts and programmability to the Binance Chain and in a nutshell, creates a dual-chain system.

Binance Smart Chain launched on September 1st, 2020. The blockchain can be best described as a parallel blockchain of the Binance Chain. However, unlike Binance Chain, BSC has a smart contract feature and compatibility with the Ethereum Virtual Machine (EVM).

  • EVM — Ethereum Virtual Machine: virtual machines create a level of abstraction between the executing code and the executing machine. That layer improves the portability of software and makes sure applications are separated from each other and their host. Read everything about the EVM here.

The goal Binance had when creating the BSC was to keep the Binance Chain’s high throughput intact while also introducing smart contracts to their ecosystem. While BSC is a parallel blockchain, it is not a layer two or off-chain scalability solution, it is its own independent blockchain that can continue to run independently if Binance Chain would go offline, for example.

Since the BSC is EVM compliant, it can draw on the many Ethereum tools and DApps, making it easier for developers to transfer their projects from Ethereum. It also means that users can configure other exchanges, games, etc. with BSC as it is a matter of adjusting a few settings. Some top DApps build on Binance Smart Chain are:

  1. PancakeSwap — with 9.2k users, this platform is a decentralized exchange running on Binance Smart Chain, with lots of other features that let you earn and win tokens.
  2. RocketGame is a decentralized gaming platform on which you can find anything from lotteries to dicing and card games.
  3. BLINK is a mining DApp build on the BSC.
  4. BurgerSwap is a DeFi platform that combines the trading liquidity providing elements of the Uniswap Protocol with staking and decentralized governance, super low fees, and fast transactions.
  5. Venus Money Market to enable digital asset lending and generation of synthetic stablecoins backed by a basket of various BEP-20 assets.

🧐 How Does Binance Smart Chain work?

Binance Smart Chain uses a Proof-of-Stake consensus called Proof of Staked Authority (PoSA), in which participants deploy $BNB (Binance native asset) to become validators. If they propose a valid block, they will receive a transaction fee for the transactions included in it. Unlike many other protocols, there is no block distribution for the newly minted BNB: BNB is non-inflationary and it, therefore, diminishes over time, as the Binance team burns assets regularly.

BSC uses dual-chain architecture so that users can seamlessly transfer assets from one blockchain to another. That way, fast trading on Binance Chain can be done while powerful DApps can be built on BSC.

Binance Chain’s BEP-2 and BEP-8 tokens can be exchanged for BEP-20 tokens, which can be seen as the new standard introduced for Binance Smart Chain. BEP-20 tokens extend from ERC-20, the most common Ethereum token standard. Which you can see as the blueprint for digital assets that define how they can be spent, who can spend them etc. To move tokens from one chain to another (i.e. BEP-2 to BEP-20 or vice versa), you can use the Binance Chain Wallet.

💰 Binance Smart Chain and DeFi

Decentralized Finance (DeFi) could almost be seen as “the word of the year in Blockchain 2020”, with so many protocols, networks, and DApps focussed on increasingly adding DeFi solutions, the trend seems to be here to stay. DeFi during writing has a USD locked value of 15 billion, according to defipulse. So, it’s not strange that with so much popularity and so many assets locked, DeFi has also become an interesting investment for the Binance Smart Chain.

BSC offers new staking capabilities that allow BNB token holders to earn a yield on the Binance coin (as discussed above), which results in increased utility for the token. Additionally, Binance Smart Chain offers a flexibility that lets assets from a number of different chains to be used in the fast-growing DeFi environment. Applications such as PancakeSwap allow users to exchange trustless assets (just like Uniswap), participate in yield farming, and vote on proposals. DApps like Venus and Cream.Finance offer lending and borrowing services. Bridges such as Binance Bridge allow seamless peg tokens to the BSC ecosystem and use them in smart-contract applications. NFTs and collectibles are thriving too.

This commitment to DeFi is further reinforced with the $100m DeFi Accelerator Fund, which already funded 15 projects as of December 2020. Binance Smart Chain is now one of the fastest-growing DApp and DeFi ecosystem, with major players already present in the landscape.

Watch the video below for 6 Binance Metrics you should know.

More Information & Sources

DISCLAIMER: This is not financial advice. Staking, delegation, and cryptocurrencies involve a high degree of risk, and there is always the possibility of loss, including the loss of all staked digital assets. Additionally, delegators are at risk of slashing in case of security or liveness faults on some protocols. We advise you to do your due diligence before choosing a validator.

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