You’ve probably heard of Binance Smart Chain, the home of the BNB currency. It’s optimized for ultra-fast trading. To achieve this, it had to make certain trade-offs – one being that it wasn’t as flexible from a programmability standpoint as other blockchains.
Well, Binance Smart Chain is here to change that, a new blockchain with a full-fledged environment for developing high-performance decentralized applications. It was built for cross-chain compatibility with Binance Chain to ensure that users get the best of both worlds.
Binance Chain was launched by Binance in April 2019. Its primary focus is to facilitate fast, decentralized (or non-custodial) trading. Perhaps unsurprisingly, the biggest decentralized application (or DApp) on it is Binance DEX, one of the friendliest decentralized exchanges out there. You can use it via a web interface at binance.org or through its native integration with Trust Wallet.
Due to limitations inherent to blockchain systems, however, the chain doesn’t have much flexibility – smart contracts in a system optimized for fast trading could significantly congest the network. Remember CryptoKitties? At the height of its popularity, it brought the Ethereum blockchain to a standstill.
Scalability remains one of the most challenging hurdles to blockchain development. And that’s where Binance Smart Chain comes in.
What is Binance Smart Chain?
Binance Smart Chain (BSC) is best described as a blockchain that runs in parallel to the Binance Chain. Unlike Binance Chain, BSC boasts smart contract functionality and compatibility with the Ethereum Virtual Machine (EVM). The design goal here was to leave the high throughput of Binance Chain intact while introducing smart contracts into its ecosystem.
In essence, both blockchains operate side-by-side. It’s worth noting that BSC isn’t a so-called layer two or off-chain scalability solution. It’s an independent blockchain that could run even if Binance Chain went offline. That said, both chains bear a strong resemblance from a design standpoint.
Because BSC is EVM-compatible, it launched with support for the rich universe of Ethereum tools and DApps. In theory, this makes it easy for developers to port their projects over from Ethereum. For users, it means that applications like MetaMask can be easily configured to work with BSC. Seriously – it’s just a matter of tweaking a couple of settings. Check out Use MetaMask for Binance Smart Chain to get started.
How does Binance Smart Chain work?
Binance Smart Chain achieves ~3 second block times with a Proof-of-Stake consensus algorithm. Specifically, it uses something called Proof of Staked Authority (or PoSA), where participants stake BNB to become validators. If they propose a valid block, they’ll receive transaction fees from the transactions included in it.
Note that, unlike many protocols, there is no block subsidy of freshly-minted BNB, as BNB is not inflationary. On the contrary, the supply of BNB decreases over time, as the Binance team regularly conducts coin burns.
Binance Smart Chain was envisioned as an independent but complementary system to the existing Binance Chain. Dual-chain architecture is used, with the idea being that users can seamlessly transfer assets from one blockchain to another. In this way, rapid trading can be enjoyed on Binance Chain, while powerful decentralized apps can be built on BSC. With this interoperability, users are exposed to a vast ecosystem that can cater to a myriad of use cases.
BEP-2 and BEP-8 tokens from Binance Chain can be swapped for BEP-20 tokens, the new standard introduced for Binance Smart Chain. Have you read An Introduction to ERC-20 Tokens? Then you’ll already be familiar with the format of BEP-20. It uses the same functions as its Ethereum counterpart.
To move tokens from one chain to another (i.e., BEP-2 to BEP-20 or vice versa), the simplest method is perhaps to use the Binance Chain Wallet, available on Chrome and Firefox. Check out Use Binance Chain Extension Wallet for a guide to this.
Decentralized Finance on Binance Smart Chain
You may know that a number of digital assets – such as BTC, LTC, ETH, EOS, or XRP – already exist on Binance Chain as “Peggy coins.” These are tokens that are pegged to assets on their native chains. For instance, you might decide to lock up 10 BTC in order to receive 10 BTCB on Binance Chain. At any time, you can trade your 10 BTCB for 10 BTC, meaning that the price of BTCB should closely track that of native BTC.
By doing this, you effectively port these assets onto Binance Chain. Interested in how this kind of thing can be achieved? Check out Tokenized Bitcoin on Ethereum Explained.
Because of the flexibility afforded by Binance Smart Chain, assets from a number of different chains can be used in the growing DeFi space. For instance, applications like PancakeSwap allow users to trustlessly exchange assets (much like Uniswap), engage in yield farming, and vote on proposals. Similar projects include BurgerSwap and BakerySwap (if you’re new to crypto, hi! We’re big fans of decentralized exchanges named after foods).
Binance Smart Chain greatly extends the functionality of the original Binance Chain and joins a range of cutting-edge protocols designed to bridge the gap between various blockchains. Though still in its infancy, the promise of BNB staking alongside EVM compatibility makes the platform an ideal engine for developers building powerful decentralized applications.