Technological transformations are underway in the ecosystem tied to the world’s largest crypto exchange, Binance: Two previously separate blockchains are being merged to become fit for MetaFi christened tasks.
The Binance crypto exchange has been active since 2017 and has since become the global market leader. Investors know the Binance Coin (BNB) as the forerunner of all discount tokens, which has now become the fourth most valuable cryptocurrency by market capitalization. In addition, since 2020, the Binance Smart Chain (BSC) has established itself as the technological foundation for a variety of DeFi projects and DApps. Now, Binance is reorganizing its ecosystem and plans to drop the company name in the process, as an official blog post explains. Even if you as an investor won’t feel much of the far-reaching changes in your everyday life at first, it’s worth taking a look at the details:
Background on the new BNB Chain
Previously, the Binance Coin was based on its own blockchain and the Binance Smart Chain operated separately from it for DeFi. Now, the two blockchains will be merged into one multi-chain system, which is named BNB Chain. In parallel, the ticker abbreviation BNB will no longer stand for Binance Coin, but for “Build and Build”. However, BNB will (for now) continue to guarantee discounts on fees and additionally serve as a voting token (governance token) in strategic decisions. The associated blockchain is now called BNB Beacon Chain.
Second part of the new BNB Chain is the previous BSC, which now becomes shorthand for BNB Smart Chain and remains interface to DeFi. In the BNB Chain, transaction fees continue to be calculated and collected in BNB. The old BSC was sometimes criticized for having only 21 network nodes that could confirm transactions. The number of such network points, often called Super Nodes, in the merged BSC will be increased to 41, promising greater decentralization.
Why the significant rebuild at Binance?
Binance writes that the ecosystem around BNB is evolving in the direction of becoming many times larger than the original crypto exchange itself. The figure of 1 billion users is becoming realistic, and DeFi’s revenues are steadily increasing. Currently, for example, DeFiLlama counts a good $13 billion in deposited capital with the (old) BSC, making the DeFi there the third largest in the world. In fact, Binance is reducing its direct influence on the BSC with the upgrade in concept, for which the term “evolution” is used.
As a second weighty argument for the far-reaching changes, Binance cites the artificial word MetaFi. This is to include the crypto divisions DeFi, Metaverse, NFTs, blockchain gaming, Web3 and others under an easy-to-remember abbreviation, which also deliberately no longer includes any allusion to Binance. With upcoming technological updates, the BSC will be set up even more efficiently for MetaFi, they say.
Conclusion: innovative concept at Binance or mere PR stunt?
The success of Binance, BNB and BSC in the past was closely linked to the fact that, on the one hand, own products such as IEOs enriched the market and, on the other hand, trends such as NFTs were quickly integrated. However, the starting point for this was usually the Binance team itself.
With its new motto “Build and Build”, Binance is hinting at handing over more responsibility and opportunities to the community in a transparent way. An important part of this is increased decentralization, which is also protection against the BSC ecosystem being affected if the Binance crypto exchange runs into problems.
Binance founder Changpeng Zhao (CZ) had predicted years ago that centralized approaches like his crypto exchange would lose importance and the crypto industry would grow where decentralized principles prevail. With the reorganization, his conviction is clearly visible.
Whether MetaFi will prevail as an umbrella term for the growth sectors of Bitcoin and Co. is another matter. To be sure, Binance is already right that the boundaries between DeFi and GameFi, between Metaverse and Web3 are often blurred. But MetaFi initially sounds unfamiliar and like a buzzword. Here, the future must show whether MetaFi will naturalize into the vernacular of the crypto scene.
Investors like you should keep in mind: With the new BSC and Binance’s partial retreat in the order of the ecosystem, cryptocurrency BNB is by no means becoming less important. BNB remains the base currency for everything that is built in and around the BSC. There is potential here for medium- and long-term price gains.