Binance Smart Chain — An Introduction
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Originally published in the NOWNodes blog.
Binance smart chain became live on its mainnet on 17th September 2020. It took five months for the smart chain to go live since it was announced in April 2020. Since recently we added support to Binance Smart Chain, we will cover it in our next article.
What is Binance Smart Chain (BSC)?
Binance smart chain runs parallel to the Binance chain. Binance Chain is a fast and secure decentralized exchange for digital assets. It is based on a highly performant matching engine and is developed on distributed consensus. Programming languages for the Binance chain include GO, Java, Javascript, C++, C#, Python, and Swift.
Binance smart chain goes a step further. It aims at providing an architecture that will simultaneously serve two purposes. On one hand, BSC enables the users to build their apps and digital assets on one blockchain. On the other blockchain, it allows the users to leverage the facilities of fast trading.
In terms of its features, the Binance Smart Chain is EVM compatible. It is built on proof of stake consensus-building mechanisms. The dual chain architecture of the BSC enables it to do cross-chain transfers and trades. The block time of BSC is approximately 5 seconds.
Why Was Binance Smart Chain Launched?
Several reasons motivated Binance to launch the smart chain. At the core of it all, the objective of Binance was to improve the freedom of assets. The team of Binance and the global team of developers involved in it aimed to develop an internet of blockchain where the interoperable DeFi money legos would be blockchain agnostic. Moreover, the users would be able to flow free based on their needs and choices. In all these, the Ethereum mainnet would be serving as a global settlement layer.
Apart from this broad scheme of things, the Binance smart chain also has some specific advantages.
- EVM compatibility: Since the smart chain is EVM compatible, it is supportive of all existing Ethereum toolings including Metamask, Remix, Truffle, etc. On top of that, critical infrastructures like ChainLink and BandProtocol are also integrated with the BSC.Assets and trading pairs that are listed on the Binance DEX can flow smoothly into the smart chain. In total, there are 139 such trading pairs and 110 BEP-2 assets present on the Binance exchange.
- The list of pegged tokens on the Binance chain includes all the major cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Ripple, EOS, Tron, etc. This extensive list helps to grow the list of assets on the smart chain.
- High transaction fees on Ethereum has been a concern. Ethereum transaction fees even crossed 200 gwei at one point. Binance smart chain, on the other hand, has very low gas fees: 10 gwei per unit of gas. This low rate effectively makes the transaction fees on blockchain come down to a mere 1 cent.
- BSC provides a high-performance environment. With a network of 21 validators, it offers a high-speed infrastructure for decentralized finance protocols. These validators get BNB rewards that ensure stability.
- The Binance chain and the Binance smart chain communicates through its native cross-chain mechanism. They also have a built-in transfer protocol that ensures the smooth bi-directional flow of BEP2 tokens.
Overall, the Binance smart chain serves as a valuable addition to the entire Binance ecosystem, an ecosystem that consists of more than 30 wallet providers. Binance smart chain also gets a readymade base of 600,000 users already present on the Binance chain and more than 15 million users present on the platform Binance.com.
The $100 Million Fund as Incentive on BSC
To encourage the use of the Binance smart chain, Binance has set up a 100 million dollar fund. This accelerator fund intends to support projects developed on BSC.
As per the latest available information, six projects have been awarded grants from this fund to date. These six projects were selected from a list of 180 applicants. The grant awarded amounted to $350,000. The selection of these projects considered multiple criteria and conducted a careful examination of the teams and their products. However, the most important factor to consider was the contribution of these projects towards developing the entire blockchain ecosystem.
To cite as a sample of one of the projects that were chosen for this grant, PanCakeSwap served as an automated market maker which, according to Binance’s observations, was the “number one liquidity provider” on BSC. Binance judged the performance of PanCakeSwap in terms of its volume, the number of active users, and its contribution to gas fees.
The other five selected projects were AnySwap, Arkane Network, BakerySwap, Bitquery, and Proxima
BSC Tokenomics
Similar to the Binance chain, Binance smart chain has the same token universe for both BNB and BEP2 tokens. BNB is the native token for BSC.
Being the native token for BSC, BNB has many functions. Foremost, BNB is the currency to pay “gas” when deploying smart contracts on the BSC. BNB is also used for staking and rewards. It’s also used in performing operations across chains including the transfer of token assets across the Binance chain and Binance smart chain.
The circulating supply of BNB is 144,406,561 tokens or a little more than 144 million. The maximum supply is fixed at 176,406,561 tokens or a little more than 176 million. While discussing tokens, we also need to keep in mind that BSC is compatible with Ethereum. Therefore BSC supports ERC20 tokens.
During the genesis stage, certain amounts of BNB have burnt off the Binance chain and minted on the smart chain. The amount burnt is called ‘Seed Fund’. The seed fund BNBs are deployed in paying transaction fees to transfer more BNB from the Binance chain to the Binance smart chain using cross-chain protocols.
Summary
The introduction of the Binance smart chain addressed the growing demand for adding the smart contract function onto the Binance chain. It paved the way for introducing the smart chain feature without slowing down the function of the Binance exchange or giving a rise to the scope of adding non-deterministic factors to trading.
It can be expected that in the days to come BSC would facilitate users to leverage fast transferring and trading on one side and reap the benefits of flexible and extendable programming on the other side.
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