What’s the Difference Between Binance Smart Chain and Ethereum?

Binance Smart Chain (BSC) is a hard fork of the Go Ethereum (Geth) protocol, and as such, it has a lot in common with the Ethereum blockchain. In several key aspects though, BSC developers have made major modifications. BSC’s consensus mechanism is the most significant development, since it enables cheaper and quicker transactions.

Introduction

Binance Smart Chain (BSC) and Ethereum appear to be quite similar at first glance. BSC-based DApps and Tokens are compatible with Ethereum’s Virtual machine (EVM). There is a good chance you’ve observed that your public wallet addresses on both blockchains are identical. On both networks, cross-chain projects are even possible. Despite this, there are a few differences between the two chains that are worth mentioning. Knowing and understanding the distinctions can help you decide which one to utilize.

DApp Ecosystem and Blockchain Traffic

Ethereum has about 2800 DApps on the blockchain as of June 2021, compared to over 810 on BSC. It’s a big change, but given BSC’s youth, it indicates a healthy and developing ecology.

Another crucial on-chain measure to evaluate is active addresses. Despite being a younger blockchain, BSC surpassed Ethereum’s all-time high of 799,580 addresses on May 9, 2021, with a high of 2,105,367 addresses on June 7, 2021.

Is there an explanation behind BSC’s rapid growth? Faster confirmation times and low fees play a big role in this. Growing interest in NFTs and compatibility with popular crypto wallets such as Trust Wallet and MetaMask may possibly be contributing to BSC’s growth as well.

We can see the difference between the two much more clearly by looking at daily transactions. On BSC, users may move their funds and interact with smart contracts faster and at a lower fee. Observe BSC’s high of 12 million transactions per day in the chart below.

Ethereum, on the other hand, has never logged more than 1.75 million daily transactions. BSC appears to be the more popular option for individuals that need to shift their funds on a regular basis. Daily transactions must also be viewed in the context of active addresses. As of this writing, BSC has a larger number of users who, on average, transact more.

Ethereum and BSC’s Most Popular DeFi DApps

The compatibility of BSC and Ethereum blockchains allows for a lot of cross-over in decentralized finance. Developers can easily port Ethereum applications to Binance Smart Chain, and new BSC projects frequently replicate Ethereum open-source code under a different name. Let’s take a look at the top five Ethereum DApps according to DAppRadar users.

A blend of two DeFi Automated Market Makers (Uniswap and SushiSwap), a crypto game (Axie Infinity), and a peer-to-peer marketplace (OpenSea) may be found here. If you check at BSC’s top five, you’ll see a lot of similarities.

PancakeSwap is a hard fork of Uniswap. Autofarm and Pancake Bunny are yield farms — a category that isn’t represented in Ethereum’s top five apps at the moment. Lastly, Biswap and Apeswap are categorized as Automated Market Makers. Binance Smart Chain’s costs are so low, and transactions are so rapid, that yield farms tend to be more efficient on Binance Smart Chain. For these reasons, they are a popular option among Binance users.

Among crypto games, Ethereum has the most popular titles. Although CryptoKitties-like and Axie Infinity-like projects do exist on Binance Smart Chain, they haven’t attracted as many players as the Ethereum classics.

Inter-Network Transfers

The Ethereum and BSC wallet addresses are identical, and if you’ve made any BEP-20 or ERC-20 deposits into your wallet, you will notice it. So, if you withdraw your tokens from an exchange and pick the wrong network, you may easily retrieve them from the other blockchain.

If you withdraw ERC-20 tokens to BSC by mistake, they will still be available in the relevant BSC address. If you mistakenly transmit tokens from BSC to Ethereum, you can follow the same procedure. Your money is not permanently lost in either of these instances. For a how-to, check it out here at Silver Stonks!

Transaction Fees

For transaction fees, both BSC and Ethereum use a gas model that measures the transaction’s complexity. BSC users can set a gas price based on network demand, with higher-priced transactions favored by miners. The Ethereum London hard fork, on the other hand, adds a number of new features that will likely eliminate the need for high fees.

With the Ethereum update, a new pricing mechanism based on a per-block base fee is introduced. Users no longer need to establish their own gas price because the fundamental cost changes based on transaction demand.

Ethereum’s gas fees have always been significantly greater than those on BSC. In May 2021, seen as the highest average, was at $68.72. Ethereum’s price is still higher than BSC’s, despite the fact that the trend has begun to shift.

