There are thousands of blockchains worldwide. This article explores the various factors that make the BNB Chain stand out among its competitors.
There are over a thousand blockchains with at least four types of networks worldwide. For various reasons, developers and businesses deploy their Decentralized Finance (DeFi) protocols on different blockchains like Ethereum, Avalanche, Solana, BNB Chain, etc.
Developers optimize each blockchain to solve the biggest trilemma for a DeFi ecosystem – balancing between decentralization, scalability, and security. Most blockchains model after the “Grandfather of DeFi,” the Ethereum blockchain that pioneered smart contracts and Layer 2 scaling. Newer blockchains modeled after the Ethereum blockchain have tweaked their network to improve its speed, scalability, and costs.
In this article, we will explore how the BNB Chain utilizes the best aspects of other blockchains, including Ethereum, to render its network to be blazingly fast, scalable, safe, cheap, and easy to use. This should give our readers a better understanding of why developers and businesses want to deploy their DeFi protocols on the BNB chain compared to other popular blockchains like Avalanche, Solana, and Ethereum.
Introduction of BNB Chain
BNB Chain is the current umbrella network of Binance’s layer-1 blockchain, which came to be after several improvements, integrations, and mergers.
Creation of Binance Chain
Binance’s humble beginnings did not first start with a blockchain. They initially created the BNB token as an ERC-20 token launched on the Ethereum blockchain in 2017. Binance then created Binance Chain in 2019 as a decentralized exchange to facilitate the transfer of the ERC-20 BNB tokens over to Binance Chain as a BEP-2 token. Holders of the BEP-2 BNB tokens would use it as a governance token for staking, voting, and paying for gas for transactions. Holders of the BEP-2 tokens can only use them on Binance Chain and nowhere else.
Creation of Binance Smart Chain
Having a platform for crypto exchange was still not sufficient for mass adoption. Binance created Binance Smart Chain (BSC) in September 2020 as a hard fork of the Go Ethereum (Geth) protocol. This makes BSC compatible with the Ethereum Virtual Machine (EVM) and able to execute smart contracts and run decentralized applications. Since BNB Token and BSC are offshoots from Ethereum, both platforms share many similarities and distinctions.
Binance Smart Chain uses the BEP-20 token standard to regulate tokens produced on the BSC. It also facilitates the transfers of BNB tokens from Binance Chain to BSC and vice versa. The BEP-20 tokens can also be transferred to other blockchains outside of the Binance ecosystem through cross-chain bridges.
The Inauguration of BNB Chain
On February 15, 2022–with little to no premonition–Binance Chain and Binance Smart Chain merged to form the BNB Chain. Binance Chain also rebranded into the BNB Beacon Chain. Binance Smart Chain changed its name to BNB Smart Chain but maintained its abbreviation, BSC.
The name change is still a controversial topic. For example, the BNB team refers to it as the “Build ‘n Build” Chain as well, while the programmed code of BNB Smart Chain still refers to the chain as BSC.
The BNB Sidechain launched a month later to allow developers to create customized blockchains for their DeFi protocols while being closely connected to the BSC infrastructure.
Currently, the BSC community is working on the BNB ZkRollup. This functions similarly to Ethereum layer 2 ZkRollups, recording and compressing transactions outside of the blockchain to be added to the main chain later on. This also greatly speeds up transactions on the main chain itself.
BSC would function as the primary network having interoperability with BNB Beacon Chain, BNB Sidechain, and BNB ZkRollup. The entire ecosystem would fall under the BNB Chain umbrella.
What makes BNB Chain a great blockchain for developers and businesses?
BNB Chain was designed to be scalable, decentralized, open-source, multi-chain, and permissionless. It gives developers the tools to implement cutting-edge smart contracts and dApps. It also supports quick, inexpensive, and efficient DeFi transactions.
To understand what makes BNB Chain great and where it falls short, we need to explore different aspects of BNB Chain to ascertain how it fares compared to other popular blockchain networks like Ethereum, Solana, Avalanche, etc.
Here we outline the various factors to consider about BNB Chain:
The core purpose of any blockchain or DeFi protocol is decentralization. Decentralization prevents one organization or a small group of individuals from controlling most of the network.
