Binance launched Binance smart Chain in April 2019. Home to the Binance Token ($BNB) coin, it is optimized for ultra-fast trading. To achieve this, it had to make inevitable trade-offs, one of which was that it was not as flexible from a programmability standpoint as other blockchains. Smart contracts in a system optimized for fast transactions could significantly congest the network. For example, how CryptoKitties brought the Ethereum blockchain to a standstill at its popularity and scalability height remains one of the most challenging obstacles to blockchain development.
Binance Smart Chain aims to change this problem. It is a new blockchain with a complete environment for developing high-performance decentralized applications. It was built for cross-chain compatibility with Binance Chain to ensure users get the best of both worlds. Binance Smart Chain went live on the mainnet on September 1, 2020, activating the blockchain parallel to Binance Chain, which enabled the creation of smart contracts and the staking mechanism for BNB.
What is Binance Smart Chain (BSC)?
Binance Smart Chain (BSC) is best described as a blockchain that runs parallel to Binance Chain. However, unlike Binance Chain, BSC features smart contract functionality and Ethereum Virtual Machine (EVM) compatibility. The design goal here was to leave Binance Chain’s high performance intact while introducing smart contracts to its ecosystem.
BSC is not a layer two or off-chain scalability solution for the existing Binance Chain. It is an independent blockchain that could run even if Binance Chain went offline. Because BSC supports EVM, it makes it easy for developers to port their projects from Ethereum. For users, it means that apps like MetaMask can be easily configured to work with BSC just by tweaking a couple of settings.
Binance Smart Chain vs Binance Chain: Differences?
How does Binance Smart Chain work?
Binance Smart Chain was conceived as a separate but complementary system to the existing Binance Chain with the idea that users can seamlessly transfer assets from one blockchain to another. In this way, fast trading can be enjoyed on Binance Chain, while powerful decentralized applications can be built on BSC.
Binance Smart Chain supports the BEP-20 token standard, which uses the same features as its Ethereum counterpart ERC-20, while Binance Chain supports the BEP-2 token standard. BEP20 is a developer-friendly token standard that allows anyone to deploy fungible digital coins or tokens on Binance Smart Chain. Additionally, leading digital assets on other chains can be transferred to Binance Smart Chain in the form of pegged BEP20 tokens. For example, you can use Binance Bridge to exchange bitcoin (BTC) for BTC-backed BTCB (BEP20) tokens. BTCB (BEP20) tokens can be implemented in DeFi protocols to gain performance in bitcoin. The same goes for ETH, XRP, DOGE, and many more.
To move tokens from one chain to another, the simplest method is perhaps to use the Binance Chain Wallet, available in Chrome and Firefox. The cross-chain transfer is the key communication between the two blockchains. Essentially, the logic is that the
transfer-outblockchain will lock the amount of the source owner’s addresses into a system controlled address/contract. The
transfer-inblockchain will unlock the system-controlled address/contracts and send it to the destination addresses.
Compatible with Ethereum
Smart contracts, which Ethereum supports, are supported by BSC. Developers can create or migrate DApps, tools, and other ecosystem components on the BSC network through this feature without much friction.
Proof of staked authority
The platform runs on a stake proof-of-authority consensus model. This combines delegated PoS and proof of authority (PoA) to achieve network consensus and maintain blockchain security.
In this model, there are chosen validators who take turns confirming transactions on the network and are tasked with producing the blocks in a PoA manner, considering the amount of their stake and their reputation in the community. To become a validator, a user must stake BNB.
This consensus model allows BSC to achieve block times of around three seconds. If a block proposed by the validator is added to the chain, they receive the transaction fees incurred on that block as a reward. PoA is known for its ability to thwart 51% of attacks and its tolerance to Byzantine attacks.
A validating quorum is required to secure the BSC network. The blockchain has 21 validators that are chosen by BNB stakers every 24 hours. Anyone can be a candidate for the election as a validator. Still, only those who belong to the 21 nodes with the highest participation will be chosen for the next set of validators.
There is an “epoch” period for the platform, where sets of validators can update the BSC network as needed. Each epoch period consists of 240 blocks, which is equivalent to about 20 minutes. BSC also implements the “hack” to discourage malicious actors from validating inaccurate transactions or double signatures. Hacking is designed to expose an attacker and make his attempts extremely expensive to execute.
