While talking about cryptocurrency trading, we cannot ignore the contribution of the Binance Chain and its leading BNB token. The Binance first introduced the home of BNB currencies, popularly known as the Binance Chain, in 2019. This innovative concept swept the whole cryptocurrency world by storm right after its inception, faster than anticipated. Overwhelmed by the response, Binance claimed to facilitate the traders with the most decentralized and fastest trading, thus improving its current systems. Binance Smart Chain, a subsidiary of the Binance Chains, is constructed on the new blockchain technology training, putting forward a full-featured decentralized development environment backed up by high speed and throughput design. Now the question arises; when Binance Chain was supporting cross-chain compatibility already, why did Binance come up with Binance Smart Chain? What value does it add to the trading? We are here to solve the mystery!
This article highlights all the necessary information to decipher the Binance Smart Chain smartly. Let’s reflect on an introduction to BC and BSC first, and then we will discuss the working, attributes, and potential advantages and disadvantages of BSC.
As mentioned above, this well-known exchange was brought forward in the crypto world in 2019. Through this invention, Binance intended to facilitate traders with ultrafast and decentralized trading options. Alongside the Binance Chain, they also introduced DEX to execute high outputs. This invention backs up the best possible layout, user experiences, and professional transactions. In addition to this, BC offers other services, which are listed below ;
Moreover, the Binance Chain incorporates BFT (Byzantine Fault Tolerance) Tendermint with its systems, which are one of the well-performing chains of the cosmos blockchains.
Before we talk about the Binance Smart Chain network, let us set up the foundation for the need for its development first. BC emphasizes the issuance and trade of cryptocurrencies, thus drawing both conveniences and limitations. One of the most challenging problems that Binance experts face is the addition of an innovative contract feature. This feature may hurt or slow down the DEX. Also, major RPC implementation or novel machine specifications can lead existing dApp communities toward steeper learning curves.
To resolve the mentioned limitations imposed by Binance Chain, Binance experts invented a parallel blockchain, Binance Smart Chain, an improved version of BSC. Binance Smart Chain hands down operate at par and amalgamate existing mainnet leading towards brilliant contract facilities and retention of high-performance native DEX.
Let’s talk more about Binance Smart Chain in the coming sections.
In 2020, Binance introduced a new system built from scratch named Binance Smart Chain(BSC) instead of upgrading its existing blockchain platform. It was the best solution that Binance came up with without tearing down the speed of the Binance chain.
Note: This younger sibling of BS exhibits some features and functions the same as BS, such as EOS (dApp platforms) and Tron. BSC is also compatible with other high-performing apps, and Ethereum is available for cryptocurrency. Binance backed BSC with a Proof of Stake Authority consensus mechanism instead of Ethereum’s current Proof of Work (PoW). It helped in reducing the cost and time of transactions.
This defines its functionalities and performance. Stated below are the highlights of BSC design principles.
Although BSC is not a layer two solution, it still supports native compatibility. As BC and BSC are parallel blockchains, this non-restriction feature works fine. The benefit of this distinct feature to the users is that they can quickly transfer their cryptocurrencies from one system to another.
Although BSC is a derivative of BC, these systems don’t depend on each other. Only the parent, Binance Exchange, can connect BC with BSC. No other source can create this connection. It keeps Binance Smart Chain from technical glitches or any interference in case of faults in BC.
To decipher the BSC network, there is a need to understand Ethereum’s compatibility design feature. Ethereum is the most preferred, practical, and widely used platform for developing smart contracts. The compatibility of Ethereum’s mainnet and BSC grants access to the collection of relatively mature applications and the community. It also allows access to practical tools, apps, and ecosystem components backed by Ethereum. Possible Ethereum upgrades are also implemented.
Another crucial highlight of BSC leading toward the Binance Smart Chain MetaMask integrations is the governance and consensus associated with staking. BSC has gained massive popularity amongst MetaMask users over time. Why? Because its environment-friendly approach guarantees rewards from staking alongside governance and consensus. In comparison to Proof-of-Work blockchains, improved network performance is pursued through flexibility. Regarding blocking time without boundary limitations or improving transaction capacity, staking-based consensus plays a crucial role.
To understand the working of the Binance Smart Chain, it is necessary to refer to the validator quorum. Validators abide by specific rules to support the BSC extension operations. Now let’s talk about the genesis stage or the initial step. The first validator set is responsible for gathering a full selection of credible nodes only. When the elections for the validators and blocking begins, any individual can participate and compete. Validator set is consistently shortlisted by the staking status who chooses top-performing stake nodes. This election process occurs every 24 hours, where BNB serves as the staking token.
