All You Must Know About Binance Smart Chain (BSC) Blockchain Platform
We have drafted a quick preface on the Binance Smart Chain (BSC) blockchain platform. This guide will clear all the primary concepts on and around BSC. Let’s dive in!
Since you’re here, you might already be aware that Binance Smart Chain (BSC) is a blockchain that runs parallel to Binance’s mainnet Binance Chain (BC). Within this guide, we aim to answer all the questions on why BSC was introduced? How does it differ from BC? What exactly is Binance Coin? And other relevant questions around it.
In brief
- A centralized version of Ethereum, but has been performant over Ethereum in terms of adoption rate and transaction speed.
- Constantly evolving since its launch in 2019 with a multi-functioning and highly dynamic cross-compatible ecosystem.
- Binance Smart Chain has established itself as a community-driven, decentralized and open-sourced ecosystem for blockchain development.
What Will You Learn?
- What is Binance Chain (BC)
- What Is Binance Smart Chain (BSC)
- What is a Binance Coin (BNB)
- What are the uses of the Binance Coin (BNB)
- What Is The Difference Between BC And BSC
- Key Differences between BSC & BC
- What Is The Difference Between Binance Coin And BSC
- What Are the Basics of Binance
- Key Principles of BSC
- How does BSC work
- Proof of Staked Authority (PoSA)
- Takeaway
What is Binance Chain?
Binance is one of the fastest evolving cryptocurrencies and is credited with unveiling two major Blockchain in the last few years. One of these is known as Binance Chain. Binance Chain was announced back in April of 2019 and is the company’s first Blockchain platform. It serves as a marketplace platform for crypto-based asset exchange. It offers Binance DEX- an exchange for trading BNB or Binance Coin.
With Binance Chain and its own crypto coin, the company became a challenger to the top crypto coins such as Ethereum.
Binance Chain (BC) is meant to let users create decentralized apps or Dapps. On this Blockchain, trading fees are low, and no third party is involved in trading. It is a transparent and decentralized platform.
With Binance Chain, users can store their cryptocurrency funds. They can also make trading pairs between distinct tokens. These are like crypto assets that may be traded via exchange for each other.
What Is Binance Smart Chain?
Binance, from its time of inception, made headlines for innovations. In September 2020, Binance developed a new Blockchain and named it Binance Smart Chain (BSC). Binance Smart Chain serves as an individual Blockchain, but it does not replace the older Binance Chain. In fact, the two platforms co-exist.
The Binance Smart Chain was created so that limitations of the Binance Chain could be overcome. BSC is Ethereum Virtual Machine (EVM) compatible.
BSC’s EVM compatibility ensures Ethereum-based applications will execute on this Blockchain platform. As of now, hundreds of apps are hosted by Ethereum on BSC. The Binance Smart Chain deploys a PoSA- Proof of Staked Authority. It merges two older protocols-namely Delegated Proof of Stake and Proof of Authority. The BSC enables smart contracts. So, overall, Binance Smart Chain offers a secure and EVM-compatible experience and packs in the benefits of a smart contract.
What is a Binance Coin?
Binance Coin is now referred to as BNB, which stands for Build and Build.
Binance coin is the native crypto-coin offered by the Binance exchange. Its trading symbol is BNB. It was formerly known as Ethereum Request for Comment-20 (ERC-20). The Binance coin is meant to enhance the Binance exchange operation and its ecosystem. Its supported utilities include exchange fees, trading fees and other charges on the Binance exchange.
The Binance coin is handy for investing in specific initial coin offerings covered in Binance’s Launchpad program. Binance coin has garnered the support of the VISA debit card of Monaco. BNB as a cryptocurrency is important since The Binance Exchange is rated as the biggest cryptocurrency exchange globally.
BNB users get a discount on transaction charges on the platform. You may trade BNB for other cryptocurrencies like Litecoin, Bitcoin, and Ethereum. The Binance Coin was unveiled with an ICO in July 2017. Since then, it has received adequate adoption from blockchain developers.
