Binance’s smart chain (BSC)
Binance Smart Chain (BSC) is a newer blockchain protocol that attracts users due to its low gas fees (low commissions) and lightning-fast trading times. But to better understand BSC, let’s remember what blockchain is before we hit the road.
Blockchain: An Intensive Course
Blockchain is a shared, breached-free digital storage file that records transactions on a decentralized peer-to-peer network. We are surrounded by ledgers in our daily lives. For example, the mobile banking app on our phones is a form of ledger. The critical difference is that someone (a central authority-entity) maintains control over the funds in our applications in the mobile banking.
Decentralization is the backbone of blockchain, the most critical concept in digital currency. It offers many elements that make up financial freedom, transparency, an immutable and reliable transaction. 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 by changing a single option.
In addition, when assets are traded between peers on the network, transactions are recorded permanently. This makes the blockchain tamper-resistant, which drastically reduces fraudulent activity. You should no longer lock your debit card because some stranger decided to go crazy by abusing it at their local grocery store, in a random country you’ve never been to.
What is Binance smart chain?
Our story begins in April 2019, when Binance launched its own blockchain, the Binance Chain. The goal 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 many applications and decided to focus only on its main application the Binance exchange.
Meanwhile, DeFi on Ethereum is booming, and Binance is realizing that, just like Ethereum, smart contract capabilities are needed to keep up with the momentum. Their code bits run when a set of predefined conditions is met. Which lays the foundation for lending, lending and other decentralized financing activities.
So back to Binance. At this point, instead of adding all these features directly to the Binance Chain and risking bogging down the network, they decide to launch the Binance Smart Chain (BSC). A Binance blockchain that aims to compete with Ethereum.
BSC: What’s the difference?
Realizing that time is of the essence to creating a cost-effective alternative to Ethereum, Binance limits the time-consuming task of creating its own smart contracts from scratch and implements its own PoA protocol (proof of authority).
In fact, BSC even uses a specific PoA consensus algorithm. Proof of Staked Authority (PoSA.) In this protocol, there are only 21 validators confirming transactions at any one time. In turn, this makes BSC more centralized than other platforms.
Interestingly, BSC is designing its platform to become Ethereum compatible. Namely? it can run applications and run smart contracts, using the Ethereum model, but charging its users only a fraction of Ethereum’s commissions.
As a centralized network, BSC offers a much-needed economic alternative to Ethereum. It also boasts faster trading times. The network is governed by Binance’s token, BNB, which users have to pay a small commission. BNB is currently worth a little less than $400 per token to give you an idea of awareness rates.
Is BSC advantageous or not?
BSC has brought significant benefits to Binance, which is a centralized entity, and to 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 opt for Binance’s smart chain.
Also let’s not forget that BSC is behind PancakeSwap, the main DEX (Decentralized EXhange = decentralized exchange) of the network and one of the leading DEXs in DeFi.
Binance Smart Chain offers practical solutions to users who may be new to DeFi or those who are primarily looking for a cheaper option than Ethereum. This is not to say that cryptocurrency enthusiasts are throwing the ball completely on the Binance blockchain. In contrast, BSC is a reliable ecosystem that has proven its use only in statistics.
As of its inception, the daily increase in new wallet addresses is around 400,000, with more than 74 million total unique addresses. These are big numbers, enough to prove that the network is growing at a voracious pace.
Food for thought
It is doubtful that millions of crypto geeks are unaware of the concept of decentralization. BSC, although not decentralized, offers the kind of approach to developing countries that Ethereum could not achieve due to its high commissions on its transactions.
On the contrary, what do BSC users sacrifice in the long run? Decentralization, for sure. Safety? Possible. What about all the trust they are forced to have in Binance itself, as a central authority?
The fact that BSC and so many other networks like it pop up every day, underscores that users may really not want to pay a high premium in the name of decentralization. On the other hand, if Ethereum didn’t exist, would any of these networks ever exist?