BNB Smart Chain
Strengths and Weaknesses
- Ethereum compatibility – thanks to EVM support, many applications can be easily converted to BSC.
- BC interoperability – information exchange between the two chains is fast.
- Support for smart contracts and dApps – thanks to the integration of smart contracts and dApps, the entire ecosystem can grow and new users can be added.
- Exchange of BEP-2 and BEP-8 tokens for BEP-20 tokens – standardization of both blockchains’ tokens.
- Centralization – there are only 21 active validators who have control over the entire blockchain.
- Scam projects – due to its low fees and large user base, BSC attracts the most fraudulent dApps.
- Blockchain innovations – BSC shares developers with Ethereum, so the primary development focuses on the Ethereum blockchain first and later then on BSC.
BNB Smart Chain (BSC) runs on the Proof of Stake Authority (PoSA) consensus.
BSC is a standalone blockchain operating in parallel with the Build N Build (BNB) Beacon Chain (BC). BC is the main chain of the Binance exchange, but it did not support smart contracts, hence the split. The goal was to keep the speed of BC and bring smart contracts into the ecosystem.
This resulted in the creation of BSC, which is not a 2nd layer of BC, but a separate blockchain. Both can operate independently of each other, and do not affect each other's operation.
The BSC is compatible with the Ethereum Virtual Machine (EVM) and can run decentralized applications (dApps) primarily built for the Ethereum blockchain. This allows developers to easily port their dApps from Ethereum.
The main reason for the creation of the BSC was to create a blockchain with lower fees while becoming a support for the emerging world of cryptocurrencies.
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Functioning of the Chain
BSC is the interoperability and programmability solution for the entire BNB chain. It uses a system of 21 validators in the PoSA consensus. Because of this, it can have lower fees and shorter new block creation time.
The choice of validators is one of the main problems of BNB chain centralization. Validators “change” every 24 hours, but becoming a validator for a BSC is almost impossible. Binance vets and approves who it lets validate its blockchain.
BSC can handle up to 300 transactions per second. This may not seem like a high number compared to Avalanche, which handles up to 4,500 transactions per second. However, BSC still works without lag at higher loads and all transactions go through, while Avalanche cannot handle the surge of transactions at high loads and rejects them or you can wait up to 5 minutes for confirmation.
Comparison of transaction fees:
Even though BSC handles 300 transactions and Avalanche up to 4,500, the fees do not reflect this.
When the blockchain is heavily loaded, BSC charges a maximum of 8-9 GWEI, and on Avalanche it is not uncommon to charge well over 100 GWEI per transaction.
Video about how BSC works
The BNB Beacon chain is used to stack BNB coins on the Binance exchange and also manages their system.
BNB Sidechain is used to test and develop the entire BNB chain ecosystem.
BNB ZkRollup is still in the testing phase; it will improve the scaling of the entire BNB chain.
Binance exchange and the BNB coin were founded in 2017. BNB coin was first created as ERC-20 on the Ethereum blockchain. After the creation of BSC in 2020, it switched to the BEP-20 standard and became part of BSC.
In 2022, BSC and BC merged under one big chain called BNB chain, accelerating the exchange of data and the operation of the whole ecosystem.
The BNB coin of the Binance exchange was formerly called Binance Coin. In 2022, it was renamed to “Build N Build” coin. Thus, the entire Binance ecosystem was divided into BSC and BC and today everything is under one name, the BNB chain.
The BSC is becoming increasingly popular due to its interconnection with the Binance exchange. That is why there is the highest incidence of fraudulent projects, luring you to a big appreciation, but mostly it is a pump and dump scheme. It could be said that 7 out of 10 projects are scams, which is far more than on other blockchains.
You can check whether a project is a scam at this website. Just enter the contract of the token in the search engine associated with the project and select “Check”. It’s not 100% bullet-proof, but they can protect you from most fraudulent projects on BSC.
Binance and its CEO Changpeng Zhao (CZ) are behind the creation of BSC.
You can see the entire Binance team here.
Changpeng Zhao has worked for many companies in the financial sector throughout his life. After graduation, he worked for a software company that provides solutions for the Tokyo Stock Exchange. He is the founder of Fusion Systems, a creator of high-frequency trading systems for brokers. Prior to founding Binance, he was part of the team that developed Blockchain.info and also served as Chief Technology Officer at OKCoin.
Revenue & Tokenomics
The total supply of BNB is 200 million coins. Binance decided to burn BNB coins to increase their rarity. The final number of coins to be burned is expected to be 50% of the total supply, i.e. 100,000,000 BNB coins.
Binance uses 2 BNB burning mechanisms.
- Burning part of the transaction fees on the BSC chain.
- Quarterly burning of BNB.
Previously, BNB was bought and burned quarterly from the proceeds of the Binance exchange. Now, under the BNB Auto-Burn program, the number of coins burned is determined by the ratio of the total number of blocks mined on BSC during the quarter to the average BNB coin price in USD during the quarter.
BNB coin was issued as part of the ICO in July 2017.
During the ICO, the coins were distributed in the following way:
Binance Team: 40% (80 million BNB)
Investors: 10% (20 million BNB)
Public offering: 50% (100 million BNB)
All coins from the public offering were sold at $0.15 per coin. Binance raised USD 15 million, mostly in ETH and BTC.
These funds were used as follows: 35% to modernize the user interface of the Binance Exchange, 50% for Binance’s branding, marketing and education program, and the last 15% was kept by the exchange as a contingency reserve.
There are now 159,973,899.67 BNB coins in circulation.
CEX listings – Binance, KuCoin, Gate.io, Bybit, Huobi, BitMart, MEXc, Poloniex, etc.
