What is Binance Smart Chain (BSC)?
You've probably also noticed that Ethereum's transaction fees skyrocketed from 2020 to 2021. Sometimes you'd pay as much as hundreds of dollars to make a transaction. And that sucks for both end-users and developers of applications on Ethereum's blockchain.
This also causes other blockchains that perform the same work as Ethereum
to become increasingly popular. Binance Smart Chain, for example, is one of them, which we will talk about in this article.
What problem does Binance Smart Chain solve?
First, let's take a closer look at Binance Smart Chain's problem for many people. After all, Binance Smart Chain was born out of dissatisfaction with Ethereum. Starting in 2020, the transaction fees for the Ethereum blockchain began to rise sharply. Since many crypto projects use ERC-20 tokens, developers also suddenly became the brunt of these rising costs.
(Ether) is, of course, making outstanding achievements because of this, culminating in a value of at least $4000 by May 2021. Yet during this period, the network sinks once again into a crisis related to increased transaction costs. Much to the dismay of users.
This is a significant handicap for holders of small wallets who have to pay exorbitant fees that sometimes exceed 10% of the transaction amount. This forces them to have to look for other solutions. And that's why crypto exchange Binance decided to develop its blockchain: the Binance Smart Chain.
What is the Binance Smart Chain (BSC)?
The Binance Smart Chain (BSC) is the latest blockchain created by crypto platform Binance. This blockchain is related to the earlier Binance Chain. However, a significant difference makes the Binance Smart Chain many times more popular than the Binance Chain.
The significant difference is that the Binance Smart Chain focuses primarily on smart contracts, much like Ethereum does. This allows developers to run their decentralized application (dApp) or project on the blockchain of Binance Smart Chain. BSC's network then ensures that the application is run correctly, and end-users can use the application.
This is, what Ethereum does, which has become incredibly popular among crypto traders in recent years. This is due to the many possibilities that are possible on the blockchain. In this way, Binance wants to compete with Ethereum to have enough projects running on their blockchain. This also makes the importance of Binance within the crypto market many times greater than it was before.
The strengths of the Binance Smart Chain
You don't have to think about it for long to realize that the main strength of the Binance Smart Chain is its link to the platform of the same name. Thus, the company behind the blockchain is an organization with interest in the blockchain. In doing so, they also understand the subject, which makes it easier for them to address the pain points of crypto traders.
The results don't lie either, as they are outstanding. Especially when you compare this to the current state of the Ethereum blockchain, it is not without reason that more and more developers are choosing to build their project on the Binance Smart Chain.
The transaction costs on the Binance Smart Chain are many times lower than on Ethereum's blockchain. This is great for the end-users of decentralized applications but also their developers. Because when people have to pay hundreds of dollars to buy your token, it is much less likely that they will do so.
Therefore, as a developer, it is better to choose a blockchain where users have to pay lower transaction costs. It is then much easier for them to buy tokens, as they hardly have to pay for them.
Another advantage is that transactions are also processed much faster. This is because Binance's blockchain is still less commonly used than the Ethereum blockchain, but also because the BSC uses a different technique. Because of this, they do not currently suffer from scalability issues. And that is precisely something that Ethereum is suffering from a lot at the moment. They are currently working on the transition to Ethereum 2.0, although it remains to be seen whether this update will solve the problems.
Weaknesses of the Binance Smart Chain
It seems like there are only advantages to Binance Smart Chain, although that is not entirely true. There are also several weaknesses to be found in BSC. While the close relationship with the Binance platform may be seen as an advantage, it also brings a disadvantage. Namely, it makes the project suddenly a lot more centralized, given its dependence on Binance.
This is all based on a Proof of Stake Authority (PoSA) consensus algorithm where the term authority has a deeper meaning. The one who can put down the most money has the authority over the blockchain
. So as a result, instead of looking at the qualities and trustworthiness of someone, it looks at how much money they have in their possession. Again, this does not do decentralization any favours.
BEP-20 tokens and the BNB-coin
The token protocol of the Binance Smart Chain is BEP-20, not to be confused with BEP-2 (of the Binance Chain). This means that all projects on the Binance Smart Chain are therefore BEP-20 tokens and can only be stored in a wallet that supports BEP-20 tokens.
Binance's own currency is the Binance Coin, which runs on the Binance Smart Chain. This token intends to provide liquidity within Binance's platform and allows users to pay their transaction fees. The moment you want to buy a token of a project on the Binance Smart Chain, you pay the transaction costs in the form of BNB.
Do you want to buy the Binance Coin (BNB
) with iDeal, PayPal or credit card? It is not necessary to purchase it at Binance. You can best buy Binance Coin at Coinmerce. For this, you first need an account, which you can create within minutes. Once you have created an account and are logged in, click on "Coins" in the top menu bar, after which you can search for the Binance Coin (or choose it on the list). On the right-hand side, you can then indicate how many Euros you would like to purchase Binance Coin, after which you can pay and complete the order.
Once we received your order, we will make sure the right amount of Binance Coin is located in your wallet. That's how easy it can be to buy the Binance Coin on Coinmerce!
The answer to whether the Binance Smart Chain is a functional and convenient blockchain that solves problems is yes. Just as this new system can be interesting to position itself on projects with strong development potential, it loses its decentralized nature as a result.
But the fundamental importance of the blockchain lies more in the alternative it offers in anticipation of the effective launch of Ethereum 2.0. For many crypto traders, it would be sad if a centralized blockchain of Binance took over the importance of many crypto projects.