None of the participants in a decentralized blockchain network need to know or trust one another. Every network member shares a distributed ledger with an identical record. Most of the network’s members will reject any member whose ledger has been altered or corrupted.
How decentralized a blockchain is does not depend on how many nodes or validators there are in the network. Instead, it depends on the blockchain’s Nakamoto Coefficient, which is the smallest number of nodes that hold 33% of the stakes in a Proof-of-Stake blockchain. The higher the Nakamoto Coefficient, the more decentralized a blockchain is.
Currently, the Nakamoto Coefficient of BNB Chain is 7, which is 31 for the Solana and 26 for the Avalanche.
BNB Chain is less decentralized than other blockchains like Ethereum, Solana, and Avalanche. However, to boost the decentralization and robustness of its blockchain, the BNB Chain Developer Community heeded its validators’ feedback. It allowed its previously inactive 20 validator candidates to participate in the network validation process after BEP131.
- Consensus Mechanism
An essential factor for any blockchain’s operation is its consensus mechanism. The type of consensus mechanism used can significantly affect its transaction speed and security. Having some background knowledge of blockchain technology will help understand the following section.
The Nakamoto Consensus
Pioneer blockchains like Bitcoin–and previously Ethereum–use a highly secure Proof-of-Work consensus mechanism called the Nakamoto Consensus. This mechanism requires miners to use computational power to solve a cryptographic problem for the next block of transactions related to the previous block with the SHA-256 hashing algorithm. Miners perform countless iterations, and the fastest to solve the puzzle gets to broadcast their block to the network. They receive crypto as a reward for the computing power spent on validating the block.
The Nakamoto Consensus makes a blockchain highly secure, as hackers would need 51% computational power to compromise the network. However, this method uses a lot of energy for computation and has a very low transaction speed.
- The Proof of Stake Authority Consensus
BNB Chain uses the Proof of Stake Authority (PoSA) consensus mechanism, which is a hybrid of Delegated Proof of Stake (PoS) and Proof of Authority (PoA).
BNB Chain uses delegated proof of stake portion for the re-election of the top 26 validators with the highest staked BNB tokens after a set time or interval. The election used to happen after every 24 hours, but this changed to have the elections after every 200 blocks instead to improve the stability of the network.
BNB Chain uses Proof of Authority to produce blocks by the validators. The current 26 validators take turns building blocks and receive BNB tokens as a transaction fee. These tokens are then redistributed to the validator’s respective delegators, who have staked tokens to the validators. Note that validators receive existing BNB tokens as a transaction fee–hence no new BNB tokens are minted. This prevents inflation of the BNB token.
Keeping the number of validators small helps BNB Chain significantly speed up transactions by sacrificing some decentralization.
- Scalability and Speed
As mentioned above, the type of consensus mechanism used by a blockchain can significantly determine its transaction speed and scalability. This is crucial as some Dapps like DeFi games require fast transactions. Players will grow impatient if they wait 30 seconds or more for their transactions to happen.
Currently, BNB Chain has a 3-second block time with its PoSA consensus. It can handle a maximum of 300 transactions per second (TPS). Furthermore, when the BNB ZkRollup launches in 2023, it is projected to be able to handle up to 10,000 TPS. This is blazingly fast compared to Ethereum’s 20-30 TPS and Bitcoin’s 5-7 TPS. Highly optimized networks like Avalanche and Solana have about 4,500 and 2,000 TPS, respectively, not even close to zkBNB’s 10,000 TPS.
Even regarding scalability, BNB Chain has at least three times the number of daily transactions of Ethereum, some days reaching as high as 10 million transactions.
Hence, when it comes to speed and scalability, we can see why people would want to choose to deploy their DeFi protocols on BNB Chain.
- Cost of Gas Fees
Apart from BNB Chain’s fast transaction speeds, gas fees on BNB Chain are relatively cheap too, ranging from $0.20 to $0.50 per transaction compared to Ethereum gas fees of $1 to $50 per transaction.
Despite having cheaper gas fees than Ethereum, BNB Chain still does not have the cheapest gas fees among all other blockchains. Solana’s gas fees are around $0.00025 per transaction, while Ripple’s gas fees are approximately $0.0005 to $0.0007 per transaction.