Look at the average Ethereum costs from Etherscan to get a better idea as to how much it costs. Current gas costs on Ethereum are shown in the top three figure. The value of one gwei is 0.000000001 BNB or ETH for both BSC and Ethereum. Your transaction will take significantly longer to complete if you pay a lower price.

As of this writing, the average price for a simple transfer of an ERC-20 token to another wallet is $2.46. When using a Uniswap liquidity pool with multiple transactions, this number jumps to $7.58.

BSC transactions with fees as low as $0.03 may be seen here, which is equal to the ERC-20 transfer in Ethereum’s gas tracker. These figures were derived from BSC’s calculations, which involved multiplying the gas consumed by the transaction (21,000) by the gas price (5 gwei).

Transaction Time

Determining the average transaction time on blockchains can be complicated. As soon as the miners validate the block in which it appears, a transaction is theoretically complete. However, there are additional factors that might impact the time you wait:

  • If you don’t set your fee high enough, miners may delay or even not include it in a block at all.
  • Multiple transactions are needed for more complex interactions with the blockchain. Adding liquidity to a liquidity pool, for instance.
  • After a certain number of verified blocks, most services will consider a transaction legitimate. Should the block be rejected by the network, these extra confirmations decrease the risk of merchants and service providers having their payments reverted.

According to Ethereum’s Gas Statistics (seen above), transactions take between 30 seconds and 16 minutes. Successful transactions are taken into account in these statistics but the extra confirmation requirement is not.

Take this as an example. You must wait 12 network confirmations if you deposit ETH (ERC-20) into your Binance account. Depositing ETH into your spot wallet would take an extra 156 seconds with a block created every 13 seconds, as seen in the graph below.

There is an average block time of 3 seconds on the BSC platform. We’re looking at a 4.3-fold improvement in speed when compared to Ethereum’s 13 seconds.

Consensus Mechanism

Proof of Work (PoW) on Ethereum is comparable to Bitcoin’s, but it’s radically different from BSC’s Proof of Staked Authority (PoSA). This discrepancy, though, won’t stay long. The Proof of Stake (PoS) method will replace the Proof of Work (PoW) mechanism in Ethereum 2.0.

Proof of Authority (PoA) and Delegated Proof of Stake (DPoS) are combined in BSC’s PoSA. Each of the 21 validators takes it in turns to create a block and receives BNB transaction fees in exchange. To become a validator, you must run a node and stake at least 10,000 BNB.

Other users, known as delegators, use BNB to support a candidate. Afterwards, the top 21 candidates based on the amount staked will take turns processing blocks. Every 24 hours, the entire process is repeated. A portion of the benefits earned by validators goes to the delegates, as well.

Ethereum’s Proof of Work mechanism, on the other hand, is a completely distinct system. An algorithmic race is taking place instead of the community picking validators. People of all ages can participate, but they must purchase or rent specialized mining equipment. Your chances of solving the puzzle first and validating a block increase as your computing capability increases. Successful miners are rewarded with transaction fees and ETH as a result of their efforts.

Developers have subsequently studied the use of other mechanisms in place of PoW, although it is still an effective way to create consensus and ensure network security. A more efficient and environmentally friendly option is sought without compromising security.

A Proof of Stake switchover is inevitable on the Ethereum network due to these factors. Ethereum will be staked by validators in exchange for a chance to produce blocks. As a result, other validators will “attest” the block and verify its validity. The staked coins will be forfeited if someone creates a block containing a number of fraudulent transactions. For successful blocks and any attestations, validators are rewarded. A malicious validator who deposits and stakes a significant sum of ETH directly risks losing their money.

Closing Thoughts

Binance Smart Chain and Ethereum have many similarities. As a result, Ethereum users have been able to move and experiment with BSC rather easily. BSC, on the other hand, has made some intriguing adjustments to attempt and enhance performance and efficiency despite the similarities. As a result of the Proof of Staked Authority (PoSA) consensus mechanism, blockchain transactions have become even faster and cheaper.

A token on Binance Smart Chain created to help people diversify into digital and hard assets. Check out our whitepaper for more details at www.silverstonks.io.

A token on Binance Smart Chain created to help people diversify into digital and hard assets. Check out our whitepaper for more details at www.silverstonks.io.