Besides the Binance Chain, there is another component of Binance that is making its value grow even more recently. That is the Binance Smart Chain (BSC). BSC is another blockchain created by the Binance team. Similar to Ethereum, the Binance Smart Chain provides additional services by using smart contracts. By using such smart contracts, users can create and launch their own projects in the BSC. The tokens used in the BSC for maintaining such services are known as BEP-20 tokens. If the Binance Chain was created to support the Binance DEX, the BSC was created to enrich the DeFi ecosystem and turn it into one of the most efficient ecosystems in the market. This is achieved from the BSC low-cost rates and high speed.
BSC has Proof-of-Stake-Authority (PoSA) as a consensus mechanism, where the number of tokens you stake determines the reward rate. The BSC ecosystem requires 21 leading nodes to secure the network. To become a validator, you have to stake at least 10,000 BNB in the BSC. Nonetheless, others can stake even 1 BNB and become delegators. The validators use the staked BNB from the delegators and give a small portion of the reward to them.
To promote such an ecosystem, BSC uses Ethereum Virtual Machine (EVM). This enables BSC to use some of the DApps and projects in the Ethereum network. This is why the likes of MetaMask are also available on the BSC network.
Another feature on both the Binance Chain and Binance Smart Chain is the Binance Bridge. Binance Bridge enables different blockchains to co-work in a parallel manner. It is primarily focused on enabling other blockchains to connect with the BC or BSC. This allows other cryptocurrencies to be used in the two blockchains by wrapping them first. There are no conversion fees for such services.
How to use BSC?
- The first thing you need to do is purchase BNB tokens through Binance or other cryptocurrency exchanges. You need the BNB tokens for completing transactions within the BSC.
- Then, you need to set up a cryptocurrency wallet within the BSC. Such wallets might be MetaMask, Trust Wallet, or Binance Chain Wallet.
- After setting up a wallet, you can choose a BEP-20 asset to withdraw and transfer to your BSC wallet address.
- Once you own the BEP-20 tokens in your wallet, you can start using them for the various services provided in BSC.
One use of BSC is the NFT marketplace. Many people have shifted from Ethereum to BSC for minting or trading NFTs since the BSC can prove to be more efficient.
It is worth noting that the DeFi services of BSC make it the ecosystem that it is today. People can use various passive income methods or other financial services that are better than traditional options. Services such as yield farming allow users to deposit BEP-20 tokens in liquidity pools and earn interest in return. Some automated market maker (AMM) DApps in BSC can be PancakeSwap, Venus, 1inch, BurgerSwap, etc.
BSC Advantages and Disadvantages
- Gas fees in BSC are considerably lower when compared to other blockchains. To put it into perspective, a trade worth thousands of dollars might be less than $1 in gas fees, which makes BSC one of the best in this field. Moreover, the speed that BSC transactions operate is impressively fast. Even though it is a large ecosystem, a block of information is verified every 3 seconds. This comes due to the PoSA consensus mechanism.
- Implementation of the EVM allows other projects of the Ethereum network to work on the BSC.
- Token migration
- Using Binance Bridge, tokens can be migrated into BSC almost effortlessly.
- Centralized in practice
- Since only 21 validators are responsible for securing the network, it makes BSC quite centralized. The main idea of cryptocurrencies is to be decentralized. Even though scalability issues are solved with BSC, the key concept of cryptocurrencies is missing.
- Due to the fact that only 21 validators secure the network, which makes BSC practically centralized, BSC might be vulnerable to hacker attacks. It is much easier for hackers to get a hold of 51% of the network when it is centralized and fewer validators govern it. Nevertheless, it is still extremely hard for such a thing to be achieved.
The Bottom Line
To conclude, the Binance Coin and Binance Smart Chain are two very important additions to the cryptocurrency market. The two are directly related as well because an increase in the popularity of BSC may cause an increase in the price of BNB. It is safe to say the Binance has taken the cryptocurrency world by storm, and it does not look like it is going to stop any time soon.