[ad_1]
In the letter
- Binance Smart Chain is a blockchain platform for developers that enables smart contracts.
- It works in parallel with the original Binance Chain, which is optimized for fast transactions.
- Binance Smart Chain is also compatible with apps originally coded for Ethereum.
Launched in 2019, Binance Chain is a blockchain platform developed by the popular centralized cryptocurrency exchange to support Binance DEX, a decentralized exchange that allows users to trade directly with each other. It also powers Binance Coin (BNB), which started on Ethereum but was converted via token swap.
Binance Chain launched relatively quickly and optimized for fast trading, but it lacked the extended functionality needed to support a wider range of decentralized apps (dapps).
This is where the new Binance Smart Chain comes into play. As the name suggests, it is a more advanced blockchain than the original, but it is a parallel platform, not a replacement.
What is Binance Smart Chain?
Launched in September 2020, Binance Smart Chain is a blockchain service that allows developers to build their own decentralized apps using smart contracts. The original Binance Chain was not built to enable such functionality, but the Binance Smart Chain was designed to provide the same type of fast transactions, while also greatly expanding the available features and capabilities. It is also compatible with the Ethereum Virtual Machine (EVM), which means it is capable of running dapps transferred from Ethereum.
However, Binance Smart Chain is not a rebranded version of the original Binance Chain, nor is it a tier two or sidechain platform solely meant to expand on the original Binance Chain. It is a completely separate and standalone blockchain that can continue even if Binance Chain were to go offline, but the two blockchains are ultimately designed to run in parallel.
How does Binance Smart Chain work?
Binance Smart Chain uses what it calls a Proof-of-Staked Authority (PoSA) consensus algorithm, a hybrid of proof-of-stake and proof-of-authority models. Validators on the network are those who have staked a certain amount of BNB and therefore receive transaction fees when validating approved blocks on the network.
As mentioned, Binance Chain and Binance Smart Chain are designed to work in unison, and Binance has easy cross-chain compatibility built into each other. Assets can be quickly transferred between blockchains, thus coupling the fast trading capabilities of the former with the smart contract functionality of the latter. Likewise, Binance Chain’s BEP-2 and BEP-8 tokens can be exchanged for Smart Chain’s BEP-20 tokens.
Furthermore, compatibility with the Ethereum virtual machine means that creators of dapps on other blockchains could bring them to Binance Smart Chain with relative ease. This could be of particular interest to dapp traders as Ethereum continues to rise and gas tariffs rise, although Ethereum’s planned shift to a proof-of-stake model in Ethereum 2.0 could alleviate some of its current downsizing concerns.
What’s so special about Binance Smart Chain?
Cross-chain compatibility between Binance Chain and Binance Smart Chain offers an intriguing tandem of possibilities for developers, allowing them to leverage the respective strengths of both blockchains to maximize the functionality and performance of their dapps.
Furthermore, the EVM compatibility means that dapps can be transferred from Ethereum and therefore potentially enhanced and expanded on the Binance Smart Chain. There are many emerging blockchains that aim to steal some of the thunder from Ethereum thanks to EVM support, including Avalanche and Telos, and Binance is adding its name to that list with Smart Chain.
Binance has the benefit of immense name recognition in space, not to mention sizable funding and liquidity given its thriving exchange and ecosystem.
What can you do with Binance Smart Chain?
Binance Smart Chain is really aimed at decentralized app developers, whether they are looking for a platform to build a new app on or want to transfer a project from Ethereum. Between the dual-chain system, EVM support and Binance support, the company hopes to attract developers to its ecosystem, creating value for all stakeholders.
As Binance founder Changpeng “CZ” Zhao explained Decrypt in October 2020, the company sees Binance Smart Chain as a way to bridge the gap between centralized and decentralized finance. Binance has set up a $ 100 million fund to support decentralized finance (DeFi) projects that are launched on the blockchain, including up to $ 100,000 for certain individual projects.
Did you know?
In Chinese, Binance’s name is 币 安, where 币 means “encryption” and 安 means “security”.
The future
These are early days for Binance Smart Chain, which just launched in early September 2020 after the concept was unveiled earlier this year. Even so, Binance is giving the platform a big boost thanks to its $ 100 million support fund for DeFi apps and highlighting the benefits of the dual chain approach.
Interestingly, the launch of Binance Smart Chain and strong attempts to woo DeFi developers go against Binance’s core business of being a centralized exchange. According to the company, it continually tries to “destroy itself”.
“For some people, the emergence of DeFi represents a move away from centralized blockchain platforms,” reads a blog post on the launch of Binance Smart Chain. “This could be interpreted as a threat to services like Binance. We ask that you disagree. For us, DeFi is an opportunity to offer better solutions to the blockchain world. “
We will see if the blockchain world agrees and transforms Binance Smart Chain into a leading blockchain platform for decentralized apps for years to come.
