Binance Smart Chain (BSC) is a blockchain designed for decentralised financial (DeFi) applications and activities like yield farming. It is largely administered by Binance, the world’s largest cryptocurrency exchange, and is built on Ethereum. It’s popular because of its low fees and high liquidity, which makes it a good alternative to Ethereum for some applications.
We’ll walk you through all you need to know to get started with BSC in this article, including how to link a wallet, utilize Binance Bridge to import assets from Ethereum, and use DeFi platforms like Pancakeswap and 1inch. We also go through some of the things you can do with BSC, as well as some of the hazards.
What is Binance Smart Chain?
Binance Smart Chain is a blockchain that is managed by the Binance cryptocurrency exchange. It’s built on Ethereum and has many of the same capabilities as the blockchain, including smart contracts and compatibility for a variety of DeFi protocols. Binance Smart Chain, which handles the Binance Decentralised Exchange, was introduced in 2020 as a companion to Binance Chain (DEX).
Binance uses two separate blockchains, each with its own naming convention.
- The Binance Chain – It was launched in 2019 to underpin Binance’s decentralised exchange (DEX). The BEP-2 token standard is supported by this chain. Because it does not enable smart contracts, it is relatively restricted and is no longer widely utilised.
- Binance Smart Chain – It is a cryptocurrency developed by Binance. In 2020, it was founded to enable smart contracts and a thriving DeFi ecosystem. The BEP-20 token standard is supported.
Binance Smart Chain is a blockchain that operates in tandem with the Binance Chain. Binance, a centralised exchange, made its entry into decentralised finance in April 2019 with the introduction of the Binance Chain. Binance Chain was created with the intention of hosting the Binance DEX and facilitating high-speed transactions. Unfortunately, it lacked smart contract capabilities, necessitating the creation of a separate blockchain to accommodate DeFi applications.
Binance announced the Binance Smart Chain (BSC) in September 2020 to support a low-cost, high-speed DeFi ecosystem.
BSC effectively combines the Binance Chain’s fast throughput with smart contracts, letting users to manage their digital assets across many chains, including Ethereum. It provides a platform for the development of dApps and other DeFi products. It has a three-second block time, cross-chain asset transfers, compatibility with the Ethereum Virtual Machine (EVM), and a Proof-of-Stake consensus algorithm.
It can execute Ethereum-based apps like MetaMask thanks to EVM’s implementation. It’s worth mentioning that BSC isn’t a layer-2 protocol for Binance Chain; rather, it’s a standalone blockchain that could continue to function even if Binance Chain went down. BSC is essentially a fork of Ethereum that has been changed.
Because it operates alongside Binance Chain (BC), it encourages a dual-chain design in which users can easily move their digital assets from one chain to the other utilising Binance Bridge.
BSC employs a Proof-of-Staked-Authority (PoSA) variation of the PoS consensus method to secure the network, which requires validators to stake 10,000 Binance Coin (BNB) in order to function as a validator. Individual users can also stake a minimum of 1 BNB as a delegator, allowing validators to utilise their tokens in exchange for a percentage of the staking benefits.
How to use Binance Smart Chain?
Binance’s Trust Wallet allows you to manage your BSC assets.
You may communicate with BSC using MetaMask, Binance Chain Wallet, Math Wallet, Ledger, TokenPocket, Bitkeep, ONTO, Safepal, and Arkane in addition to Trust Wallet.
As the name implies, Binance Bridge connects other blockchains, allowing users to exchange their digital assets into and out of Binance Chain and BSC wrapped tokens. It’s essentially a cross-chain service that aims to improve blockchain interoperability. You may utilise Binance Chain and BSC to convert chosen tokens into wrapped coins or pegged tokens.
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Cross-chain transfers are now supported for ERC-20 (Ethereum) and TRC-20 (Tron).
Binance Bridge has no conversion costs and takes only a few minutes to convert. On the blockchain from which you are converting, you merely need to pay the network transaction fees. The Binance Bridge is available to anybody, and you don’t need a Binance account to utilise it.
What can you do on Binance Smart Chain?