FYI, BNB is referred to as Binance Smart Chain Evolution Proposal 2 (BEP-2) technical standard for the issuance and implementation of the token.
What are the uses of the Binance Coin (BNB)?
From many, BNB serves the following three major purposes in Binance Smart Chain:
- In performing cross-chain operations; such as transferring tokens assets from BSC to BC and vice versa.
- For staking on BSC validators and obtaining rewards
- To pay the gas fees in order to deploy smart contracts on BSC
What Is The Difference Between Binance Chain And Binance Smart Chain?
Lots of developments are happening in the cryptocurrency sector, and Binance Chain is one of them. Here we will talk briefly about Binance Chain and Binance Smart Chain and analyze their similarities and differences.
Binance Chain was introduced in the crypto world in 2019 April. Developed by Binance, the largest crypto exchange, the target of this blockchain is to provide a fast and decentralized exchange for various crypto assets. With the introduction of the Binance Chain, Binance aimed at providing users with the best layout and user experience with professional transactions.
Launched in September 2020, Binance Smart Chain (BSC) is a parallel chain of Binance Chain (BC). This smart contract platform imitates the functionalities of various dApp platforms like EOS and Tron, and also Ethereum. Instead of upgrading the Binance Chain, Binance thought of launching a new blockchain. Initially derived from Go Ethereum, Binance Smart Chain chose a ‘Proof of Staked Authority’ consensus mechanism. As a result, the cost and time of transactions have reduced significantly.
Key Differences Between BC & BSC
Here are some key differences between Binance Smart Chain (BSC) and Binance Chain (BC):
- BSC is a programmable platform where you can host any dApp (including Smart Contracts). Platforms running on Ethereum can also be ported to the BSC platform. Whereas, BC has limited functionality, and it can only host Binance DEX.
- BC network tokens are issued under the BEP-2 issuance standard, while BSC tokens have to comply with BEP-20 standards. The full form of BEP is Binance Evolution Proposal.
- BSC uses Proof of Staked Authority (PoSA), while BC uses the Tendermint BFT consensus mechanism.
What Is The Difference Between Binance Coin And Binance Smart Chain?
The cryptocurrency revolution has swept the whole world. The latest technological advancements in this industry make the transaction process seamless and hassle-free. That’s the reason so many blockchain platforms have been budding for developers to create blockchain-based applications. Let’s discuss Binance Coin and Binance Smart Chain.
Running parallel to Binance Chain, the premiere blockchain of Binance, Binance Smart Chain was launched almost 1.5 years later than Binance Chain. The main purpose of launching the Smart Chain was to introduce smart contract programmability, which was not there in Binance Chain. In the crypto community, smart contracts are decentralized applications (dApps), which are highly popular on the Ethereum blockchain.
At the same time, Binance Coin was launched in 2017 July as an ERC-20 token. This is the native token of the Binance Chain. Binance Coin is a BEP-2 token. When transactions take place on the Binance Chain, Binance Coins burn. This happens as per a fee schedule approximately after every three months. The initial maximum supply is 200 million. Till the supply reaches 100 million, burns will keep on taking place.
While Binance Smart Chain is a programmable platform, Binance Coin is a native token of Binance Chain. Binance coins burn on the Smart Chain platform.
What Are the Basics of Binance Blockchain Platform?
To develop a better understanding of the Binance Smart Chain (BSC), you must analyze the properties well. This will offer an idea as to why Smart Chain is different or unique when compared to other blockchains in the market.
In this context, you need to fathom the founding principles, the constituent parts, the ecosystem, and the consensus mechanism of the Binance Smart Chain. Lots of changes seeped into this blockchain platform in the last year. It is important to track the progress and keep a note of the changes that are tweaking the platform.