The Uniqueness of the Chain
The BSC was created because of the need for smart contracts that could not be incorporated into the BC. It would have been slower and more vulnerable. Therefore, Binance management decided to form a second independent chain (BSC) alongside BC, which has the speed and security of BC and allows the use of smart contracts.
With its EVM compatibility and cheap transactions, BSC is an obvious choice for newbies to the crypto world. It’s stable even with a high volume of transactions. The large representation of the DeFi sector and dApps makes it easy to get involved with the entire BSC ecosystem.
The BSC issues various grants and loans to developers to support the development of the project, thereby improving the entire blockchain.
How the Network is Secured
The security of the BSC is ensured by the PoSA consensus with 21 validators. The validators taking care of the chain change every 24 hours. Each day, a different 21 validators can check the blocks, reducing the possibility of a 51% attack. For a 51% attack, more than 51% of the chain needs to be controlled by one entity and with a daily rotation of validators, this is more difficult.
The defense against duplication of transactions is provided by slashing. This feature watches for any validator that would try to double spend transactions. Anyone, even other validators, can report suspicious validator behavior. Proof of chain abuse by a validator will result in the validator being removed from the validator list and a set number of BNB coins being removed. Some of these coins will be given as a reward to the party reporting the suspicious behavior, and the rest of the confiscated coins will go to other validators. They will distribute them to their delegators (sometimes also called nominators).
The secure inclusion of each transaction in a block on the BSC is validated by 21 validators. If the block write time is 5 seconds, ⅔*N+1 different validators will need a time period of (⅔*21+1)*5 = 75 seconds. After such a period of time, all transactions written to the block are considered secure and non-duplicated.
PoSA consensus is a combination of DPoS and PoA. The block write time is set to 5 seconds, and with 21 validators, the total block validation time is sufficient to prevent 51% of attacks. DPoS selects the validators by voting by the users of the chain and PoA is selected by a central entity (Binance exchange). Thus, PoSA selects a limited number of validators with the largest number of locked BNB coins. This produces a chain with high transaction throughput and strong security.
How to become a BSC validator:
You must have sufficient software, hardware and a node with at least 10,000 BNB coins. This does not necessarily mean that you will be selected for validation. Every 24 hours, 21 validators are selected to manage the chain. The selection is based on the total delegated BNB share (your share + the delegators’ share).
- BSC software operating on VPS servers with firewall (can be rented from Amazon or Google).
- Memory: 16 GB RAM (Testnet 8 GB RAM).
- Disk space: 500 GB SSD storage.
- CPU: 64 bit.
- Receives rewards from the chain’s transaction fees.
- Sets its own fees for delegators.
- Oversees the security of the chain. The more quality validators, the more secure the chain.
How to become a delegator on BSC:
If you hold BNB in your wallet and will not be trading them for a long time, the best way to value them is to provide them to the validators and become a delegator (aka nominator).
As a delegator, you will pay a fee for depositing your BNB.
Choose the validator offering the best percentages
- Binance Chain Wallet.
- BNB for depositing to the validator.
- Receives a reward for staked BNBs from the validator.
- Increases the credibility of his validator through more locked BNBs so the validator has a higher chance of being elected.
Q4 2022 & Q1 2023
Lighter applications, ideal for non-DeFi dApps:
BNB chain developers are working to improve blockchain storage systems. This will solve long-standing problems for validators, which will see their operating costs and hardware requirements drop. Part of this update will include developing access to cheaper decentralized storage.
Due to its scalability, low transaction fees and fast transaction confirmation, BSC is considered a good alternative to the Ethereum blockchain.
Top BSC projects:
PancakeSwap – DEX.
Venus – Lending.
Alpaca Finance – Yield.
There are now over 400 DeFi projects on the BSC blockchain.
TVL (Total Value Locked) in DeFi is USD 8 billion.
The official BNB Chain (BSC) Discord is friendly and the admins are very active. If a developer has a problem, they will get a very quick response. BSC has a lot of user groups and projects due to its simplicity and inter-connectivity with the Binance exchange. Given the size of BSC and the simplicity of creating dApps, one has to be cautious about scams. There are many more of these on BSC than on other blockchains.
Binance and the associated BSC got many partners.
Here is a short list:
- Alpine F1 Team
- Cristiano Ronaldo
- France FinTech
- Settle Network
- Z Corporation
- Portals Downtown
Where to Buy
The easiest way to obtain BNB coins is on Binance. You can also quickly and easily send fiat from your bank account there.
Another way is to buy on DEX. The biggest DEX for BSC is PancakeSwap. Here you can exchange any cryptocurrency for BNB and vice versa.
BSC is the best and the worst blockchain for a beginner at the same time. It is very easy to send fiat to Binance exchange and from there send tokens/coins to a BSwallet. This is why BSC is so widespread and popular. Although the blockchain with its 300 transactions per second is not the fastest, it can handle it nicely and everything runs smoothly even under heavy load. DeFi is doing very well here and new protocols are mushrooming.
Consensus PoSA is a hybrid between DPoS and PoA. It makes BSC a secure blockchain.
On the other hand, only 21 selected validators are involved in the management of the entire blockchain, so one can argue about decentralization (for comparison, the Ethereum blockchain has about 468 thousand validators). An example of “centralization” was shown by the hack of the bridge between BSC and BC in October 2022, when both blockchains were shut down in a moment to prevent an attacker from moving funds on another blockchain.
I’m not worried about the future of this blockchain. It has a solid foundation and Binance will not let its title of number one CEX be taken easily. Its founder and CEO Changpeng Zhao is a well known cryptocurrency enthusiast and a good manager.