Binance Smart Chain: key aspects to consider if you are planning to migrate
Those who read my blog may probably know that I’m a big fan of EOS, or at least I used to be. The lack of any significant improvements in the recent years and the rank loss at Blocktivity.info (15% now vs 80% in the past few years) now make me doubt whether it has any chances.
Ethereum, on the contrary, has never been as triumphant as in these last couple of months. With its recent migration to PoS and Sharding looming just around the corner, there’s no doubt that it has all the chances to show the world what the true decentralized blockchain is all about.
However, Ethereum is no longer the only player on the field as many other solutions have emerged while it has been struggling to resolve the scalability issues. Binance Smart Chain, or shortly BSC, has recently caught my attention, so in this article, I’d like to make a short rundown of its features and highlight its pros and cons
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Blocktivity.info: slowly but surely, Ethereum is regaining back its positions while EOS is losing them
Binance Smart Chain in a nutshell
Binance Smart Chain was launched in parallel to Binance Chain with the key goal to resolve the scalability problem inherent to the latest one. Other key features that make BSC different are compatibility with Ethereum Virtual Machine and the possibility to run smart contracts.
BSC supports the same high throughput level that Binance Chain does. It’s also worth noting that these two chains run in parallel and do not depend upon each other. BSC is not a layer two or an off-chain solution dependent on the initial platform. It will run even if all nodes supporting Binance Chain go offline.
Binance Smart Chain features that make it stand out
Well, perhaps, each of these features is not so unique. BSC is not about revolution, it’s about smooth growth based on the implementation of the best inventions. However, combined together, these features contribute to the projects’ strengths.
#1. Compatible with Ethereum.
Changpeng Zhao is not trying to re-invent the wheel, neither does he try to persuade Ethereum’s users to accept a totally new approach like other bold projects such as EOS and TRON do. With that in mind, he made Binance Smart Chain fully compatible with Ethereum Virtual Machine to facilitate the migration process both for developers and end-users. For example, one can easily run Metamask on BSC without having to build any additional bridges while getting the benefit of low fees.
#2. Based on the Proof of Staked Authority (PoSA).
Bitcoin and many other projects based on the Proof-of-Work consensus mechanism have proved to be incapable of handling big amounts of users due to the scalability problem. Proof-of-stake is the best alternative that has been invented so far. BSC implements its modification with 21 validators acting as authority to support the chain and produce new blocks every 3 seconds.
#3. Tokenizing other assets.
BSC allows tokenizing a number of digital assets that belong to other blockchains in order to operate with them without having to switch them to the local currency. This feature was first implemented on Binance Chain and works just the same on BSC. For example, you can lock 1 BTC and get 1 BCTB instead and use it actively in the growing DeFi infrastructure offered by BSC. The value of the new coin is pegged to the original one and can easily be exchanged backward at any time.
#4. Yield farming.
With BSC, you can generate more crypto by simply holding it in the right place. Platforms such as PancakeSwap provide this opportunity. Combined with ultra-low fees, this is a great option for making passive income available not only for whales but for small crypto holders as well.
BSC pros and cons: is everything as bright as you paint it?
With everything said above, Binance Smart Chain comes with the following positive aspects:
- A growing ecosystem with a big number of tools and dApps
- A wide set of crypto projects that already support BSC and a great user base
- EVM-compatibility facilitating the integration process for Ethereum users
- High throughput allowing instant confirmation of transactions
- Small network fees (2–4 cents, can reach 1 cent)
- A possibility to integrate major cryptocurrencies by converting them into Binance-based derivatives
However, every coin has its dark side, and the same applies to BSC as well. Perhaps, the biggest fly in this ointment is a much lower level of decentralization compared to Ethereum and some other blockchains as well. BSC is supported by the centralized exchange that enables fast transactions at a low cost but makes the whole system vulnerable at the same time.
The distribution of coins is not really fair either. At the time of writing, BscScan shows that 50% of all BNB coins are locked in the wrapped BNB contract, 13% more are located in Venus or vBNB Token which is a farming pool provided by Binance as well. The remaining 23 top wallets hold 18% of all BNB coins. Just to compare: the top 25 wallets on Ethereum hold only 21% of all ethers.
BscScan: top 2 accounts hold more than 50% of all coins in the system
Also, BSC is heavily dependent on the success of Binance as it rises and falls along with it. Thus, if you are inclined on using BSC, you should really trust Zhao and pray that the project doesn’t get out of business.
BSC vs Ethereum: comparison by key features
Finally, here’s a brief comparison of these two projects by their core elements. These numbers are also worth considering if you’ve decided to switch sides.
Closing thoughts
Binance Smart Cnain has undoubtedly achieved some sustainable results in terms of scalability of the overall productivity. However, the level of its decentralization still leaves much to be desired. Considering the fact that the blockchain is developed by a purely centralized instance, the chances of the network going decentralized are really small. Still, the platform is worth studying if you are a true Binance lover and put your trust in its creator who has proved to be infallible so far.