Key Principles of BSC Blockchain Platform
During the design of the Binance Smart Chain, there were four key principles of Binance on which the blockchain is based. The development and architecture are also dependent on these principles:
⦁ Staking
Binance Smart Chain uses a staking model for ensuring participation in block creation and governance from the BSC community. Binance chose to stake as they emphasized network speed rather than paying more attention to security and decentralization. Also, staking models support quicker block generation and are more environment-friendly.
⦁ Standalone blockchain
Binance targeted Binance Smart Chain to stand alone. By decoupling the two blockchains, there were no scopes of service interruptions, even if one of them failed. With the separation of the networks, Binance can implement new technologies and also remove side effects, if any.
⦁ Native cross-chain communication
Though BSC is a parallel chain to Binance Chain (BC), there is native-cross chain compatibility between the two blockchains.
⦁ Consensus
It has 3 seconds of blocking time using PoSA or Proof of Staked Authority. If they propose one valid block, they are to receive transaction fees from the transactions included in it.
⦁ Ethereum Compatibility
When it comes to leading smart contract platforms, Ethereum is the first name that comes to mind. Binance worked on the same path as Ethereum and made a few modifications. Particular mention should be made of the consensus mechanism. By copying Ethereum’s source code, it is possible to transfer native Ethereum dApps to BSC.
Fact: Ethereum takes upto 14 seconds for confirming a transaction, whereas BSC can complete it within three-second time.
How does BSC work?
Ethereum currently operates on Proof of Work (PoW) consensus and is planning to move to Proof of Stake, which will make it more efficient. As mentioned above, Binance Smart Chain is already operating on Proof of Stake’s modified version, referred to as Proof of Staked Authority (PoSA).
The blockchain platform works similar to any other, which is by staking the native token to perform a certain task and then receiving a reward in return for a successful transaction.
In BSC, the participants stake the native token (which is BNB) to become validators. Once they validate and propose confirming the blocks (which also represent transactions), the validators receive the required transaction fees.
You must note, like any other blockchain platform, that the transaction fees received by the validators on Binance are also received in the form of native tokens. But unlike other chains, it comes from the existing supply of BNB and no tokens are freshly-minted.
You may ask why?
It’s because BNB is not inflationary, and the Binance team regularly burns a portion of its supply. As per the data available, there exists an initial maximum supply of 200 million and the burns will continue until the BNB supply reaches 100 million.
Proof of Staked Authority (PoSA) Consensus Mechanism
For achieving consensus within the network, Binance Smart Chain used the Proof of Staked Authority (PoSA) mechanism. You might not be aware that Proof of Staked Authority is the combination of Proof of Authority (PoA) and Delegated Proof of Stake (DPoS). Delegated Proof of Stake has already been implemented in many blockchains successfully, like EOS.
The DPoS is a staking model where validators put up a stake of native tokens of the network so that they get an opportunity of creating blocks and validate transactions. Technically, if you have a minimum stake of the needed tokens, you can become a validator. But this is not allowed to prevent the network from becoming slow. To become validators, token holders have to vote for a particular number of delegates. For EOS and Binance Smart Chain, the number of validators is 21.
As applicable for Binance Smart Chain, PoA represents a model where validators are picked or chosen by a central party. In this case, the central party is Binance. Precisely, it depends on Binance’s approval as to who can participate in block creation.
Merging DPoS consensus models with PoA enhances network centralization. With this, Binance Smart Chain has a block generation time of just 3 seconds, compared to 10 minutes for Bitcoin and 13-14 seconds for Ethereum.
Takeaway
We hope the above analysis of the ecosystem will make it easy for you to understand the BSC platform and develop blockchain applications on it.
Innovations and new applications are making their way into the BSC ecosystem. The space is constantly growing, which makes it a game-changer in the DeFi world. Its core functionalities of interoperability, programmability and standalone blockchain with Ethereum compatibility establish BSC as one of the high-performance-oriented blockchain development platforms.
If you’re planning to leverage the best out of the Binance Smart Chain platform! Connect with our blockchain developers, we can help you build an innovative blockchain application from scratch.
