Introduction
It all started in 2017 when the Chinese developer – Changpeng Zhao – set up one of the world’s largest crypto exchange Binance, which focuses on offering basic and ultimate trading services for crypto users. As many other exchanges, the core value is to drive crypto mass adoption through a broad range of its features.
Throughout the significant crypto revolution, Binance Chain was created in April 2019 and its primary target is high-frequency decentralized trading. However, while Binance Chain successfully provides a fast and secure exchange solution, its capability of going forward and extending itself is restricted. Scalability has become the foremost struggle in blockchain development. Seemingly the challenge for scaling opens the world of potential where comes a number of solutions and explains the motivation behind the launch of Binance Smart Chain.
What is Binance Smart Chain?
Binance Smart Chain (BSC), at the base layer, is an alternative to Binance mainnet with the ability to create and deploy smart contracts. The blockchain will run in parallel with the original Binance Chain while being compatible with the Ethereum Virtual Machine (EVM). It seems like the leading cryptocurrency exchange was starting to completely engage the world of crypto and expand from merely a trading exchange to an entire ecosystem with Binance Smart Chain.
Basically, the new mechanism operates as a standalone blockchain, rather than a layer-2 or off-chain solution. In other words, Binance Smart Chain does not require the association with Binance Chain and run independently even if the other chain shuts down. Both chains share similar characteristics from a design point of view.
EVM-compatibility enables Ethereum tools and dApps to work well with BSC with zero or minimum changes. It’s worth noting that users need to modify some settings in order to set up dApps like MetaMask to work on BSC.
How does Binance Smart Chain work?
Consensus
Although the Proof-of-Work (PoW) mechanism is valuable, it negatively affects the ecosystem and also requires more than half of the network to maintain the security. Binance Smart Chain uses the consensus mechanism Proof-of-Stake-Authority (PoSA) to keep the ecosystem in sync. PoSA is a mechanism whereby the validators stake BNB and attest to the validity of transactions. This model is more efficient from the energy perspective with low cost fees compared to other variations. The governance in association with the PoSA consensus algorithm on 21 transaction validators will provide decentralization and enable substantial participation in market transactions.
Cross-chain Compatibility
The need for blockchain interoperability is becoming increasingly essential. Cross-chain compatibility enables the interoperability between two or more blockchains. This functionality makes it easy to exchange assets from Binance Chain to Binance Smart Chain. Even in the case that these two blockchains work independently, they can still communicate with each other. Users can convert three types of Binance’s most popular BEP standards: BEP2, BEP8 and BEP20 tokens using this solution.
Ethereum Compatibility
Apart from native cross-chain communication, Binance Smart Chain is also compatible with the Ethereum mainnet to support all existing Ethereum tools or coins at lower transaction fees and faster processing times compared to the normal base.
Additionally, Binance Smart Chain will support the existing Binance Chain to jointly maintain the high performance of Binance DEX (Binance Decentralized Exchange) as well as enable smart contracts from investors. With EVM compatible programming capabilities and native support for cross-chain communication, developers will enhance functionality.
BSC Yield Farms
BNB holders who are enthusiastic in staking BNB can also contribute to the growth of Binance Smart Chain and generate incentive from this participation. Binance Smart Chain has featured all the current DeFi projects on its yield farming dashboard. Users can easily follow all the information and keep track of the most potential ones integrated with BSC.
Current big projects are listed including the Oracle networks (Chainlink, Band protocol, Gravity), Autonomous Market Makers (Bounce, Pancake Swap, Pancake Swap, DODO), derivative protocols (MCDEX, Hedget), lending platforms (Fortube, Hard Protocol) and defi ecosystem project.
