Binance Smart Chain vs. Solana: Comparing the Key Differences — AAX Academy
This year, the sector of smart contract blockchains has gone through a significant change.
While Ethereum remained the king in this field, its limited scalability has exponentially increased gas fees, which made DeFi and other dApps unviable for many (although, due to the recent market downside and network upgrade, the average transaction costs on Ethereum have decreased significantly to as low as $0.63 as of June 18).
As a result, with the goal to challenge Ethereum’s dominance, competitor platforms have become increasingly popular over the past few months.
While Binance Smart Chain has quickly become a leader in this area, Solana is also an emerging solution with respect to smart contract blockchains.
Previously, we took a look at the key differences between BSC and Ethereum.
In this article, we will compare Binance Smart Chain and Solana based on various metrics, such as token prices, network usage, fees, scalability, and speed.
Recap: Binance Smart Chain and Solana
Before we take a deep dive into our topic, let’s first start with a recap of both Binance Smart Chain and Solana.
What Is Binance Smart Chain?
Launched as the project of crypto exchange Binance, Binance Smart Chain (BSC) is a highly scalable blockchain network that natively supports smart contracts.
With a fully developed platform, low transaction fees, high throughput, and rapid block times, BSC has quickly become the top Ethereum competitor in the cryptocurrency industry.
As a side note, while their names are very similar, Binance Smart Chain and Binance Chain are different blockchains.
Launched as the exchange’s first chain, the latter network features high scalability but lacks native smart contract support. For that reason, it’s primarily utilized to operate the Binance DEX along with some other applications.
On the other hand, BSC supports smart contracts while leveraging the Proof-of-Staked-Authority (PoSA) consensus mechanism as well as Binance Chain’s high throughput to achieve the same level of scalability and speed (the two chains run in parallel with each other).
One main advantage of Binance Smart Chain is that the blockchain network is compatible with the Ethereum Virtual Machine (EVM), which allows developers to deploy ETH smart contracts and dApps with minimal configuration on BSC.
However, BSC sacrifices a level of decentralization to achieve high scalability and throughput due to the limited number of validators required to reach a consensus.
Also, due to the centralized nature of Binance Bridge — a solution that serves as the gateway between Ethereum and BSC -, users in some countries may face restrictions due to Binance’s policies.
That said, Binance Smart Chain is a highly efficient smart contract platform that has proved itself a worthy competitor to Ethereum.
What Is Solana?
Like BSC, Solana is a highly scalable smart contract blockchain platform that has gained quite some traction lately.
However, Solana achieves enhanced throughput and performance without sacrificing too much decentralization as participants in the network reach a consensus via a large number of validators.
Launched in 2017 during the ICO boom, Solana operates its mainnet in beta phase since March 2020.
The blockchain network utilizes the Proof-of-Stake (PoS) consensus algorithm. The DLT solution reinforces PoS with Tower BFT, a custom implementation of Practical Byzantine Fault Tolerance (PBFT) to ensure the network’s security and stability even when numerous malicious nodes combine their voting powers to take over the ecosystem.
Tower BFT works together with Proof of History (PoH), a protocol responsible for keeping track of the order of the transactions.
Unlike in the Bitcoin network, where blocks include massive groups of unordered transactions, PoH orders transfers in a chain of hashes. As a result, the time validators spend on confirming the order of transactions is significantly enhanced on Solana.
In addition to Tower BFT and PoH, Solana developed unique solutions to increase the efficiency of its network, such as:
- Turbine: A BitTorrent-inspired block propagation protocol optimizing the network to broadcast large amounts of data to a large number of validators
- Gulf Stream: A transaction-forwarding protocol that operates without mempools (the place where pending transfers are stored on the blockchain before they get processed by validators)
- Sealevel: A runtime that allows Solana to process thousands of smart contracts in parallel
- Pipelining: A transaction processing unit to optimize validation
- Cloudbreak: A horizontally-scaled accounts database
- Archivers: A solution for the blockchain to store multiple petabytes (PBs) of data
As a result of all these unique elements, functionalities, and features, Solana can achieve excellent scalability while keeping security and decentralization at a high level.
That said, while Solana has gained quite some traction lately, it still falls significantly behind Ethereum and a major competitor like BSC in terms of adoption.
However, as the ecosystem continues its organic growth, Solana has the potential to compete with Ethereum in the field of smart contract blockchains.
Binance Smart Chain vs. Solana: the Ultimate Comparison
Now that we have revisited the essentials about Binance Smart Chain and Solana, let’s see how the two blockchains compare based on various metrics.
Market Cap and Token Stats
To start, let’s take a look at the native cryptocurrencies of the two smart contract blockchain platforms.
It’s not a surprise that Binance Smart Chain leads in this field, especially if we compare the adoption of its BNB exchange token.
According to CoinMarketCap, BNB holds the 4th rank among cryptocurrencies with a $53.4 billion market cap and a nearly $1.4 billion 24-hour trading volume.