- Network Adoption Rate and Community Around BNB Chain
Apart from a blockchain’s speed, security, and decentralization, other crucial factors are the number of users, brands, the size of the community, and the number of cryptocurrency wallets interacting with the blockchain network. This is important because the larger the community, the better the chance of finding support in case of any problems.
Furthermore, the more popular a platform becomes, the more likely it will receive regular updates and bug fixes.
The Ethereum blockchain is always the benchmark when it comes to anything DeFi, especially when it comes to smart contracts and Dapps like P2E games, trading, and staking platforms, etc. Hence, it will naturally have the highest network adoption rate and maturity of the platform.
The number of unique Ethereum addresses grew to about 211 million as of Nov 13th, 2022, and there are currently about 3000 dApps on the Ethereum blockchain. Some of Ethereum’s most popular dApps are Uniswap, MetaMask, and Opensea, to name a few.
Despite BNB Smart Chain starting much later than Ethereum, its network activity has grown to nearly the same size or more compared with Ethereum. BNB Chain has over 218 million unique addresses just two years after its launch. It also has a total locked value of about $5.2 billion.
Furthermore, there are currently about 1445 dApps on the BNB Smart Chain. Some of the most notable projects built on the BNB Smart Chain include PancakeSwap, BakerySwap, Alpaca Finance, and Venus Protocol.
These numbers show that BNB Chain has a thriving community of users, entrepreneurs, and developers.
- Composability and Compatibility
One key factor for developers to consider is the difficulty in developing protocols on a blockchain. There should be sufficient development tools, and it should be compatible with other blockchains.
The BNB Smart Chain is compatible with EVM smart contracts and protocols. This simplifies developers’ migration process of dApps from other blockchains like Ethereum, Polygon, Solana, and Avalanche to BSC.
The BNB Smart Chain also has a full suite of development tools for DeFi, Non-fungible Tokens (NFTs), Blockchain Gaming, and more. This includes IDEs, block explorers, data oracles, security auditing tools, analytics, DAOs, gaming tools, and cross-chain bridges. BSC also supports popular smart contract programming like Solidity and Vyper.
Users can easily transfer BEP-20 tokens like USDT (Tether) and ETH to other blockchains through Binance Bridge. This allows for smooth transactions with businesses that operate on other blockchain networks.
- Incentives and Support for Developers
Another bonus incentive for developers and businesses to build on BNB Smart Chain would be the support they provide in terms of financial grants, coaching, consultation, etc.
BNB Chain has developer programs, namely Builder Grants, Growth Incentives, and Trailblazer Programs. These programs provide financial support for starting and growing Dapps on BSC.
Competitions exist, like the Revelation Hackathon, to compete against some of the most cutting-edge blockchain projects for sponsorship and investments. There is also the Most Valuable Builder Accelerator Program, which is a 6-8 week project aiming to help projects deliver a working product through consultation, investments, and networking.
Many factors must be in place for developers and entrepreneurs to be motivated to launch their protocols on a blockchain. Pioneering blockchains like Ethereum and Bitcoin have high security and decentralization at the cost of slow transaction speeds and high gas fees. However, many developers still choose to work with them due to the massive community support and network adoption rate.
It is palpable that BNB Chain has matured into a force to be reckoned with in the DeFi space. While it is not the most decentralized platform, it makes up for its high transaction speeds and low gas fees. Furthermore, it has outgrown Ethereum in terms of daily activities and unique addresses.
BNB Smart Chain makes it easy for developers with its EVM-compatible smart contracts, popular coding languages, cross-chain interoperability, and a full range of development tools. Connections to the largest global crypto exchange, Binance, also help immensely in bootstrapping projects and providing priority support for new projects. The financial grants provided by Binance also highly incentivized developers to onboard.
With the huge support and community behind the BNB Chain network, this blockchain may be paving the way in the DeFi space, innovating new technologies, and creating a vast ecosystem for mass adoption.
Source : bsc.news
Founded in 2020, BSCNews is the leading media platform covering decentralized finance (DeFi) on the Binance Smart Chain (BSC). We cover a wide range of blockchain news revolving mainly around the DeFi sector of the crypto markets. BSCNews aims to inform, educate and share information with the global investment community through our website, social media, newsletters, podcasts, research, and live ask me anything (AMA). Our content reaches hundreds of thousands of global investors who are active in the BSC DeFi space.