A validator quorum secures the network of the Binance Smart Chain. In total, 21 validators can access the blockchain operations. The stakes of BNB act these 21 validators after every 24 hours. A validator can function for 2 hours only. Anyone can become a validator without needing any special qualifications. However, there is only one condition: a validator will only be elected from the top 21 performers. During an epoch, platform validators upgrade the BSC network. On average, an epoch period consists of 240 blocks that consume 20 minutes. BSC enacts slashing to keep malicious actors from double signing or approving suspicious transactions. A slashing attack exposes the attackers and causes them to suffer costly attempts.
Note: BSC solely relies on BC for staking management as the latter possesses a reliable staking module.
To generate new blocks, subsisting BSC validators approve the periodic relay of the Validator-Set-Update message for BSC.
Many traders perceive both blockchains as the same, which is incorrect. Both blockchains are comparable products, but certain functions make a difference. BSC is highly compatible with Ethereum, so its functions and features go hand in hand. So, what are the differences between these two blockchains? Let’s find out below;
Those traders looking forward to using the BSC blockchain and accessing available tokens through BSC Wallet should first explore the token economy. BSC and BC both feature identical token functionalities and components for BEP-2 and BNB tokens. Following are the rules for the BSC token economy.
You can refer to the Consensus of Authority mechanism to determine how the Binance Smart Chain consensus works. As Proof of Work consensus consumes resources, it puts the environment’s well-being at stake. On the other hand, Proof of Authority is a safe and efficient option as it effectively combats 51% of attacks on Proof of Work systems.
Moreover, the Protocols of Authority have remained under heat for decentralization setbacks. Alongside DPoS or Delegated Proof of Stake, token holders vote for and select validators. This is why DPoS has proved to be a favorable consensus mechanism for better community governance and decentralization. The following precedents are responsible for the top performance by Proof of Authority and the DPoS consensus mechanism.
Out of the core components that support functionalities of the Binance Smart Chain, consensus protocol holds a vital position. You can explore the consensus protocol mechanism to dig the roots of the BS operations. The following goals are achieved through the consensus protocol of the Binance Smart Chain;
From the differences in consensus objectives in BSC, it is easy to infer that the BSC token list undertakes all Ethereum-based tokens.
Over the past two years, defi experts have given much attention to pegged coins. When linked to cryptocurrencies, multi-chain currencies, or other assets, coins gain considerable value. For example, traders prefer gold and fiat currencies to attach coins to.
In the NFT market, BSC has succeeded in securing a strong presence. As NFTs can update scarce layers to digital assets, it grabs the attention of many traders. The price of major NFTs lies between hundreds and thousands of dollars.
Formerly Binance and now BNB (Build and Build) benefits token holders by staking their tokens. Binance Smart Chain directly supports cross-chain wallets. Talking about the current market conditions, staking has become one of the most common and most popularly used Metaverses and Defi options. After staking their Build and Build, users start receiving rewards more rapidly than usual, achieving consensus and governance in an environment-friendly approach. All thanks to the ultra-fast transactions of Bitcoins and assets supported by Binance Smart Chain, staking is a convenient option.
Furthermore, compared to Proof of Work blockchains, staking on BSC improves the network performance by boosting the blocking time and transaction capacity without any limitations.
To access the Ethereum ecosystem, traders must get their hands on the MetaMask. It is not only an Ethereum wallet but also facilitates interaction with portals integrated with Ethereum. Through MetaMask, you can also trade without dealing with intermediaries or playful transparent-coded games.
Although MetaMask is an Ethereum wallet, it can be connected to BSC. The integration of MetaMask with BSC allows users to access the UI they are familiar with.
Binance Smart Chain has gained popularity within a few years among all available blockchains. BSC is reputed to execute more than thirteen million transactions within twenty-four hours, making a record, as Ethereum processes only 1.7 million transactions within a day.
This detailed overview of Binance Smart Chain validates and reflects on how Binance Smart Chain serves as an efficient and powerful DEX alternative. Keeping the advantage of interoperability and programmability, BSC is a game-changer in the Defi institution.. Above all, BSC guarantees maximum retention of accurate results on all levels being highly compatible with Ethereum and standalone blockchain.
As Binance Smart Chain runs parallel to Binance Chain, BSC keeps introducing improvements from time to time, such as staking-based consensus and cross-chain communication. Even in the initial stages of its integration, BSC gained a lot of hype. Ethereum, the longest-running blockchain, has failed to beat BSC’s popularity and growth, even though it introduced timely upgrades and updates.
All in all, there is more to explore about Defi and Binance Smart Chain than the information stated in this article. Through this small effort, we tried to convey the necessary information regarding BSC. Explore our other articles for more details on BSC and its usage.
Thanks for Reading!
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