Blockchain enthusiasts understand that there seems to be a war among the top options. The Ethereum blockchain remains the most popular choice for anyone looking to enjoy easy access to decentralized applications (dApps), but there has been a significant rise in the use of the Binance Smart Chain.
This trend has been especially useful in the decentralized finance (DeFi) community. Many have pointed out that the Ethereum blockchain has increasing gas fees, and it is no longer conducive for developing DeFi protocols and use by customers. Several blockchains already stepped up to take off some of the slack, and the Binance Smart Chain is one of the topmost options.
What is the Binance Smart Chain?
Developed by Binance, the Binance Smart Chain is a blockchain protocol that runs parallel with the Binance Chain. However, unlike the latter, the Binance Smart Chain provides smart contract functionality and is also compatible with the Ethereum Virtual Machine (EVM). With this, the Binance Smart Chain provides even better use for DeFi protocol developers.
Even better, the Binance Smart Chain provides one of the quickest blockchain transaction speeds. Fee structures are much lower than what you would get with most blockchains, making this option an attractive one for the development of decentralized apps and DeFi protocols.
Unlike most conventional blockchains, the Binance Smart Chain uses the Proof-of-Stake (PoS) blockchain consensus algorithm. Its algorithm is even more advanced - Proof-of-Staked Authority (PoSA). Here, 21 validators on the network stake BNB - Binance’s in-house token - to secure the network.
While many blockchains provide block subsidies or allow validators to earn fresh tokens as rewards, the Binance Smart Chain doesn’t do this. Instead, validators get transaction fees as rewards for their work securing the network.
The Smart Chain also has BEP-20 tokens - blockchain-native tokens that work similarly to the Ethereum blockchain’s ERC-20 tokens. There are scores of dApps running on the Smart Chain, many of which are focusing on DeFi.
What Makes the Binance Smart Chain So Impressive?
Binance Smart Chain provides a wide array of features that make it more suitable for DeFi protocols. Some of these features include:
The Binance Smart Chain was designed with a dual-chain architecture, making it possible for it to work with other blockchains. With this feature, users can enjoy flexibility when transferring assets between blockchains. This interoperability feature offers users the opportunity to access a broad ecosystem of use cases and applications.
These days, most blockchain enthusiasts look for interoperability when looking for high-performing platforms to use. When it comes to providing optimal interoperability, the Binance Smart Chain is at the forefront.
Lower Transaction Costs
Transaction fees are another significant feature that blockchain enthusiasts consider when choosing platforms. Essentially, these are fees that users pay when they conduct transactions and send money via a blockchain. Most transaction fees go to miners or network validators who work to ensure that the blockchain only processes and records valid transactions.
Most DeFi applications require a wide array of transactions. At every step, these transactions incur fees. This is why anyone looking to choose a blockchain will need to consider the transaction costs.
As explained earlier, the Binance Smart Chain and the Ethereum blockchain are two of the most popular blockchains available to users. However, when it comes to maximizing savings and reducing costs, the Binance Smart Chain is much better than the Ethereum blockchain.
Bolstered Transaction Speed
Transactions are also much faster on the Binance Smart Chain. Blockchain transactions will need a specific number of confirmations before they can be processed. The point of this is to avoid the propensity of the double-spending attack. However, the longer the number of confirmations, the longer the confirmation time - and this also means that transactions won’t be completed quickly.
Another significant factor that DeFi users consider when choosing blockchains is the transaction speed. Like in the traditional space, no one wants to experience unnecessary delays when making transactions. So, they look into the blockchains and available options well.
Over the past few years, the Ethereum blockchain has had to contend with several issues concerning scalability. An influx of users has meant that the blockchain has suffered from long transaction wait times and congestion on the blockchain platform itself.
This is where the Binance Smart Chain comes in. The platform was designed to improve scalability, combining easy smart contract implementation with high throughput to improve developers’ ability to build decentralized applications.
Binance built the Smart Chain in a similar fashion to its Binance Chain, focusing on latency reduction and performance optimization. The only difference is that the Binance Chain can’t handle smart contracts - the Smart Chain can. However, thanks to the connection with the Binance Chain, the Smart Chain can achieve even shorter confirmation times and optimized transaction speeds.
Where This Leads
To be fair, none of these mean that the Binance Smart Chain will eventually overtake Ethereum. For one, Etheruem has the power of being the first blockchain platform for programmers, and it will be difficult for any other blockchain platform to simply take its place.
At the same time, Etheruem is currently working on Ethereum 2.0 - an upgrade to the original blockchain that will see it transition to Proof-of-Stake and also bring in several other scalability benefits. The thought is that this transition will help the blockchain improve its performance across the board.