BNB Smart Chain Blockchain History, Use cases, Pros & Cons

BNB Smart Chain

The BNB Smart Chain (BSC), formerly known as Binance Smart Chain, is a high-performance blockchain network designed to support smart contracts and decentralized applications (DApps). It aims to provide fast and inexpensive transactions and is a core component of the broader BNB Chain ecosystem.

Evolution and Relationship within the BNB Chain Ecosystem

Origin and Initial Purpose:

With limitations on programmability, the Binance Chain was the company’s initial blockchain. A blockchain network designed for smart contract-based apps, the Binance Smart Chain (BSC), was announced in September 2020 to circumvent these limits. BSC, which runs alongside the original Binance Chain (previously the BNB Beacon Chain), offers smart contract features and high transaction throughput.

Rebranding to BNB Chain:

A merger of Binance Smart Chain and Binance Chain created BNB Chain in 2022. Decentralizing the chain and connecting it to BNB, its governance token, was the goal of this project. Binance CEO Changpeng Zhao renamed “BNB” to “Build ‘N Build,” emphasizing community involvement in ecosystem expansion.

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Current Structure of BNB Chain:

The BNB Chain currently comprises two parallel blockchains:

• BNB Beacon Chain: This chain primarily functions as a governance layer, handling staking and voting using the BEP-2 token standard.
• BNB Smart Chain (BSC): This chain provides smart contract capabilities, EVM compatibility, and supports DApps, DeFi services, and multi-chain functionality, using the BEP-20 token standard.

Future Fusion:

BNB Chain announced intentions to retire the BNB Beacon Chain in late 2023 and move its major activities to the BNB Smart Chain network. A single BNB Smart Chain is expected to emerge from this migration from April to June 2024.

Core Features and Capabilities

• Smart Contract Functionality: Specifically designed to provide strong smart contract capabilities, BSC allows developers to implement a wide range of services and applications.
• Ethereum Virtual Machine (EVM) Compatibility: A key characteristic of BSC is that it works with the Ethereum Virtual Machine (EVM). Users can make use of well-known tools like MetaMask, and developers can effortlessly and with little modification migrate existing Ethereum-based projects and DApps to BSC.
• Decentralized Applications (DApps): BSC supports GameFi, Metaverse, SocialFi, NFTs, and Decentralized Finance (DeFi). Over 2,000 DApps are active, and the platform boasts 1 million daily users.
• High Performance and Efficiency: With short block periods of roughly three seconds and cheap transaction fees, BSC is renowned for its rapid throughput. Transaction finality is accelerated by the speed at which they are confirmed, frequently within two blocks.
• Interoperability: With compatibility for both BEP-20 and BEP-2 token standards, the dual-chain design of the BNB Chain ecosystem makes interoperability easier through the native BNB token. Transferring tokens between BSC and other blockchains is made possible by tools like Binance Bridge. Additionally, the BSC ecosystem allows for the utilisation of external assets through the use of “peggy coins” or wrapped tokens, which are based on the value of original assets on other chains.
• Developer Friendly: Developed for developers, BSC offers compatible tooling for increased capacity and supports well-known programming languages like Solidity, GO, Java, and Swift.

Consensus Mechanism: Proof of Staked Authority (PoSA)

Block timings and security are achieved by the Proof of Stake (PoS) consensus process, specifically Proof of Staked Authority (PoSA), in the BNB Smart Chain. The hybrid PoSA paradigm incorporates aspects of both Proof-of-Authority (PoA) and Delegated Proof of Stake (DPoS).

• Validators: A small group of 55 validators, total 32 are active validators and 23 are backup. “Candidates” are responsible for protecting the network. The network’s upkeep and transaction approval are under the purview of these validators. Every day, validators are selected depending on the quantity of BNB staked; blocks are produced by the most bonded validator candidates. Using a PoA-like process, validators alternately produce blocks.
• Incentives: Validators are compensated with transaction fees (gas) from the blocks they validate. Unlike many other protocols, there is no block subsidy of newly minted BNB; instead, the supply of BNB decreases over time due to regular coin burns implemented by the BNB team.
• Decentralization and Governance: PoSA includes governance and decentralization aspects. By “bonding” and assigning their BNB to any validator or candidate, token holders can stake their money. Active validators are those who rank highest among bonded token candidates. Slashing logic for double-sign detection, malicious vote detection, and instability is part of the system, which also ensures security and chain finality and penalizes validators for misbehavior. If improper behavior is detected, there is an “unbonding period” to guarantee that tokens stay linked, permitting slashing.
• Trade-off: While PoSA offers high speed and low costs, it is noted that the limited number of validators makes BSC less decentralized than some other blockchains, which is a deliberate trade-off for efficiency and throughput. Binance has invested over $1 billion in the BSC ecosystem to support its rivalry with Ethereum and address criticisms regarding centralization.

