What is the Binance Smart Chain (BSC)?

If you’re interested in crypto industry trends, you’ve probably heard of the Binance Smart Chain (BSC). What sets the BSC apart and makes it the increasingly popular blockchain for DeFi?

These days, Ethereum (ETH) and Binance Coin (BNB) are rushing from one all-time high to the next. The main reason for this is their success as native tokens in the rapidly growing Decentralized Finances (DeFi) market. And Binance’s ecosystem as the largest crypto exchange in the world is built on the Binance Smart Chain (BSC), a self-developed current generation blockchain, in this field. In direct comparison with Ethereum’s blockchain, the BSC scores with fees lower by a factor of 100 and more, as well as significantly higher speed.

In addition to these two very important factors for DeFi, the BSC is technologically compatible with the DeFi market for Ethereum. The Binance Smart Chain has integrated the Ethereum Virtual Machine (EVM), which allows smart contracts to be transferred easily. This also makes it possible in the BSC to turn Ethereum and related ERC-20 tokens into user-friendly so-called BEP2E tokens, which are then suitable for use on the BSC. Common DApps for Ethereum are also no problem due to the EVM for the BSC.

Binance Smart Chain – important to know

The BSC is based on a combination of the Delegated Proof-of-Stake (DPoS) and Proof-of-Authority (PoA) protocols. The principle behind DPoS is that in BSC, 21 network nodes are elected as validators every 24 hours. These nodes, also known as super nodes, thus release transactions. PoA serves as a second protection mechanism that evaluates the honesty and reliability of validators and thus further secures the steady flow of transactions. With a block time of 3 seconds, the BSC is clearly superior to Ethereum’s blockchain with 13 seconds there. For their part, Ethereum supporters know that their blockchain protocol Proof-of-Work, which is still in use, barely stands up to DeFi’s requirements. But they also point out that with DeFi under ETH, an actual decentralized network is the underpinning. In the case of BSC, the restriction to 21 validators and thus only limited decentralization can be criticized. However, the BSC has not attracted attention with irregularities so far, which would immediately also shake the trust in the BSC and thus the business models.

Ecosystem around the BSC

Since the beginning of the year, the BSC has gained users and applications at a rapid pace. The linchpin here is PancakeSwap as a decentralized crypto exchange (DEX), which is giving its ETH version Uniswap increasingly stiff competition. Lending transactions on the BSC are mostly handled via Venus and Autofarm has proven itself for yield farming on the BSC. Projects on the BSC have long since moved beyond copying ideas from the Ethereum ecosystem and are pushing the use of BSC with their own initiatives such as betting on price trends of BNB. CoinMarketCap already counts an impressive 130+ projects in its overview of the BSC ecosystem. Also, the ever-increasing number of transactions processed via BSC and the rapid growth of active BSC wallets testify that DeFi has become a highly vibrant business at Binance Smart Chain.

Conclusion: how can I participate in the success of the Binance Smart Chain?

The positive price developments for Ethereum and Binance Coin can be logically derived from the fact that without ETH and BNB DeFi makes little sense in the respective ecosystems. Thus, you do not even have to delve deeper into the topic of DeFi to take advantage of profit opportunities there, but can also simply invest in the underlying cryptocurrencies. With BNB, you can also profit from staking through interest on deposits in Binance Coin, if desired. In general, Binance has listed simple entries into DeFi with fair risk assessment under the menu item “Finances”. For further success of the BSC speaks that Binance supports developers with well-filled cash for project ideas. At Ethereum, the EIP-1559 improvement proposal could catch the problem of high transaction fees in the summer, before the protocol switch to proof-of-stake is to be accomplished in the medium term with Ethereum 2.0. We also have a background on how BSC / BNB and Ethereum are competing in the DeFi space here for you. It is quite possible that we will continue to see two winners here.

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