Binance Smart Chain emerged as an alternative to Ethereum, a new blockchain with a complete environment for developing high-performance decentralized applications and low transaction fees. It was built to provide cross-chain compatibility with Binance Chain, ensuring that users can enjoy the best of both worlds.
In this article, we will discuss:
What is the Binance Smart Chain?
Binance Smart Chain (BSC) is best described as a blockchain that runs in parallel with Binance Chain. contrary to Binance Chain, BSC has smart contract functionality and compatibility with the Ethereum Virtual Machine (EVM). Binance Smart Chain's goal was to introduce smart contracts into its ecosystem without jeopardizing Binance Chain's high throughput.
In essence, the two blockchains operate side by side. It is important to note that BSC is not a layer two or off-chain scalability solution. Is blockchain independent network that can be executed even if Binance Chain goes offline. That said, both chains bear a strong similarity in terms of design.
As BSC is compatible with EVM, it was launched with support for Ethereum's vast universe of tools and DApps. In theory, this makes it easier for developers to migrate their Ethereum projects. For users, this means that applications like MetaMask can be easily configured to work with BSC. It is just a matter of adjusting some settings. Check out Using MetaMask on the Binance Smart Chain to get started.
See also:
What is Binance Coin (BNB)
How does Binance Smart Chain work?
Binance Smart Chain achieves block times of ~ 3 seconds with the Proof-of-Stake consensus algorithm. More specifically, it uses the so-called Proof of Staked Authority (or PoSA), where participants stake out BNBs to become validators. When these users propose a valid block, they receive fees for the transactions included in the block.
Note that, unlike many protocols, there is no block grant for the newly created BNB, as BNB is not inflationary. On the contrary, the supply of BNB decreases over time, as Binance regularly flushes coins.
Cross-Chain Compatibility
Binance Smart Chain was created as an independent system, but complementary to Binance Chain. The Dual-chain architecture is used so that users can transfer assets from one blockchain to another, without any difficulties. In this way, users can take advantage of fast trading operations on the Binance Chain, while important decentralized applications can be built at BSC. With this interoperability, users enjoy a vast ecosystem that can meet a multitude of needs and use cases.
Binance Chain's BEP-2 and BEP-8 tokens can be exchanged for BEP-20 tokens, the new standard introduced on Binance Smart Chain. Have you read An Introduction to ERC-20 Tokens? If so, you might already be familiar with the BEP-20 format. It uses the same functions as its Ethereum counterpart.
To move tokens from one chain to another (BEP-2 to BEP-20 or vice versa), perhaps the simplest method is to use the Binance Chain Wallet, available for Chrome and Firefox. Check out the guide to Using the Binance Chain Wallet Extension for more details.
Decentralized Finance (DeFi) at Binance Smart Chain
You should know that several digital assets - such as BTC,LTC, ETH, EOS or XRP – already exist on Binance Chain as “Peggy coins”. They are tokens linked to assets on their native chains. For example, you might decide to block 10 BTC to receive 10 BTCB on Binance Chain. At any time, you can exchange your 10 BTCB for 10 BTC, which means that the price of BTCB must follow the BTC price native.
In doing so, you effectively transport these assets to the Binance Chain. Are you interested in knowing more about this? See our Guide to Tokenized Bitcoin on Ethereum.
Thanks to the flexibility offered by Binance Smart Chain, assets from many different chains can be used in the emerging DeFi sector. For example, applications such as PancakeSwap allow users to exchange assets without the need for trust (as well as the Uniswap), participate in yield farming and vote on proposals. Some similar projects are BurgerSwap and BakerySwap (if you are new to the crypto world, hello! As you can see, we are big fans of decentralized exchanges with food names).
Final Words
Binance Smart Chain greatly expands the functionality of the original Binance Chain and brings together several cutting-edge protocols, designed to bridge the gap between various blockchains. Although it is still in its initial phase, the proposed BNB staking together with EVM compatibility, makes the platform the ideal mechanism for developers who create important decentralized applications.