BSC currently has ~ $8.8 billion in total value locked (TVL) across all its DeFi apps, whopping ~47 million in distinct addresses interacting with the protocol, and ~2.5 million daily blockchain transactions (though these should be taken with a grain of salt as Binance has been accused of spoofing transactions in the past.)Īs a result of the surge in activity, the price of the BNB token, used to pay for transactions on BSC, grew by more than 200% in the last month: from ~$50 at the beginning of February to ~$250 at the beginning of March. Binance Smart Chain Ecosystem Overviewīinance launched the Binance Smart Chain in September 2020 and the ecosystem has already seen impressive growth. For this reason, Binance designed the BSC protocol to be compatible with Ethereum, allowing for most of Ethereum’s dApps, tools, and ecosystem components to be ported or simply copied on BSC with zero or minimum effort. The Binance Smart Chain’s primary mission is to provide a full-fledged environment for building high-performance “decentralized” applications. To further exacerbate things, most of these nodes on BSC are operated by Binance itself.īecoming a validator on BSC involves being approved by Binance and staking BNB to secure the network, and Binance still holds a vast majority portion of the total BNB supply.Ĭentralization concerns, however, aren’t that bad considering that Binance is transparent about their vision - the Binance Smart Chain optimizes for speed, scalability, cross-chain interoperability, or more specifically, Ethereum-compatibility, and not decentralization. Namely, the Binance Smart Chain has only 21 validating nodes in its PoSA network, compared to Ethereum, which has about 10,000 PoW mining nodes. That being said, Binance’s flagship smart contract platform for “decentralized” applications is a bit of an oxymoron because the blockchain itself is highly centralized. This means that BSC validators aren’t rewarded with newly minted BNB for securing the network, but rather solely by racking up transaction fees. Unlike Ethereum, which is still a Proof-of-Work-based protocol, BSC uses a hybrid consensus algorithm called Proof of Staked Authority (PoSA), which allows BSC to achieve significantly higher transaction throughput without sacrificing security.Īnother critical difference between the two competing blockchains is that, unlike Ethereum, whose native token ETH is inflationary, BSC’s native token BNB is deflationary (burned by Binance on a regular schedule). That’s why we emphasized “DeFi” in the title– the Binance Smart Chain is centralized to Binance as a company. Instead, it is an entirely independent blockchain that operates side-by-side with the Binance Chain and supports smart contract functionalities and compatibility with the Ethereum Virtual Machine (EVM). It’s important to note, right out the gate, that the Binance Smart Chain is not an off-chain or layer-2 protocol running on top of the Binance Chain. The Binance Smart Chain (BSC) is a blockchain protocol built by one of the largest centralized exchanges in crypto, Binance, that operates in parallel with the Binance Chain.
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