A Look at The Binance Smart Chain (BSC) – How Does It work?
The Binance Smart Chain (BSC) is the latest addition to Binance’s ecosystem. This fourth-generation has built blockchain to bring advanced features and DeFi capabilities into the network. The BSC was devised as an independent blockchain to the network’s original Binance Chain project.
The developer’s decision to pursue a dual-chain architecture has paid off. The new blockchain increased both the usability and functionality of the network’s utility token, BNB. The additional benefits gained from the new network have translated over into direct gains for BNB holders.
Benefits of The Binance Smart Chain
There are many benefits that users now enjoy, thanks to the BSC’s structure. Primarily, Binance users now have direct access to DeFi features such as staking and farming. It built the BSC from the ground up to encourage developers to create and run these applications within the Binance ecosystem.
Smart Contract Support
Unlike its predecessor, Binance Chain, BSC supports the creation and running of smart contracts. Users can build their decentralized apps and digital assets with ease utilizing the network’s interface. Additionally, the BSC was designed to be compatible with the Ethereum Virtual Machine (EVM). This approach allows developers to deploy Dapps that It originally built on the Ethereum blockchain to the BSC without altering the core coding.
One of the main benefits achieved by the BSC integration is cost-effectiveness. Currently, Ethereum’s network is congested and experiencing record high GAS fees. Ethereum applications utilize GAS to complete instances of the EVM. This congestion directly equates to higher costs for the average user. In contrast, BSC users can conduct complex transactions for pennies. It’s these cost savings that have helped to drive more interest in the BSC.
The BSC was designed to be highly responsive. The network offers high performance and can conduct multiple transactions when it takes Ethereum users to complete one. For example, Ethereum is structured to approve blocks approximately every 5-minutes. In comparison, BSC is capable of producing a block every 3-5 seconds. Faster block times equal a more responsive network with more scalability.
The BSC is far more flexible than the Binance Chain. The network is capable of cross-chain transactions such as atomic swaps. This functionality helps to improve the network’s decentralized exchange (DEX) capabilities. These transactions also play a vital role in helping to reduce congestion. The BSC was designed to offer access to all the latest DeFi features available to users. The network supports non-fungible tokens (NFTs), pegged coins, staking, farming, and P2P lending.
How Does The Binance Smart Chain Work
The BSC introduces a new token standard to the market, BEP-20. BEP-20 allows developers to create and issue tokens that can represent all types of assets, ranging from real-world options such as real estate all the way to decentralized blockchain tokens. Notably, BEP-20 can be considered BSC’s version of the popular ERC-20 standard first introduced by Ethereum in 2017.
One of the first benefits realized by BNB token holders was the ability to stake their tokens. The BSC supports staking directly from the network’s wallet. Staking is one of the most popular DeFi options available today. Users can earn rewards with very minimum effort when they stake their BNB.
Farming is another top feature that has become popular over the last few months. Farming is a bit more flexible than staking because it requires no lockup period or early withdrawal penalties.
NFT Creation and Support
The BSC has also enabled the network to enter the NFT market. NFTs are one of the fastest-growing sections of the blockchain industry. These tokens provide an extra layer of scarcity to digital assets. Notably, there are already NFTs selling for millions of dollars.
Pegged coins are another development that has seen a lot of attention this year. Pegged coins derive their value from other assets. These assets can be pegged to precious metals such as gold or fiat currencies. They can also receive their value from other cryptocurrencies or a basket of currencies. The BSC has simplified the creation and issuance of these tokens.
The Binance Launchpad directly leverages the BSC features to provide Initial Exchange Offering (IEO) capabilities to the network. IEOs are a crowdfunding strategy designed to remove some of the technical and financial barriers encountered by early ICOs. An IEO directly offers tokens to users via the exchange rather than hosting a crowdfunding event. The benefits are that companies gain instant access to Binance’s huge network of users.
The BSC gains much of its speed and efficiency from using a Proof-of-Authority (PoA) consensus mechanism. Unlike a Proof-of-Work network, like Ethereum, a PoA network uses only select nodes to conduct transaction approvals. This method is a bit more centralized than PoW networks like Bitcoin but offers more scalability and faster transaction times.
The BSC introduces some community governance systems to provide users with more say on how the network develops. BNB holders can submit proposals for adding trade pairs or other vital upgrades. These proposals are then put to the vote, with BNB users making the final approval decision. Community governance mechanisms serve an important role in keeping a project’s community involved and cohesive.
History of The Binance Smart Chain
The official BSC mainnet went public on September 1, 2020. This event was quickly followed by a campaign to drive Dapp developers to the network. Specifically, Binance hosted a $100 million developer seed fund to encourage more participation from the market. This fund paid off quickly as there are now over 50 Dapps live on the BSC.
According to Dappradar, BSC’s transaction volume hit a record high of $745 billion in February 2021. Impressively, the network surpassed Ethereum in terms of unique active wallets entering service that month. Specifically, It opened 108,000 new BSC wallets in February 2021 alone.
The Binance Smart Chain – Another Key Maneuver by One of the Biggest Players in the Game
The decision to launch the BSC is one of Binance’s biggest moves. The network is now free from a reliance on Ethereum. Additionally, the timing was impeccable. Developers have been hungry for cheaper DeFi alternatives ever since Ethereum’s GAS prices peaked. As such, the BSC now offers a viable alternative to users and developers alike. You can expect to see significant growth on this network over the coming months as more Dapp developers shift to this more efficient alternative.