While BNB started 2021 at $37.92, the coin is trading at $348.01 at the moment, which represents a year-to-date (YTD) ROI of 818%.
On the other hand, Solana’s native SOL token features a market cap of $10.2 billion and a 24-hour trading volume of $372 million.
Currently ranking as the 13th largest coin, SOL has experienced an even greater price appreciation this year than BNB. Growing its value from January 1’s $1.54 to $37.16, SOL achieved a YTD ROI of 2,313% as of June 18.
Scalability and Block Time
As both projects feature blockchains with high scalability, it’s important to check their block time and throughput.
According to BscScan, the average block time of Binance Smart Chain is around 3 seconds.
Based on the number of daily transfers in the network, BSC handled approximately 62.4 transactions per second (TPS) on June 17 with a network utilization rate of 38.91%. As a result, Binance Smart Chain can process around 160 TPS with full network usage.
On the other hand, Solana featured an average block time of 0.610 seconds in the last hour and processed around 700 TPS in the previous six hours, which is more than four times what BSC can handle at 100% capacity.
Furthermore, Solana features a maximum TPS of 50,000 — which can be scaled up to 65,000 TPS -, according to the project.
Transaction Fees
In terms of transaction fees, it’s safe to say that both blockchains are inexpensive for users.
Based on June 17 data, a transaction on Binance Smart Chain features an average fee of 7.6 gwei. With the average gas used per transaction being 123,000, the average transfer cost is 0.0009348 BNB, which equals $0.325.
You should note that this cost takes into account the average of standard user-to-user BNB transfers, BEP-20 token transfers, and smart contract transactions (e.g., for DeFi).
Taking a look at multiple transactions on Solana (due to the platform’s beta release, it lacks sophisticated network stats and charts), the fee for a transfer equals 0.000005 SOL, which is worth $0.000186 based on the current price of the token.
Usage and Activity
Now, let’s examine the usage and user activity of both smart contract platforms.
According to BscScan, Binance Smart Chain handled nearly 5.39 million transactions on June 17 while featuring a daily growth of 390,000 unique addresses, increasing the total number of addresses within the network to 78.7 million, from which 967,000 were active that day. Unique addresses does not necessarily imply the same increase in users.
Unfortunately, we don’t have access to such a detailed data set for Solana. However, based on the approximately 700 TPS the network currently handles, Solana processed around 60 million transactions on June 17.
While Solana definitely processed more transactions than BSC, we should note that a significant share of these transfers originates from the Serum DEX’s on-chain order book that amasses much more network resources than other blockchain solutions.
DeFi
Decentralized finance (DeFi) is a sector that is widely popular among cryptocurrency users.
As such solutions operate via smart contracts, it’s important to check how Solana and BSC perform in this area.
According to Defi Llama, decentralized finance dApps on Binance Smart Chain feature a TVL (total value locked) of $14.62 billion (a 12.65% market share), with the PancakeSwap AMM being the leader among the ecosystem’s solutions with a $4.16 billion TVL.
Solana has a $642.47 million TVL (0.556% market share), with the yield farming platform and AMM protocol Raydium being the most popular DeFi dApp within the ecosystem ($317.76 million TVL).
Validators, Security, and Centralization
To gain insights into the level of security and decentralization within their networks, it’s essential to analyze the number of validators who participate in the consensus mechanism of the competing blockchains.
As mentioned earlier, Binance Smart Chain utilizes the PoSA algorithm, which requires only 21 validators (with the highest voting power) to reach a consensus to verify transactions and add new blocks to the chain.
On the other hand, Solana has no such limits, with its network currently featuring 658 validators. As a result, it’s safe to conclude that Solana features a higher level of decentralization than Binance Smart Chain.
That said, it must be mentioned that, due to the 15 validators with the highest voting power possessing over 33% of the staked coins, some have pointed out that those validators could theoretically halt or censor Solana’s network.
In terms of security, the consensus algorithms of both blockchains are based on PoS, which require validators or their delegates to stake coins (to verify blocks).
Since malicious validators lose all their staked tokens if their activity is spotted by honest nodes, it can cause heavy losses for attackers. As it significantly decreases the chances of attempts to take over the network, PoS-based blockchains are generally considered secure.
Binance Smart Chain vs. Solana: Summarizing the Results
Based on our comparison, both Binance Smart Chain and Solana have great potential to succeed in the field of smart contract blockchains.
While BSC features a higher usage rate and market cap as well as a thriving DeFi industry, its network sacrifices some degree of decentralization to achieve enhanced scalability.
On the other hand, while Solana features limited adoption, the project can process a massive number of transactions per second while keeping both network security and decentralization at high levels.
Now, the question is: can any of these two blockchains dethrone Ethereum in the future to become the prime smart contract platform?
Originally published at https://academy.aaxspace.com on June 21, 2021.
