What is Binance Smart Chain?

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    What is Binance Smart Chain

    Binance was first commenced in the Cayman Islands by a Chinese-Canadian software developer, Changpeng Zhao. Zhao had previous experience in assembling high-frequency trading software. In 2017, Zhao along with a team of endowed developers came forward with the concept of Binance. Since Binance has come into effect, it has surpassed numerous crypto exchanges in terms of daily trading. Currently, it is the leading cryptocurrency exchange in the world.

    People often get confused between Binance Chain and Binance Smart Chain. Even though both the blockchain were founded by Binance they are completely two diverse entities. Known for its ultra-fast trading, Binance Chain is an authentic blockchain that was initiated in April 2019. It is said to be the home of the BNB currency. Over the years, it showed some limitations and its programmability wasn’t as flexible as other blockchain applications. It struggled with Ethereum-based applications and smart contract-based applications. So, Binance built another blockchain to overcome these issues and they called it Binance Smart Chain (BSC).

    Binance Smart Chain is a more optimized blockchain and it offers a developed environment to evolve potent decentralized applications. It has a cross-chain agreement with Binance Chain to ensure that users receive the best service from both the blockchain. In this article, we’ll present a detailed view of the Binance Smart Chain, its attributes, and its working process.

    What do you mean by Binance Smart Chain?

    Binance Smart Chain (BSC) is best defined as a blockchain network that was built for running Ethereum-based applications and smart contract-based applications. It can function in parallel to the native blockchain network of Binance i.e., Binance Chain (BC). Hence, they both allow their user to experience the best form of their services like the high transaction capacity of Binance Chain and the smart contract technology of Binance Smart Chain.

    Overcoming the shortcomings of BC was not the ultimate goal of BSC as it aims to allow the developer to create decentralized applications (DApps) and guide the users to direct the cross-chain of their digital assets with low latency and large dimensions. Besides, Binance Smart Chain gears with the Ethereum Virtual Machine (EVM) that permits the user to regulate Ethereum-based applications like MetaMask. The configuration process of these applications is very easy. Since it is compatible with EVM it supports Ethereum tools and thus makes the job of the developers easier. On the other hand, Binance Smart Chain is designed in such a way that it can introduce smart contracts to the new ecosystem without hampering the high throughput model of the Binance Chain. Scalability is another hurdle that has been overtaken by the Binance Smart Chain.

    Attributes of Binance Smart Chain

    Binance Smart Chain prolongs the features and functionalities of the native Binance Chain. It possesses an array of leading-edge conventions that are designed to link the gap between several blockchains. Although BSC is still in its initial stage, the services offered by it make the platform an ideal place for developers to build potent decentralized applications. Here are the four attributes of BSC:

    • Independent Blockchain
    • Compatible with Ethereum
    • Native Interoperability
    • Allows Staking and Community-based Governance

    How Does a Binance Smart Chain Work?

    Here in this section, we’ll discuss the working principle of the Binance Smart Chain.

    Consensus Algorithm

    Binance Smart Chain accomplishes ~3 second block times along with a Proof-of-Stake, a category of consensus algorithm that is used by public blockchains.

    Precisely, the agreement that BSC uses is known as the Proof-of-Staked-Authority (PoSA). Here, participants take their Binance Coins to turn out to be validators. If the participants put forward a legal and usable block, then they’ll obtain a transaction fee from the trades included in it.

    Since Binance Chain is not a cost inflationary blockchain, it doesn’t require any freshly-minted BNB subsidy. On the other hand, the percentage of BNB supply has reduced gradually, as the Binance team frequently airs coin burns.

    Cross-chain Compatibility

    The project of Binance Smart Chain was proposed as an independent system but in reality, it is more of an interdependent system that bears all the functionalities of the Binance Chain. A dual-chain architecture has been incorporated on the BSC so that users can effortlessly transfer their assets from one blockchain to another. That is why rapid trading is more enjoyable on Binance Chain whereas Binance Smart Chain can be used for building potent decentralized apps. With this similarity and harmony, you can enjoy a massive ecosystem that can accommodate innumerable use cases.

    The existing tokens such as BEP-2 and BEP-8 of Binance Chain can be exchanged for BEP-20 tokens, a new standard token that is exclusively introduced for the Binance Smart Chain. ERC-20 is the Ethereum counterpart of BEP-20 and both these tokens bear similar functionalities.

    The exchange of tokens is done through a very simple method which is known as the Binance Chain Wallet, available on both Google Chrome and Mozilla Firefox.

    Top Tokens and Coins on Binance Smart Chain?

    Tokens on the Binance Smart Chain are mainly of two types – BEP-20 tokens and BEP-721 tokens. The majority of the coins that are available on the Binance Smart Chain are BEP-20. The BEP-20 type tokens are exchangeable whereas the BEP-721 tokens are non-exchangeable. Here is the list of the most valuable coins and tokens on Binance’s network.

    • Ethereum (ETH)
    • Tether (USDT)
    • Binance Coin (BNB)
    • Cardano (ADA)
    • USD Coin (USDC)
    • Polkadot (DOT)
    • Dogecoin (DOGE)
    • Avalanche (AVAX)
    • Polygon (MATIC)
    • Binance USD (BUSD)

    Conclusion

    The Binance Smart Chain is a prompt, quick, and cost-effective platform for decentralized applications for crypto users. We cannot deny the fact that the number of new users had a sudden surge last year. With the mobbing of Ethereum and gas fee disputes, Binance Smart Chain got its grip on the market in early 2021. These disputes forced developers and staking investors to move out of this platform and search for other alternatives. At that time, users were looking for a stable alternative at a lower rate. The BSC community had a clear idea of all these and they just took advantage of that current scenario.

    So, the BSC community introduced tempting features to attract new users. To counter the price hike of Binance Coin in February 2021, BSC reduced its gas fee to 10 Gwei from 15 Gwei. With this, the total transaction volume reached up to $15 billion by the middle of 2021.

    It is noticeable that Binance Smart Chain isn’t an off-chain scalability result; rather it is a liberated blockchain that can operate even without the presence of Binance Chain. As long as a popular blockchain like Ethereum lingers to scrap with congestion, slow transaction rates, and inflated transaction fees, we can see a lot of affordable tokens like BSC, Polkadot, Cardano, Tether, Dogecoin, etc. to evolve in the market in the coming years.