BNB Smart Chain (Binance Smart Chain) network

ResearchApr 28, 2022
BNB Smart Chain (Binance Smart Chain) network

BNB Smart Chain is a relatively young ecosystem for smart contracts and Dapps. Created by the biggest crypto exchange, it is now intertwined with the older BNB Beacon Chain. The blockchain has similar transaction power but fills in its counterpart’s functionality gaps. Learn more about this innovative network from our guide.

Definition of BNB Smart Chain. Source: Bnbchain.world
Definition of BNB Smart Chain. Source: Bnbchain.world

How it started: Binance Chain

At the time of its emergence, this platform was known as Binance Smart Chain (BSC), a partner to Binance Chain (BC). Binance’s older network appeared in April 2019 to support a decentralized exchange with an emphasis on fast trading. Today, the Binance DEX is accessible through its web interface and native integration with Trust Wallet.

Transactions on BC are validated using Tendermint Byzantine Fault Tolerance (BFT) and delegated Proof-of-Stake (DPoS). Thus, users elect delegates that make critical decisions. BC supports the following functions:

  • transfer of digital assets
  • management of token issuance and supply (minting, burning, etc.)
  • issuance of new BEP-2 tokens (see below)

Unlike the Ethereum network, Binance Chain prevents congestion by means of design. This narrowly focused blockchain accommodates substantial throughput. On the flip side, it is unable to support a fully-functional DEX with smart contracts.

In September 2020, Binance Smart Chain was born to address these challenges. Today, this platform can host any Dapp.

BSC Launch Announcement. Source: Binance.com
BSC Launch Announcement. Source: Binance.com

Bridging Binance Chain and Ethereum blockchain

BSC’s enhanced functionality is rooted in its compatibility with the Ethereum Virtual Machine. Developers use EVM to build decentralized applications based on smart contracts. As a result, BSC can interact with popular Ethereum-based Dapps like the MetaMask wallet. This boosts both scalability and efficiency.

Independence sets this network apart from Layer 2 systems, which are built on top of blockchains. Binance Smart Chain has three main functions:

  • allowing developers to build powerful apps
  • allowing users to manage digital assets across blockchains
  • providing large capacity and low latency (the time required for a new transaction to be confirmed by the network)

Success of Binance Smart Chain

Due to the deficiencies of the Ethereum blockchain, BSC took off quickly. In 2020, its rival was already suffering from congestion, delays and exorbitant gas fees. Developers and staking investors flocked to BSC, whose key selling points were stability and cost-efficiency.

In February 2021, Binance Coin (BNB) soared above $300. To prevent a transaction fee surge, BSC brought its gas price down from 15 Gwei to 10 Gwei. This approach paid off: on November 17, the blockchain set a record by processing over 14.7 million transactions. Since then, its throughout has dipped on April 27, 2022, around 4.8 million transactions were processed.

BNB Daily Transaction Graph. Source: Bscscan.com
BNB Daily Transaction Graph. Source: Bscscan.com

Key features of Binance Smart Chain

Let’s take a closer look at the features of the upgraded blockchain. Here are four key distinctions in comparison with BC:

  • Standalone blockchain

BC’s offshoot has always been an independent environment. If the predecessor stops operating, BSC can take over its technical and business functions.

  • EVM-compatible

BSC supports smart contracts, which are compatible with Ethereum. Developers can create and transfer tools, decentralized applications, and other components of this ecosystem fairly easily. They can also build self-executing contracts in any language that can be compiled to the EVM Bytecode.

  • Staking and community-based governance

BC uses delegated Proof-of-Stake (PoS) to ensure consensus. BSC transforms it into Proof-of-Staked-Authority (PoSA) by adding Proof-of-Authority (PoA).  This introduces a voting mechanism while the exchange vets all potential validators. To have a say in matters involving community governance, users must stake BNB.

On Binance Smart Chain, stakers elect 21 new validators every 24 hours, and anyone can be a candidate. Each new elected set includes the highest-staked nodes. They verify transactions in turns, producing new blocks in a PoA fashion that is, based on stake and reputation.

This model supports shorter block times (around three seconds) and lower fees. A validator gets the transaction fees for every block they propose once it is added to the blockchain.

Compared to Proof-of-Work (PoW) used by Bitcoin and Ethereum (until Eth2 arrives), this model is also more energy-efficient. By using staking instead of mining, Binance avoids the need for immense computing power. At the moment, Vitalik Buterin’s blockchain still needs 70,000 validators, while the Ethereum alternative uses 21 (41 since its merger with BC).

Comparison of Common Consensus Models. Source: Medium.com
Comparison of Common Consensus Models. Source: Medium.com
  • Native interoperability

BSC can interact with BC smoothly. It runs in parallel to the older blockchain, so users can move cryptoassets there with little effort.

BNB Chain: the big merger

In February 2022, Binance Chain and Binance Smart Chain merged to form the dual BNB Chain ecosystem. BNB stands for Build and Build.

The coupling brought more innovation and decentralization. It also underscored BSC’s connection with the native token and ecosystem. Meanwhile, the Binance community moved closer to its ultimate goal building the infrastructure for the world’s parallel virtual economy.

