Binance Smart Chain(BSC) is a new blockchain protocol developed by Binance. BSC offers Smart Contract functionality with compatibility with Ethereum’s virtual machine and is excellent for those looking to develop DeFi apps, as it offers swift transactions and incredibly low-cost structures.
What is Binance and what are its features?
Binance Chain promises to be a game-changer when fully up and running.
- Interoperability: Binance Smart Chain’s dual chain architecture provides users with the utmost flexibility of interchange and access.
- Low transaction fees: Binance incurs lower transaction costs (0.0007 BNB/tx for Jan 08, 2023) than Ethereum ( 0.3795 USD/tx for Jan 08, 2023).
- No transaction delays: Ethereum is known for its scalability issues, causing unnecessary congestion and delays when processing transactions. Whereas BSC (Binance Smart Chain) has been designed to answer Ethereum’s scalability challenges, boasting high throughputs and facilitating the implementation of decentralized applications with greater ease.
How does Binance Chain compare to other blockchain platforms like Ethereum?
BSC has the upper hand regarding both speed and cost when considering the scalability trilemma of blockchain technology.
BSC boasts incredibly short 3-second block times compared to Ethereum’s significantly longer 14 seconds. Likewise, BSC is cheaper than Ethereum.
However, BSC falls short in security: with only 21 validators compared to Ethereum’s 300K+, BSC can be considered pseudo-decentralized.
Why Should DeFi Projects Use Binance Smart Chain?
Binance Chain is a preferred option for DeFi projects because of its affordability, speed, reliability, and interoperability. The following characteristics make it popular among developers while creating a DeFi project:
Transaction speed and throughput
BSC can handle as many as 300 transactions per second, significantly outperforming the 15 TPS rate of Ethereum. Also, BSC’s average transaction costs just a few cents compared to higher fees on the Ethereum Network. Thus, BSC provides an attractive alternative for users priced out of Ethereum’s network due to these fees and its lack of scalability. In short, BSC enables users to experience similar DeFi features but in a low-cost environment.
BSC has implemented a hybrid consensus model called Proof of Staked Authority (PoSA) which combines the superior trustworthiness of the Proof of Authority (PoA) with the speed and democracy of Delegated Proof of Stake (DPoS). BSC’s system allows for high throughput rates at cost-effective levels. Ethereum recently adapted its system to a Proof-of-Stake consensus mechanism after the Merge in September 2022, reducing its energy usage by 99.5%. While transaction speeds and throughput have not increased significantly, they will catch up entirely after the update is completed in 2023.
BSC provides an unparalleled user experience for DeFi users looking to farm the best yields or lend on a permissionless platform. Also, BSC’s “bridges” offer a secure process for transferring users’ assets from one blockchain to another, making BSC an ideal choice for those looking to attract a broader customer base.
Examples of DeFi projects on Binance Smart Chain
- PancakeSwap (CAKE): Decentralized Exchange.
- Venus (XVS): Decentralized Money Market.
- Auto (AUTO): DEX and Interest Aggregator.
- BakerySwap (BAKE): Decentralized Exchange for Tokens and NFTs.
- 1Inch Exchange.
- Linear Finance.
Although Ethereum projects dominate DeFi, Binance is quickly emerging as a strong alternative with more affordable transaction fees, high throughput, fast transactions and low congestion. In the coming days, both blockchains will play up their game, and it will be interesting to see which blockchain player dominates the space in future.
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