Why move on Binance Smart Chain 2020!

Binance newly announced its Binance smart chain this year ( 2020 ).

This new blockchain will work in parallel with the exchange’s primary blockchain, the Binance Chain.

Both chains are being improved at exceptional speed.

This case study will take you through a detailed overview of how the Binance Smart Chain works and what projects it has integrated so far, to see if it could possibly overtake Ethereum, and what this all means for Defi.

Let’s take a look at it in more detail. 

What is a Binance Smart Chain?

Binance Smart Chain is a blockchain that works in parallel with the Binance Chain to enable the creation of smart contracts and the staking mechanism for BNB.

BSC is compatible with Ethereum Virtual-Machine and is currently being tested by a number of prominent crypto projects.

It’s expected to increase the utility of BNB and Binance Chain.

BSC uses a Proof of Staked Authority consensus mechanism which allows validators, token holders developers, and users to contribute to or benefit from high performance and future innovations.

What is a Binance coin (BNB)?

Binance Coin (BNB) is an exchange-based token created and issued by the cryptocurrency exchange Binance.

Initially created on the Ethereum blockchain as an ERC-20 token in July 2017, BNB was migrated over to Binance smart chain in February 2019 and became the native coin of the Binance smart chain.

Binance Coin has seen massive growth in interest throughout the years.

Several rounds of token burn events have appreciated BNB price and pushed it up as one of the top-10 cryptocurrencies by market capitalization.

BNB can be traded in over 300 trading pairs across 120 exchanges tracked. 

Binance Smart Chain Concept

Binance Smart Chain is an innovative solution to bring programmability and interoperability to Binance Chain.

Binance Smart Chain relies on a system of 21 validators with Proof of Staked Authority (PoSA) consensus that can support short block time and lower fees.

The most bonded validator candidates of staking will become validators and produce blocks.

The double-sign detection and other slashing logic guarantee security, stability, and chain finality. 

The Binance Smart Chain also supports EMV-compatible smart contracts and protocols.

Cross-chain transfer and other communication are possible due to native support of interoperability.

Binance DEX remains a liquid venue of the exchange of assets on both chains.

This dual-chain architecture will be ideal for users to take advantage of the fast trading on one side and build their decentralized apps on the other side.

The Binance Smart Chain will be :  

• A self-sovereign blockchain – Provides security and safety with elected validators.
• EVM – Compatible – Supports all the existing Ethereum tooling along with faster finality and cheaper transaction fees.
• Interoperable – Comes with efficient native dual chain communication; Optimized for scaling high-performance dapps that require fast and smooth user experience
• Distributed with on-chain governance – Proof of Stake Authority brings in decentralization and community participants. As the native token, BNB will serve as both the gas of smart contract execution and tokens for staking. 

Working of the design principles

After the creation of the parallel blockchain into the Binance Chain ecosystem, two blockchains will run side by side to provide different services.

The new parallel chain will be called “Binance Smart Chain” (short as “BSC”), while the existing mainnet remains named “Binance Chain” (short as “BC”).

Following are the design principles : 

• Standalone Blockchain: Technically, BSC is a standalone blockchain, instead of a layer 2 solution. 
• Ethereum Compatibility: The first practical and widely-used Smart Contract platform is Ethereum. To take advantage of the relatively mature applications and community, BSC chooses to be compatible with the existing Ethereum mainnet. 
• Staking Involved Consensus and Governance: Staking-based consensus is more environmentally friendly and leaves more flexible options to the community governance.
• Native Cross-Chain Communication: Both BC and BSC will be written with native support for cross-chain communication among the two blockchains. The communication protocol should be bi-directional, decentralized, and trustless

Consensus and Validator Quorum

Based on the above design principles, the consensus protocol on BSC is to fulfill the below goals: 

1. Blocking time should be shorter than Ethereum, e.g. 5 seconds or even shorter.
2. It requires limited time to confirm the finality of transactions, e.g. around 1 min level or shorter.
3. There is no inflation, the block reward is collected from gas fees, and gas will be paid in BNB.
4. It enables the system compatible with Ethereum as much as possible.
5. It equips modern staking-based network governance. 

