All of you must know about the famous cryptocurrency exchange platform, Binance. Binance Smart Chain, also known as BSC, is built by Binance and operates in parallel with the Binance Chain. It is a blockchain protocol known to provide better alternatives to cryptocurrencies. It allows users to use their custom tokens and facilitates smart contract functionality. It exhibits compatibility with the Ethereum Virtual Machine (EVM). The smart chain is centralized to the company, Binance. It was launched in 2019 to support decentralized trading through Binance DEX.
It was created in addition to Binance’s native chain to provide the functionalities mentioned above, like allowing users to develop their Dapps unavailable in Binance Chain (BC). Dapps stand for decentralized applications that function on the blockchain.
Binance Smart Chain deploys an algorithm known as Proof-of-Staked Authority, a combination of two unique algorithms: proof-of-authority and proof-of-stake. Too much technical jargon, right?
Let’s understand it from a flowchart perspective. As the name shows, a blockchain is a chain of blocks connected to different nodes. The Proof-of-Stake method (PoS) works by selecting a node to be the validator of the next block in the chain using a pseudo-random election process. On the other hand, Proof-of-Authority is a modified version of PoS which utilizes certain trustworthy authorities to validate transactions instead of tokens used in PoS.
Back to BSC, validators who are a part of the network stake a certain amount of Binance (BNB) coins to earn transaction fees as they validate approved blocks along the chain. Binance ensures cross-chain compatibility between BSC and BC, so BC’s BEP-8 and BEP-2 tokens can be exchanged for BSC’s BEP-20 tokens. This can be easily facilitated through the BC wallet.
Several applications have been utilizing Binance Smart Chain recently. Some of them are:
An automated market maker (AMM) developed on BSC, PancakeSwap allows its users to trade digital assets functioning on BSC. It also enables DeFi investors to stake crypto assets to make high APYs (Annual Percentage Yields) on their virtual assets.
It is a lending platform that facilitates borrowing against collateral without passing a credit check. In contrast, lenders may deposit funds in a lending pool to receive an above-average variable APY on their crypto assets.
It is another DeFi platform that facilitates a yield aggregator and DEX (decentralized exchange). The platform provides vaults that “automate the best yield farming opportunities.” Vaults automatically carry out automated actions such as utilizing assets as collateral and liquidity and compound yields.
Like PancakeSwap, it is an AMM that provides pegged assets and stablecoins trading facilities. The platform facilitates swapping between tokens to earn NRV (coins utilized to exchange currency for advertising) for staking liquidity providers’ tokens.
It is a DeFi investment management platform that supports easier investing by offering vaults for DeFi investors who want an experience of BSC assets.
Here are some more top applications built on the Binance Smart Chain
There are some fundamental differences between Ethereum and BSC. Ethereum utilizes Proof-of-Work (PoW) consensus mechanism while BSC uses Proof-of-Staked Authority (PoSA) consensus mechanism. PoW is a method of adding new blocks to a blockchain that works by generating hashes for different blocks. BSC’s transaction speed is much faster than that of Ethereum. BSC’s translation fees are much lower than those of Ethereum. Ethereum also has a larger community than BSC, as it was launched in the market five years before BSC. Ethereum also features more development activity as compared to BSC.
BSC differs from Solana in terms of its block time and transaction speed. BSC has an average block time of 3 seconds, while Solana's is around 0.610 seconds. BSC can manage 160 transactions every second, while Solana can manage up to 700 transactions every second.
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