Key Metrics Comparison
Binance Smart Chain has had immense traction in early 2021 so far, in part thanks to Ethereum’s gas fee and congestion issues, causing developers and stake investors to look for other options.
According to “Binance Smart Chain: Q1 2021 Overview” published by DappRadar
- BSC is the most widely used blockchain in terms of unique active wallets averaging 105,000 as of March 2021.
- Gas prices were almost 14x lower on BSC than Ethereum in Q1 2021.
- Although Ethereum is still leading in terms of TVL with $54 billion, BSC TVL recorded a growth of 121% month on month.
- BSC finance dapp Venus has surpassed Compound and Uniswap in terms of TVL, reaching $6.3 billion at the end of Q1 2021.
The BSC community made the network even more attractive to new users as a profitable and stable alternative by lowering its gas fee from 15 Gwei to 10 Gwei to counter the price increase of Binance Coin (BNB) to more than $ 600 in April 2021. At the end of March 2021, BSC gas fees were 14 times lower than on Ethereum. As a result, the BSC generated record figures in the first quarter of 2021.
According to “DappRadar Q1 Industry Report“, in terms of key metrics, daily unique active wallets grew 639% year-on-year from 62,000 in Q1 2020 to over 458,000 in Q1 2021. BSC has led the group with average daily unique active portfolios of 105,000. In March, the chain also had the largest increase in terms of unique active wallets at 50% month over month. The Ethereum and Flow blockchains generated an average of around 75,000 and 53,000 unique active wallets daily, respectively.
Binance Smart Chain DAPP
Some of the most popular decentralized apps on BSC are listed below, with the complete list of available dApps on DappRadar:
PancakeSwap is the number one Automated Market Maker ( AMM ) on Binance Smart Chain. The rise of BSC in 2021 cannot be adequately described without mentioning the thePancakeSwap exchange. The BSC-based decentralized exchange has seen remarkable growth in 2021, both from trading volume and its governance token CAKE. Just like Uniswap or SushiSwap, you can do token swaps for BEP-20 tokens on PancakeSwap. Users can also earn passive income by providing liquidity, participate in a lottery to win NFT, participating in token sales, competing for places on the leaderboard, etc. PancakeSwap has become the second most popular DEX after Ethereum’s UniSwap.
BakerySwap is a decentralized automated market-making (AMM) protocol on BSC and its first NFT trading platform,’ Bakery NFT Supermarket.’ BakerySwap claims to be a faster and cheaper version of Uniswap. The BAKE token is the platform’s native BEP-20 governance token, and users can earn BAKE tokens by providing liquidity on BakerySwap. BAKE can be used to compose a random combo meal, which is a unique NFT (non-fungible token). His unique NFT combo is not only a collectible item but also a BAKE farming tool. Each NFT combo has a betting power and can be wagered to win BAKE.
Venus can be seen as a hybrid of Composite and MakerDAO in BSC. It is a loan lending protocol like Compound or Aave on Ethereum. It is a decentralized money market where you can borrow and lend BEP-20 tokens with algorithmically set interest rates. Venus also enables a decentralized stablecoin called VAI, which is backed by a basket of crypto assets.
Autofarm is a leading BSC DeFi yield aggregator that has 3 products as part of the Autofarm ecosystem, namely Vaults (yield optimizer), AutoSwap (DEX Aggregator), and farmfolio. Performance Optimizer implements the most optimal strategies at the lowest cost to maximize user returns and AutoSwap implements optimizations to route users’ swaps so users can find the best price and swap rates. Lastly, farmfolio is a smart portfolio manager and tracker that helps users manage their assets across various DeFi farming projects. The AUTO token is the native token of the platform. The tokenomics is deflationary, and AUTO holders benefit from cross-chain vault fees, the DEX aggregator and the token will also be used for governance.
Spartan Protocol is a synthetic asset protocol at BSC. Allows users to create liquidity pools for BEP-20 tokens like other AMMs. However, its goal is to allow the creation of synthetic assets guaranteed by liquidity pools and on-chain loans and derivatives in the future. Spartan Protocol provides community-governed, programmable token issuance capabilities to incentivize liquidity pool formation deep.
This strong liquidity base will be used to provide asset swaps, synthetic token generation, loans, derivatives, and more. The SPARTA common base asset provides an internal pricing mechanism without relying on external oracles. Binance Smart Chain was chosen as the home of the protocol to enable near-instant settlement and extremely low gas fees.