Proof of Staked Authority

Although Proof-of-Work (PoW) has been approved as a practical mechanism to implement a decentralized network, it is not friendly to the environment and also requires a large size of participants to maintain the security.

Ethereum and some other networks, such as MATIC Bor, TOMOChain, GoChain, xDAI, do use Proof-of-Authority(PoA) or its variants in different scenarios, including both testnet and mainnet.

PoA provides some defense to 51% attack, with improved efficiency and tolerance to certain levels of Byzantine players (malicious or hacked).

It serves as an easy choice to pick as the fundamentals. 

Governance

BSC

• Uniform interface: The contracts that are interested in these parameters only need to implement the same interface.
• Extensible: When adding a new system contract, there is no need to modify any other contracts
• Failure toleration: Validators could vote to skip false proposals and go on.
• Multiplexing: Now we have only parameters gov, but in the future, there will be more governance functions. 

BC

• Codebase reuse: Reuse most of the structure of proposal and vote, and the logic about propose and vote. 
• Cross-chain package Available at once: The cross-chain package should be available once the proposal passes. 
• Native params change take place at breath block: The change of Staking/Slash/Oracle modules on BC takes place at breath block after the proposal passed. 

WORKFLOW

Why to grow a Binance Smart Chain?

Ever since Binance Smart Chain was launched in April, it has been consistently working on developing and integrating various projects.

The following are some of its crucial integrations and announcements:

Rialto

In May 2020, the Binance Smart Chain team presented its first testnet, named Rialto.

It highlights support for strengthening decentralized apps and the application of Proof of Staked Authority consensus,

as well as the capacity to stake and select BNB for voting on Binance Smart Chain validators and to secure tokens over the two blockchains for transfer of tokens.

Chapel

Binance more recently released an update to the Binance Smart Chain testnet called Chapel that replaced the Rialto testnet.

It introduced more reliable security and new characteristics to the Binance Smart Chain.

Chainlink (LINK)

Binance announced on July 23 that it has integrated the Chainlink decentralized data oracle for its Binance Smart Chain testnet.

The integration of ChainLink will enable developers on Binance’s forthcoming smart contracts platform to obtain and use real-world data for their DApps, contracts, protocols, etc…

This important alliance between the currently largest digital assets exchange Binance and the most widely used decentralized oracles project, Chainlink, will speed up the progress of blockchain-based protocols.

Band Protocol (BAND)

According to the official announcement, the Binance Smart Chain has also partnered with Band Protocol.

Band Protocol is another oracle, but with additional cross-chain capability that collects and combines real-world data and APIs and sends them to smart contracts.

This will integrate Band Protocol’s decentralized and configurable oracles to Binance Smart Chain’s environment for scalable Defi applications.

Swipe (SXP)

Swipe is a digital asset wallet.

Swipe will soon be launching decentralized lending and borrowing applications called SwipeFi on the Binance smart chain platform.

According to the official post, SwipeFi will allow users of Binance Chain tokens to earn interest on their assets after depositing them to the protocol and borrow against their security on the Binance Blockchain.

SwipeFi will be equivalent to what Aave does on Ethereum.

Ankr (ANKR)

Ankr will streamline the staking process by providing an easy to use UI as well as the needed cloud space to run a Binance node.

To clarify, running a node doesn’t require Ankr, instead, Ankr will make it easier to use.

Trust Wallet Now Supports Binance Smart Chain (BSC) :

Immediately after BSC’s main net was launched, Trust Wallet added support for the network.

You can already send and receive BNB using your Smart Chain address.

Just make sure to install the latest update available for your device, there will be a lot of exciting features that will soon be enabled within the app to support BSC. 

Step 1 : Receiving BNB on BSC

Step 2 : Get the smart chain address

Step 3 : Withdraw BNB to BSC

Step 4 : Send BNB from smart chain address

Step 5 : Check BSC transactions.

Top Reasons for Building Defi on Binance Smart Chain

Binance Smart Chain provides several benefits to Defi protocols and their users: 

1. EVM Compatibility

Binance Smart Chain is fully EVM (Ethereum Virtual Machine)-compatible and can support all of the existing Ethereum toolings such as Metamask, Remix, Truffle, etc.