Token Standards and BNB’s Role

• BEP-20 Token Standard: BEP-20 is the primary token standard utilized by BNB Smart Chain. Because of their similar functions behaving as a model for the creation of different digital assets such as NFTs, stablecoins, and utility tokens on BSC BEP-20 and Ethereum’s ERC-20 are frequently contrasted.
• The BEP-2 Token Standard is used by the BNB Beacon Chain, on the other hand.
• BNB Token: In addition to being the native currency for the BNB Beacon Chain and the BNB Smart Chain, BNB is the main cryptocurrency that powers the whole BNB Chain ecosystem. On the BNB Chain, it serves as a governance token for participation in decentralized on-chain governance and, like ETH on Ethereum, is used to pay petrol fees. A BNB auto-burn protocol and other technological advancements have also been implemented by Binance to improve decentralization and cut supply.

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Some of the biggest projects on BSC include:

• PancakeSwap
• Venus Protocol
• BakerySwap
• Alpaca Finance

Use Cases of BNB and BSC

BNB and BSC have a wide array of use cases, both within the Binance ecosystem and beyond:

• Within the Binance Ecosystem: BNB is widely used for paying transaction fees on the Binance Exchange, offering users a special discount. It also powers Binance DEX on the Binance Beacon Chain and various applications running on the BNB Smart Chain.
• Beyond Binance: BNB has diverse applications, including:
  • Payment: Through interfaces with platforms such as Pundi X, CoinGate, and Monetha, products, virtual gifts, and services are paid for with this method.
  • Travel: Applies to reservations for hotels, flights, and other travel-related services through TravelbyBit, Trip.io, and Travala.com.
  • Entertainment: Used to purchase digital assets such as music copyrights (MachiX) and virtual land (Axie Infinity) or to earn BNB in games (e.g., VIBE).
  • Service: Real-world applications include paying for cloud/web server subscriptions, hiring independent contractors, getting access to torrents, and developing smart contracts.
  • Finance: Useful for taking out loans, trading stocks, purchasing investments, and splitting bills via financial applications like ETHLend, NAGA, Moeda, LNDR, and Nexo.
• Decentralized Finance (DeFi): BSC is home to a robust DeFi ecosystem that supports lending and borrowing, yield farming, liquidity provision, and trading on DEXs (like PancakeSwap). Because of its adaptability, BSC enables the usage of wrapped tokens to access assets from many chains within its DeFi area.
• NFTs and Gaming: BSC is ideally suited for powering blockchain-based games and minting and selling NFTs because of its quick transactions and minimal fees.
• DApp Development: On BSC, developers are able to create and implement a vast array of decentralized apps.
• MetaFi Development: MetaFi is an initiative that integrates multiple blockchain features, including Metaverse, GameFi, DeFi, Web3, SocialFi, and NFTs, into a unified, interoperable meta environment. The BNB Chain is essential to this effort. In order to support MetaFi’s innovation, the BNB Chain will develop multichain projects that are reliable and compatible.

Pros and Cons of BNB Chain

• Pros: Low transaction fees, fast adoption, bridging functionality, sufficient finance, and localisation are BNB Chain benefits. Its high throughput and Ethereum compatibility make project migration straightforward. Users and developers like its speed, cost, and usability.
• Cons: Because of the small number of validators (around 20–30 active validators) and Binance’s considerable network power, concerns have been expressed about its centralization. The procedures involved in node operation and validation might be intricate and resource-intensive. Furthermore, some analysts point out that the BNB Chain environment may not always see as many related developments as Ethereum does. Certain DApps that are built on BSC have also raised security issues. To address these concerns and uphold the ecosystem, Binance has made large investments.

Future of the BNB Chain

MetaFi is receiving more attention as the BNB Chain continues to change. Future developments in BSC technology include the launch of new BSC partition chains and BSC Application Sidechains. In view of the impending “BNB Chain Fusion,” the main objective is to further decentralize the network and expand its possibilities.

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