Binance Smart Chain, like any other smart contract platform, may be used for a variety of purposes. Although, at the moment, it is most commonly used for DeFi and yield farming.
You can use the numerous DeFi protocols established on the BSC or migrated from the Ethereum blockchain once you have some BNB tokens in your wallet.
You may trade utilising decentralised exchanges modelled after AMM, such as PancakeSwap on BSC, which accepts BEP-20 tokens. To trade BEP-2 tokens, you can utilise the Binance DEX on Binance Chain.
You can move tokens from other blockchains to those compatible with the BC or BSC networks by using the blockchain’s “Peg-in” function. The “Peg-out” function allows you to do the opposite.
Essentially, you’re exchanging a token for a version that’s compatible with your preferred blockchain (for example, BSC or Ethereum).
The Binance Bridge gives you an equivalent value of wrapped to your BC or BSC wallet address on the exchange, which you may subsequently spend within the platform or on dApps. BUSD, WBNB, BUSDT, ETH, and BTCB are the most widely utilised pegged tokens.
Yield farming is possible on the BSC because to platforms like Autofarm, ACryptoS, and PancakeSwap. You can put your LP tokens or a portion of your capital into these pools to earn even more LP tokens or the protocol’s native coin. Liquidity is incentivised to collaborate with automated yield optimization algorithms for the greatest profits in the Autofarm and ACryptoS pools.
How does BNB work on BSC Coin?
BNB is the BSC and BC’s native token. It’s used to pay for things like petrol and other necessities. BNB comes in two varieties:
- On the BSC, BNB BEP-20.
- On the BC, BNB BEP-2
In a short period of time, BNB has risen to become one of the top ten cryptocurrencies by market capitalization, and it is now utilised for the following purposes on both the BC and the BSC:
- Buying and selling coins on cryptocurrency exchanges.
- Having to pay transaction fees.
- Paying trading commissions.
- Take part in the token sales on the Binance Launchpad.
- For Binance Earn on the normal Binance exchange, where you may use it for Staking, Launch pool, BNB vault, and Liquid Swap, among other things.
- As a utility token on the BSC network in games and other decentralised applications.
- Making purchases using Binance Pay and the Binance Card.
- As collateral for BNB-backed Binance cryptocurrency loans.
- Making a contribution to Binance’s own charity.
Pros of Binance Smart Chain
Before digging into Binance’s customised Ethereum clone, you should grasp all of the benefits and drawbacks of adopting the Binance Smart Chain, as it gains significance in the DeFi markets with increased acceptance and migration across DeFi protocols.
- Gas Fees – The gas rates in BSC are incredibly cheap as compared to Ethereum’s exorbitant gas fees, which have been a persistent concern for the blockchain. It has a gas charge of fewer than ten gwei, with each gwei equaling 0.0000000001 BNB. As a result, sending transactions worth thousands of dollars costs nothing. The fees are likely to stay in this range as the network is nowhere near its congestion capacity.
- Higher Transaction Speeds – The BSC has a 3 second block time. In comparison to transactions on the Ethereum network, this, paired with the use of the PoSA consensus methodology, allows the network to transact at extraordinarily rapid rates.
- Established user base – Binance is one of the world’s largest and most popular cryptocurrency exchanges. As a result, it has access to a pre-existing user base that may be persuaded to embrace the exchange’s innovations, such as BSC, through subtle marketing strategies.
- Multi-linguistic – The website of the BSC is available in a variety of languages. This makes it possible for people who aren’t natural English speakers to embrace the system.
- Interoperability and compatibility – The Ethereum Virtual Machine (EVM) is completely compatible with BSC, allowing projects and applications to migrate from Ethereum to BSC. It also includes compatibility with the Binance Chain, enabling you to smoothly operate between the two blockchains.
- Ease of token migration – Token transfer to the Binance network is a simple and user-friendly operation thanks to the Binance bridge.
Binance Smart Chain expands on the original Binance Chain’s capabilities and joins a growing list of cutting-edge protocols aimed at bridging the gap between different blockchains. Though still in its early stages, the platform’s promise of BNB staking combined with EVM compatibility makes it a suitable engine for developers creating strong decentralized apps.