At the same time, critical infrastructures like oracles (ChainLink and Band Protocol) are already integrated onto the Binance Smart Chain.

2. A Rich and Growing Ecosystem of Assets

More than 110 BEP-2 assets and 139 trading pairs are listed on Binance DEX, which can seamlessly flow into Binance Smart Chain.

Binance Chain has also pegged major cryptocurrencies that have their own blockchains, including Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin, EOS, and Tron. 

3. Cheap Transaction Fees

Ethereum transaction fees have been a major point of friction over the past few weeks, crossing 200 gwei at a point, which introduces a serious threat to the increasing adoption of Defi with numerous projects actively exploring Layer 2 solutions to help pacify the issue.

4. Cross-Chain Defi Mechanisms – Making Defi Borderless

In order to allow users and developers to move assets between chains, allowing more freedom, choice, and flexibility, a number of cross-chain infrastructures are deployed on Binance Chain and Binance Smart Chain.

5. Ecosystem

A vibrant and growing ecosystem is supporting Binance Chain and Binance Smart Chain, including:

• Over 30 wallet providers
• Over 600,000 users on Binance Chain and more than 15 million users on Binance.com, all nascent potential users of Defi projects on Binance Smart Chain.
• One of the biggest and most influential megaphones in crypto twitter as well as several other channels to engage with the Binance community.  

Defi on Binance Chain: Stake Wars and Uses cases

The binance community also concluded Stake Wars as well.

It gives a glimpse of how the Binance Smart Chain can bring forth BNB staking and further strengthen Defi.

Stake Wars is a promo that exhibited how staking will work for BNB via Binance Smart Chain (BSC). 

How stake wars helped in finding out Binance smart chain’s capabilities, stake Wars lasted for ten days and yielded amazing results. 

• More than 2,000 new addresses were created on the Binance Chain test net.
• 2,000,000 testnet BNB + 1,000 testnet BTCB airdropped. 
• More than 2,000,000 test net BNB bonded for the competition.
• 193,428 transactions executed between 2,000 activated addresses. 
• More than 30,000 staking transactions. 
• Forty-one validators were generating blocks every few seconds. 

Can Binance Smart Chain Overtake Ethereum As The Main Smart Blockchain?

Many blockchains already outperform Ethereum technically.

However, Ethereum still leverages its first-mover advantage and network effects.

What network effects mean, is that Ethereum has the highest number of users.

This causes DApp developers to launch their protocols on Ethereum, which in turn attracts more users, etc.

So far, all of Ethereum’s competitors have struggled to onboard new users because of these effects, and Ethereum has remained the leader. 

For Binance however, onboarding users shouldn’t be an issue.

In 2019, Binance boasted over 15 million users in 180+ countries.

Among them, these users average a daily trading volume of $2.85 Billion.

If Binance Smart Chain comes out technologically superior, nothing should stand in its way to overtake Ethereum, especially if Ethereum fails to launch ETH 2.0 and resolves its now sky-high transaction fees.

Some projects such as Swipe have already decided to migrate to BSC once its main net is launched.

What’s next for Binance Smart Chain?

The binance team is preparing to launch more updated versions of the test net next month.

In this month, the Binance Smart Chain test net will deploy the latest version called Millau.

The main net launch is planned for 2020’s third quarter.

According to Binance, this will eventually give the possibility of building smart contracts for the current and expected tokens on the Binance Chain ecosystem. 

Conclusion

Binance Smart Chain has the potential to further the adoption of blockchain and Defi around the world.

In addition to periodical BNB burns, which reduce the supply, the Binance Smart Chain will increase the demand for Binance’s native token.

The potential for the token price to multiply in value is huge.

Integrating smart contracts into the crypto world’s leading exchange platform by trading volume is no small step for the nascent world of blockchain.

Whether or not Binance succeeds in its endeavor, remains to be seen.

Cryptic Ocean is a blockchain technology company that provides end-to-end blockchain development and blockchain consulting services to multiple business domains.

Our goal is to assist corporations adopt new technologies and change difficult problems that arise throughout technology evolution.

Contact us for the most effective solutions regarding the utilization of blockchain technology to resolve the toughest challenges faced by the globe nowadays.

FAQ’s

If you found this article interesting, here you can find more Articles.