To interact with the apps on BSC, we need a wallet. Two of the most used wallets are MetaMask and Binance Chain Wallet. Apart from these, you can also use Trust Wallet, Math Wallet, Ledger, TokenPocket, Bitkeep, ONTO, Safepal, and Arkane.
Connecting MetaMask to Binance Smart Chain
MetaMask can be downloaded on Chrome and Firefox or iOS and Android from the MetaMask download page. From there, select the platform you are using and follow the steps to install it on your device and create a wallet.
The MetaMask wallet inherently interacts with the public Ethereum chain, as seen from the top right corner of the screen that mentions the “Ethereum Mainnet.” At this stage, we would not be able to interact with Binance Smart Chain dApps. We need to go into the settings and point the wallet towards the Binance Smart Chain nodes to change this.
On the Settings page, find the Networks menu.
Next, click Add Network in the top right corner to manually add Binance Smart Chain. It is important to note that there are two networks that we can use here: testnet or mainnet. Below are the parameters to fill in for both Binance Smart Chain Mainnet and Testnet.
- Network Name: Smart Chain
- New RPC URL: https://bsc-dataseed.binance.org/
- String ID: 56
- Symbol: BNB
- Block Scanner URL: https://bscscan.com
- Network Name: Smart Chain – Testnet
- New RPC URL: https://data-seed-prebsc-1-s1.binance.org:8545/
- Chain ID: 97
- Symbol: BNB
- Block Scanner URL: https://testnet.bscscan.com
Once you save the network and return to the main view, you will notice two things: the network has been automatically set to the one you just entered, and the units are no longer denominated in ETH, but in BNB. You may still see the Ethereum logo, but we are now interacting with the BSC.
How to deposit cryptocurrencies on Binance Smart Chain using MetaMask
Once a wallet has been set up, we can withdraw from our Binance account or use Binance Bridge.
To track our activity on the BSC blockchain, we can use BscScan, which is made by the same team that made EtherScan.
Withdrawal from Binance Exchange to a BSC wallet
If you already have a Binance account, this may be the easiest option of simply withdrawing from your Binance account to a BSC wallet.
Select BEP20 compatible token, here we have taken BNB as an example. Select Withdraw, and you will land on this page.
In the “Address” section, enter the address of your BSC wallet. Binance will automatically change the “Network” to “BEP20 (BSC)”. If not, change it manually.
Then simply enter the amount you want to send and click withdraw. After a few confirmations, you should see the funds arrive in your MetaMask BSC wallet.
How to use the Binance Chain wallet extension
Download the Binance Chain Wallet extension from the web store. The Binance Chain Wallet extension is available on Chrome and Firefox.
Transfer some funds from your Binance Exchange or MetaMask to this Binance Chain wallet. We will use BNB as an example here.
Click on “Binance Chain Network” at the top and change it to “Binance Smart Chain Network”. Copy the address and go back to “Binance Chain Network.”
Click Submit. Paste the BSC address and click the arrow next to send in the upper left corner of the screen.
Change the network back to “Binance Smart Chain Network,” and congratulations, your funds will instantly transfer between chains.
How to use Binance Bridge
Another great way to bring assets to BSC is to use Binance Bridge. You can select many of the largest blockchains, such as Ethereum or TRON, and convert their native tokens into BSC-wrapped tokens. The bridge works in both directions. You can monitor the on-chain reserve that ensures that the native tokens sufficiently collateralize the BSC-wrapped tokens in Proof of Assets.
Go to Binance Bridge and connect your MetaMask by clicking “Change Wallet” in the top right corner of the screen. Make sure to change the setting in MetaMask to point towards the BSC.
Once connected, choose the token you want to transfer to your BSC. Here we have selected USDT as an example. Enter the amount you want to send and click next. Be sure to double-check the destination address.
You will then be greeted with options on how you would like to complete the transaction. Select “I will send tokens from my own wallet.”
Once selected, a popup will appear with the summary and confirmation of the truncation. Click Confirm.
Next, a popup will appear asking you to send the selected token and amount to an address.
Go back to your MetaMask, go back to your Ethereum network, and send the funds from your Ethereum wallet to the address mentioned above. Switch the network back to BSC, and after a few confirmations, you should see your funds arrive in your MetaMask BSC wallet.