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What is Binance Smart Chain(BSC)?

May 21, 2022 - 5 min read

Binance Smart Chain (BSC) is a parallel blockchain that adds smart contracts and programmability to the Binance Chain, thereby establishing a dual-chain system.

Binance Smart Chain (BSC) provides a complete ecosystem for developing high-performance decentralized applications. It seeks to reduce transaction fees and provide an environment for the development of dApps and other DeFi products.

Binance Smart Chain

Binance is most likely the world’s largest digital asset exchange. Binance, the centralized exchange is renowned for its constant innovations, including introducing new items to the market and acquiring and selling possibilities for digital assets. However, Binance is much more than simply a centralized exchange; it is an entire blockchain and financial products ecosystem.

The cryptocurrency exchange Binance announced Binance Smart Chain (BSC) on September 1, 2020, to enable dApp creation with greater capacity, faster speeds, and lower latency than Ethereum.

BSC also sought to use the current Binance Chain’s (BC) high transaction capacity, which was designed to promote decentralized cryptocurrency trading. As BC was geared for rapid trading, it lacked flexibility in terms of programming, hence the necessity for BSC. BSC has added Ethereum Virtual Machine (EVM) functionalities, allowing it to execute Ethereum-based applications. This makes it easy for developers to move their Ethereum projects to BSC or configure them to function with BSC.

Binance Smart Chain (BSC) dApps

BSC is EVM-compatible and is launched with support for the vast ecosystem of Ethereum tools and dApps, enabling the development of powerful decentralized applications. The users can track the applications on DefiStation, DappRadar, and the Math dApp Store. Some of the most famous dAapps are built on Binance Smart Chain (BSC) are:

PancakeSwap: PancakeSwap is the most prominent automated market maker (AMM) on Binance Smart Chain. Additionally, the user can make passive income by providing liquidity to one or more liquidity pools. Just be mindful of temporary loss before making a deposit.

Venus: Venus is a system for borrowing and lending akin to Compound or Aave on Ethereum. It is a decentralized market for lending and borrowing BEP-20 tokens with algorithmically determined interest rates.

Autofarm – Autofarm is a BSC-based yield aggregator. It is comparable to the Ethereum token yearn. It automatically seeks the ideal method for users to make a return on their deposits.

BurgerSwap – BurgerSwap is a popular AMM on BSC. Users can swap BEP-20 tokens and provide liquidity.

Spartan Protocol: The Spartan Protocol is a protocol for synthetic assets on BSC. It enables users to construct liquidity pools for BEP-20 tokens, similar to several existing AMMs.

How do they work?

Proof of Staked Authority (PoSA) is a Proof-of-Stake consensus used by the Binance Smart Chain, in which participants stake $BNB (the native asset of Binance) to become validators. Every 24 hours, BNB stakeholders choose 21 validators to serve on the blockchain. The chosen validators will secure the network.

PoA is renowned for its resistance to 51 percent of attacks and tolerance for Byzantine attacks. Validators receive transaction fees for validating and submitting confirmed blocks (which reflect transactions). Unlike many other chains, validators earn transaction fees from the existing supply of BNB rather than newly-minted BNB. This is since BNB is non-inflationary, and the Binance team routinely burns a percentage of its collection.

Dual-chain architecture is utilized by BSC so that consumers can smoothly move assets between blockchains. This allows for swift trading on the Binance Chain and the development of sophisticated dApps on BSC. BEP-2 and BEP-8 tokens of Binance Chain can be swapped for BEP-20 tokens, which can be viewed as the new standard for Binance Smart Chain. BEP-20 coins are derived from ERC-20, the most used standard for Ethereum tokens.

What can users do with Binance Smart Chain?

BSC is compatible with EVM and is launched with support for the vast array of Ethereum tools and decentralized applications (dApps). This makes it simpler for developers to move their projects away from Ethereum and onto another blockchain. Furthermore, it means apps such as MetaMask can be set up to function with BSC, which is beneficial for users. In all seriousness, it entails doing little more than adjusting a few parameters here and there.

Users can send and receive BNB and other BEP2 tokens while using cross-chain functionality. Through the bscscan, API, and node RPC interfaces, they can investigate the transaction history and blocks present on the chain. In addition, they can Stake user BNB to receive certain block rewards.

Binance Smart Chain and DeFi

With so many protocols, networks, and dApps focused on increasingly adding DeFi solutions, the trend appears to be here to stay. Therefore, decentralized finance (DeFi) could almost be considered “the word of the year in Blockchain 2020.” 

Additionally, DeFi has emerged as an intriguing investment opportunity for the Binance Smart Chain. As was just mentioned, the additional staking features offered by BSC make it possible for holders of BNB tokens to receive a yield on the Binance coin, which leads to a rise in the token’s overall utility. In addition, the Binance Smart Chain provides a degree of adaptability that enables the utilization of assets from a variety of different chains within the dynamic and ever-expanding DeFi environment.

Final Thoughts

Users of cryptocurrencies can take advantage of a decentralized application (dApp) platform that is both quick and inexpensive, thanks to Binance Smart Chain. The functionality of the original Binance Chain has been significantly expanded by introducing the Binance Smart Chain, which also joins a variety of innovative protocols aimed to bridge the gap between different blockchains. The platform has the potential to become an ideal engine for developers who are working on powerful decentralized apps, thanks to the promise of BNB staking and EVM compatibility.

References

  1. (2021, 22 Feb.). How to get started with Binance Smart Chain (BSC). Binance Academy.
  2. Community, B. C. (2020). Binance Chain documentation. Binance Chain Docs
  3. Schout, G. (2021, 5 Jan.). Introduction to Binance Smart Chain. Medium
  4. Vermaak, W. (2021, 4 Mar). What is Binance Smart Chain?. CoinMarketCap.

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