Dive into Binance Smart Chain: A BNB Chain Comprehensive Guide
According to reports, many are already acquainted with Binance Chain and its corresponding BNB token. Reflecting Binance’s continuous development and expansion, the Binance Smart Chain (BSC) has rebranded and is now known as the BNB Chain.
In a transformative move, the developers have amalgamated Binance Chain and Binance Smart Chain, giving rise to the BNB Chain – which shouldn’t be confused with the original Binance Chain.
On February 15, 2022, Binance made an official declaration about the merger:
“Effective from today, Binance Smart Chain (BSC) will be recognized as the BNB Chain. This shift underlines BSC’s affiliation with the BNB token and its overall ecosystem.”
One might question the rationale and objectives behind this merger. What are the incentives? What advantages does it offer? To address these inquiries, we must explore the origins of Binance Chain and Binance Smart Chain.
From Fast Food to Digital Finance
Changpeng Zhao, often known as CZ, the creator of Binance, is an immigrant from China residing in Canada. CZ once served at McDonald’s before landing internships at the Tokyo Stock Exchange and Bloomberg Tradebook, where he was involved in trading software development post-graduation.
Binance Smart Chain and Binance Chain: A Symbiotic Partnership
The Binance Chain was the first blockchain introduced by Binance. However, due to constraints in programmability, the Binance Smart Chain was conceptualized. The rising public interest in non-traditional financial solutions gave birth to the BSC.
What is Binance Chain?
Launched in April 2019, Binance Chain primarily aimed to offer a decentralized, smooth trading experience. The BEP-2 token, the BNB token, was the original Binance token on the Binance Chain.
Binance had ambitions to create a decentralized exchange (DEX) to answer the unsatisfactory user experiences offered by other DEXs. However, the Binance Chain has only provided a decentralized trading option.
What is Binance Smart Chain?
After witnessing several advancements with the Binance Chain, Binance launched the Binance Smart Chain. As per the whitepaper, the motive behind BSC was to facilitate a smart contract function alongside the Beacon Chain.
The whitepaper stated:
“Often, convenience and adaptability have an inverse relationship with efficiency. The focus on providing an accessible digital asset issuing and trading venue also brings certain restrictions.”
Since its inception in 2017 as an ERC-20 token on the Ethereum network, the BNB token has seen several transformations, according to Binance. In 2019, it transitioned to the Binance Chain, aiding in developing the BSC network, formally launched in September 2020.
Binance now perceives BNB as a token representative of a broader ecosystem, covering both Binance Chain and BSC, as a result of the token’s growth on BSC. Binance is making this move with the strategic intention to broaden its horizons beyond its platform.
While BSC shares its lineage with Binance Chain, it can independently operate as a standalone blockchain. Even in scenarios where the Binance Chain becomes temporarily nonoperational, BSC would continue to function without disruption.
Understanding the BNB Chain
The BNB Chain boasts a vibrant, dynamic ecosystem of its own. The BNB token, designed for universal ownership, must remain accessible to all. Formerly recognized as the Binance Coin, this rebranded token now serves dual purposes as a governance token and a medium to pay gas fees on the BNB Chain.
The BNB Chain aspires to lay the groundwork for a globally parallel virtual ecosystem. Binance expresses its commitment to the community by fostering an open, multi-chain environment, welcoming creators and inventors, encouraging public participation, and maintaining decentralization.
In a public statement, Binance emphasized that “the BNB Chain continues to be a community-oriented, open-source, and decentralized ecosystem.”
Exploring the Benefits of Binance Smart Chain
Binance Smart Chain’s (BSC) rapid rise to popularity was far from surprising. Like any other blockchain, BSC presents its unique challenges and advantages. However, does it detract from its appeal compared to its market competitors? Here are some notable benefits:
Autonomy: BSC operates as an autonomous blockchain, independently from Binance Chain.
Reduced Gas Fees: Binance recognizes the significant role of gas fees in the crypto sphere. BSC’s low gas fees make it an attractive choice for developers and users, especially compared to Ethereum.
Cross-chain Compatibility: Binance Smart Chain accommodates Ethereum Virtual Machine and supports pegged coins from various blockchains.
Reputation: BSC has become one of the most reputable exchanges today, with its credibility extending across all its platforms.
Highlighting the Limitations of Binance Smart Chain
Nonetheless, BSC also has its drawbacks, which might not be of great concern to some users.
Centralization: BSC, being centralized, relies heavily on its parent company, Binance, for overseeing all cryptocurrency transactions.
Dependence: BSC is a hard fork of the GoEthereum (Geth) protocol, which means it resembles Ethereum. Binance faces limitations in creating features not available on the Ethereum network.
Increased Scam Potential: The low transaction cost might become a magnet for scammers who could exploit this feature.
Final Thoughts
Despite Binance Smart Chain’s reputation as a strong contender and its association with a central trading platform, the contest between the longstanding Ethereum and its competitor, BSC, doesn’t appear to escalate significantly.
Ethereum, given its pioneering status, is expected to hold its dominant position for a considerable period. The enormous gap between the two entities contributes to this status quo.
High transaction costs could be one of the main reasons why many developers and users prefer to stay with Ethereum. Additionally, BSC’s less decentralized infrastructure might deter others.
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