Tweet by Binance CEO Explaining BNB. Souce: Twitter.com
Tweet by Binance CEO Explaining BNB. Souce: Twitter.com

According to the company, BNB had transcended Binance in terms of its use cases. The new ecosystem, which supports large-scale applications, comprises

  • BNB Beacon Chain (Previously Binance Chain), which supports governance via staking and voting;
  • BNB Smart Chain (Previously Binance Smart Chain), which adds EVM-compatible consensus layers equipped with hubs to multi-chains.

Via the BNB Block Explorer URL, users can interact with the blockchain: browse details of added blocks, transactions, wallet balances, and BNB stats. With full network usage, this network can process up to 160 TPS. Ethereum, in comparison, can cope with 15 TPS on average.

Graphic Interface of BNB Block Explorer. Source: Bscscan.com
Graphic Interface of BNB Block Explorer. Source: Bscscan.com

The merger also enhanced BSC’s governance system. Now, it uses an expanded set of 41 validators, including 20 candidate block producers.

What is Binance coin?

Both BC and BSC are powered by Binance Coin (BNB). This token was launched through an ICO in mid-2017. As of April 27, 2022, it is worth around $391. BNB skyrocketed compared to $0.04 five years ago, but it has fallen far from its peak ($686.31 on May 10, 2021).

BNB Price Chart. Source: CoinGecko
BNB Price Chart. Source: CoinGecko

Before becoming the native currency of Binance Chain, BNB was linked to Ethereum as an ERC-20 token. In 2019, it was reinvented in compliance with the native BEP-2 standard. BEP stands for Binance Smart Chain Evolution Proposal. Today, BNB also supports BEP-20 (the standard for Binance Smart Chain).

The token is mainly used for transaction fees, staking, and transfer of assets within BNB Chain. On the BSC network, it also powers smart contracts. Users can keep their BNB in a custodial Binance wallet or non-custodial storage like the MetaMask wallet. BNB’s functionality encompasses plenty of roles:

Applications of BNB. Source: Cointelegraph.com
Applications of BNB. Source: Cointelegraph.com

As a governance token, BNB underlies delegated staking. It also covers the costs of issuing new assets on the dual blockchain.

Another peculiarity is the gradual halving of supply. Initially, 200 million tokens were released into circulation. The blockchain burns them roughly every quarter based on the Auto-Burn formula. So far, just under 1,7 million tokens have been eliminated.

Correlation Between BNB Price and Quantity of Burned Coins. Source: Binance.com
Correlation Between BNB Price and Quantity of Burned Tokens. Source: Binance.com

Securing BNB Chain

Securing the blockchain requires a validator quorum. Whenever a patch or update is needed, the network launches an epoch period a set of 240 blocks. Every epoch takes around 20 minutes.

BSC also prevents nodes from misbehaving (for example, double signing or validating inaccurate transactions) via slashing. It exposes malicious actors and makes it extremely difficult for them to proceed with their attempts.

Finally, the fusion of PoA and delegated PoS ensures protection against common attacks. In particular, this system is effective against

  • 51% attacks (when a malicious actor or group take over half of all mining power)
  • Byzantine attacks (the situation went some of the nodes fail and there is imperfect information on which)

Deploying contracts on BNB Smart Chain

As BSC reuses Ethereum’s technology, developers can create contracts in different languages. The only condition is compiling to the EVM Bytecode. For example, one can build a smart contract using Solidity.

After compiling, a developer can launch the deployment transaction from scratch or delegate this task to an Ethereum IDE like Remix. As every transaction must be signed, deployment requires a wallet address and enough BNB to cover the fees.

The cost depends on two parameters: the gas price and the contract size. Finally, the developer must access a node by sending their transaction through a public URL. Doing this on Ethereum requires a special service like Infura.

Details of every deployed contract are public. On the contract address page of the block explorer, you can check the source code, transactions, balances, and other analytics.

Dapps on BNB Smart Chain

Binance Smart Chain is the third most popular foundation for decentralized apps. The most prominent categories today are DeFi, games, and high-risk investment. According to DappRadar, the top 5 Dapps by audience size are

  1. PancakeSwap – an AMM (Automated Market Maker) DEX;
  2. MOBOX: NFT Farmer a play-to-earn game focused on NFTs (non-fungible tokens);
  3. SecondLive – a game allowing users to choose a life, space, and friends;
  4. DRIP – a network for deflationary daily return-on-investment;
  5. Baked Beans – a smart contract that acts as a BNB reward pool.

To sum up: BNB Smart Chain as smart contract network

Initially designed as a partner to Binance Chain, this network is now part of a powerful unified environment. BNB Chain is a strong alternative to Ethereum as it offers lower gas prices, faster transactions, and superior scalability. Thanks to its EVM compatibility, developers can build smart contracts in a variety of languages.

BNB Chain is fast, flexible, and inexpensive. Compared to PoS and PoW, its validation model is more sustainable and thorough. Working in unison, BNB Beacon Chain and BNB Smart Chain deliver superior convenience to users and developers alike.

Disclaimer:

The information provided by CoinLoan (“we,” “us,” or “our”) in this text is for general informational purposes only. All investment and financial opinions expressed by CoinLoan in this text are from the personal research and open information sources and are intended as educational material. All outlined information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information in this text.

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