The Back Story: Binance Smart Chain (BSC)
|— Binance Smart Chain (BSC) is an Ethereum-compatible blockchain that offers the same smart contract capabilities at much cheaper transaction fees.|
— One of the leading advantages of BSC is that it offers its users the benefit of lightning-fast transaction speeds, even though it is somewhat centralized.
— BSC has enjoyed tremendous growth in users since January 2021, thanks to its global outreach, generous Accelerator Fund, and ease of use.
Dipping your toes in DeFi and wondering what’s all the fuss about Binance Smart Chain? we’ve got you covered, here is the BSC back story.
Blockchain is the heartbeat of all things DeFi. So that means, without it, there is no decentralized finance or any of its related applications. Even Fox Studios recently announced they are launching the “first-ever animated series curated entirely on blockchain.”
Binance Smart Chain (BSC) is a newer blockchain protocol that is enticing users because of its low gas fees and lightning-fast transaction times. But to better understand BSC, let’s break down what blockchain is before hitting the road.
Blockchain: a crash course
Blockchain is a tamper-proof, shared digital ledger that records transactions in a decentralized peer-to-peer network. We are surrounded by ledgers in our day-to-day lives. For example, the mobile banking app on our phones is a form of a ledger. The critical difference is that someone (a central authority) maintains control of the funds on our mobile banking apps.
Decentralization is the backbone of blockchain, the most crucial concept in digital currency. It offers several components that make up financial freedom; transparency, immutability, and trustless transacting. If a blockchain network is not decentralized, could it be interpreted as just another database instead of a blockchain? Anyone who controls it could easily change it on a whim.
Moreover, when assets are traded between peers in the network, the transactions are permanently recorded. This makes blockchain tamper-proof, which drastically reduces fraudulent activity. No more shutting off your debit card because some stranger decided to go crazy with it at their local grocery store, in a random country you’ve never been to.
What is Binance Smart Chain (BSC?)
Our story begins back in April 2019, when Binance launched their own blockchain, Binance Chain. The aim was to create a high-speed blockchain that could support a large number of transactions. To achieve this, the team behind Binance Chain chose not to support multiple apps, and decided to focus only on its primary app – the Binance DEX.
In the meantime, DeFi on Ethereum is flourishing, and Binance realizes they, like Ethereum, need smart contract capabilities to keep up with the momentum. Their bits of code execute when a set of pre-defined conditions have been met. Which lays the foundation for lending, borrowing and other decentralized finance activities.
So back to Binance. At this point, instead of adding all these capabilities directly onto Binance Chain and risk bogging the network down, they decide to launch Binance Smart Chain (BSC). A Binance blockchain that aims to compete with Ethereum.
BSC: where’s the difference?
Realizing time is of the essence in establishing a cost-effective alternative to Ethereum, Binance cuts the time-consuming task of building its own smart-contracts from the ground up, and implements its own PoA (proof of authority) protocol.
In fact, BSC even uses a specific PoA consensus algorithm; Proof of Staked Authority (PoSA.) In this particular protocol, there are only 21 validators confirming transactions, at any given time. In turn, this makes BSC more centralized than other platforms.
Interestingly, BSC engineers its platform to become compatible with Ethereum. That is to say; it can run apps and execute smart contracts, using Ethereum’s model but charging its users only a fraction of Ethereum’s gas fees.
As a centralized network, BSC offers a much-needed affordable alternative to Ethereum. It also boasts faster transaction times. The network is governed by the Binance token, BNB, which users need to pay network fees. BNB is currently worth just under $400 per token to give you an idea of adoption rates.
To BSC or not to BSC?
Ask anyone in DeFi if they prefer Ethereum or BSC, and you’ll be surprised at the responses you receive. BSC has brought significant benefits to Binance, which is a centralized entity, and DeFi in general.
With an attractive array of benefits for users such as super-fast speeds, cheap transaction fees (as low as 1c), dApp creation, and a network of millions of users, many are choosing TO BSC indeed.
Also – let’s not forget that BSC is behind PancakeSwap, the network’s main DEX and one of the top-rated DEXs in DeFi.
Perhaps the best way to understand the good, the bad and the ugly is by comparing a side-by-side list. Let’s break this down:
Binance Smart Chain offers practical solutions to users who might be new to DeFi, or those who are primarily looking for a cheaper option than Ethereum. That’s not to say that crypto enthusiasts are dropping the ball on blockchain entirely. Rather, BSC is a reliable ecosystem that has proved its use case in statistics alone.
As of press time, the daily increase in new wallet addresses is around 400,000, with over 74 million total unique addresses. These are big figures, enough to prove that the network is growing at a voracious speed.
Food for thought
It’s doubtful that millions of crypto geeks disregard the concept of decentralization. But, isn’t blockchain supposed to be synonymous with financial inclusion? BSC, though not decentralized, offers the kind of outreach to developing countries that Ethereum couldnt achieve because of its hefty transaction fees.
In contrast, what are BSC’s users sacrificing in the long run? Decentralization, definitely. Security? Likely. What about all the trust they are forced to place in Binance itself, as a centralized authority?
The fact that BSC and so many other networks like it are popping up every day, highlights that users might really not want to pay a high premium in the name of decentralization. On the other hand, if there was no Ethereum, would any of these networks ever have existed?