Binance Smart Chain, also known as the BSC network, is one of the exceptional blockchain networks.
This network was founded in 2020 by the Binance exchange. In fact, this blockchain can be considered as a complement to the Binance Chain network. The primary digital currency for both of these networks is the BNB digital currency, which is the main cryptocurrency of the Binance exchange. In recent years, development teams for various digital currencies have updated their blockchain networks and added features to attract various DeFi projects to their networks. The Binance development team also decided to create these two networks so as not to fall behind their competitors. In the following, we will examine the BSC network and its features.
BSC expands the possibilities for decentralized applications to use various smart contracts on this blockchain.
Before the establishment of BSC, the BC network was used for Binance platforms.
The Binance Chain network or BC was founded in 2019, and the largest platform that was executed on this network was the Binance Decentralized Exchange (Binance Dex). BSC had the capability to use smart contracts, but it had some limitations. In some cases, during network congestion, transactions on this platform would face errors and slowness. Additionally, the network was not flexible, so the Binance development team established BSC or the Binance Smart Chain in 2020. In addition to removing the limitations of the BC network and being more flexible, this network also solved the problem of scalability.
The consensus mechanism of the Binance Smart Chain (BSC) is based on Proof of Staked Authority (PoSA). This consensus mechanism is a combination of proof of stake (PoS) and proof of authority (PoA) mechanisms. Every day, a certain number of validators or active miners in BSC are selected to validate transactions using this consensus mechanism. The method of generating income in BSC is also based on staking the digital currency BNB on the Binance Chain network.
Other features of the BSC network
- BSC network operates in parallel with the BC network. However, even if the BC network becomes inactive, BSC will continue to function.
- Transactions in BSC are fast and have low fees and commissions.
- BSC is fully compatible with the Ethereum digital currency virtual machine (EVM) unlike the BC network and has more operational capacity. This means that during network congestion on the decentralized exchange Binance, orders are not executed with errors and delays.
- BSC is an independent blockchain.
- BSC has the ability to stake and native interactions.
BNB, the digital currency, plays a key role in the Binance ecosystem. This digital currency is used on both BSC and BC as well as all Binance platforms such as Binance decentralized exchange. It is mainly used for paying fees, asset transfers, and staking. If you want to increase the security of BSC and earn rewards, you can deposit BNB or delegate BNB to an active validator on the network.
Two popular standards defined in the BSC and BC networks are BEP2 and BEP8 standards. All tokens that follow these standards can operate on these networks. Additionally, ERC20 tokens are also supported in BSC.
Tokens connected to their main token, such as peggy coins, are also supported in BSC. This allows development teams of these tokens to provide decentralized applications with cross-chain exchange capabilities, such as PancakeSwap.
In contrast to other protocols, BNB is not an inflationary token and does not have block subsidies or freshly minted coins. Inflationary tokens are printed continuously over time with no limit on the total supply.
BNB tokens are periodically burned to permanently reduce their circulation after they are used to pay fees. In token economics, the concept of burning coins is to decrease supply and increase the value of the remaining coins over time. Binance intends to continue burning coins until the supply reaches 100 million. Currently, the circulating supply of BNB is 153 million at the time of writing.
How does Binance Smart Chain work?
Binance Smart Chain confirms a block every 3 seconds. As mentioned, the selection of systems to become a validator is based on the Proof of Staked Authority (PoSA) consensus. Validators on the BSC network receive the transaction fee after verifying a block correctly. However, it is worth noting that the reward given to miners is not in the form of the BNB digital currency. This is because this digital currency is not an inflationary cryptocurrency, and the Binance development team occasionally performs token burning.
Token burning is performed when the development team decides to reduce the circulating supply of a digital currency.
BSC Network Projects
As mentioned, the BSC network has many features, which is why since the early years of its establishment, the development team has made this blockchain available to many decentralized projects. Some of the projects that have been implemented on this blockchain platform from the past to the present include Rialto, Chapel, Chainlink (LINK), Band Protocol (BAND), Swipe (SXP), Ankr (ANKR), and Kava.
Ankr Project If you want to become a node in the network, Ankr makes it much easier for you. Ankr also provides the necessary cloud space for a node to make the staking process much easier.
Chainlink Project It was last year that the Binance development team decided to combine the BSC smart chain with the decentralized Chainlink oracle. With the cooperation of the largest digital currency exchange and the most widely used decentralized oracle, BSC smart contracts can now use real-world data for their logic.
Competition of BSC network with ERC20 and TRC20 networks
Many users of the network believe that the main rival of the two well-known ERC20 and TRC20 networks is the Binance Smart Chain. Currently, the Ethereum ERC20 network is using its maximum capacity and in some cases we are seeing slow transactions on the ERC20 platform. On the other hand, the cost of this network has gone up significantly, and the main problem here is that the Ethereum development team has repeatedly decided to offer Ethereum 2.0 to address these issues, but each time the project has been delayed. These events have led projects to migrate from ERC20 to digital currency blockchains such as Cardano and Polkadot. There are also networks like the TRC20 network, which works better than the Ethereum network, but the ERC20 network hosts the most tokens and DeFi projects due to its popularity and older age.
Currently, if projects want to be executed, their first choice is the Ethereum blockchain. However, in practice, the BSC network has proven its technological superiority over the ERC20 network, so if Ethereum continues to operate under these conditions and Ethereum 2.0 is still delayed, the Binance Smart Chain could surpass the Ethereum blockchain.
Despite its drawbacks, BSC has been regarded as the blockchain of the future because it can serve as an alternative for many developers. Its multi-functional, highly dynamic, and cross-compatible ecosystem bridges several blockchains, making it an attractive option.