BNB Chain (previously Binance Smart Chain) was launched in late 2020 as a significant upgrade to Binance Chain. It has become one of the most popular smart contract platforms, especially in the decentralized finance (DeFi) industry.
The blockchain has seen a huge uptick in users thanks to its drastically reduced transaction prices, block intervals of three seconds compared to Ethereum's 15 seconds, and seamless interoperability with the Ethereum Virtual Machine (EVM). In this guide, we explore the internal workings of the BNB Chain. If you have ever wondered what BNB Chain is used for and what are the advantages and disadvantages, then read on!
The History of BNB Smart Chain
BNB Chain has surpassed all other smart contract blockchains in the world in terms of transaction volume and daily active users as of October 2022. The ecosystem is home to thousands of DApps and has processed billions of transactions. Furthermore, since the network is decentralized, anyone can create a product on the BNB Chain and potentially reach a huge market.
BNB Chain's beginnings can be traced back to 2019 when Binance launched what was then known as Binance Chain. At that time, the BNB utility token, originally created to reduce the trading costs that customers pay on Binance, left the Ethereum network, where it had been launched in 2017, and became the Binance Chain coin. The previous Binance Smart Chain was launched later in 2020. The main feature of this new chain was the integration of smart contract capabilities and DApp development capability.
Binance Chain and Binance Smart Chain (BSC) became BNB Chain in February 2022. The transition highlighted the relationship between BSC and the BNB ecosystem and the tokens. Overall, BNB Chain is a decentralized, open-source, and community-driven ecosystem.
What is BNB Chain?
BNB Chainis a decentralized ecosystem that is built on BNB Beacon Chain and BNB Smart Chain. BNB Beacon Chain, previously Binance Chain, allows platform users to stake and vote. The BNB Chain serves as a hub.
BNB operates as a governance token and provides energy for transactions on the BNB Chain. Users have the ability to participate in the decentralized on-chain governance of the BNB Chain by owning BNB, which is required. BNB Chain community users, projects, and developers will have received greater advantages as a result of the name change.
In addition, the community has introduced several technological advances for progressive decentralization, including the Bruno Hard Fork and the BNB auto-burn method.
What is BNB Smart Chain?
Launched in September 2020, the Binance Smart Chain supports smart contracts and provides a framework for developing powerful decentralized apps. In order to enable efficient operation for the community, it has also been developed to be compatible with the BNB Beacon Chain.
BSC is neither a layer two nor an off-chain scaling solution, as blockchains basically coexist. Instead, it is a standalone blockchain that would still function even if BNB Beacon Chain were not available.
Users can use programs like MetaMask to interact with BSC.
How the Binance Smart Chain Evolved
The Binance Smart Chain was launched after Binance and BNB were established. The BSC became more and more popular together with Binance; this was partly due to the fact that the DeFi movement was experiencing tremendous growth at the time. During this time, more decentralized applications evolved, along with the public's interest in non-traditional financial solutions.
The BNB coin has constantly been changing since its inception, according to Binance. It was first developed in 2017 as an ERC-20 token on the Ethereum network. In 2019, it moved to the Binance Chain to support the development of the BSC network, which officially launched in September 2020.
Binance now sees BNB as a token for a larger ecosystem that includes the Binance Chain and the BSC as a result of the token's rise on the BSC. The crypto titan is making this move as part of its goal to expand outside of Binance. The current token on the Binance Chain is BNB.
BNB Smart Chain and BNB
The native cryptocurrency of the BNB Beacon Chain, BNB, as well as the BEP20 tokens, are supported by the BNB Chain. Through the proof-of-stake mechanism, users can deploy BNB to become validators. Transaction fees are paid to validators for each verified block.
In addition, BSC supports Ethereum smart contracts and allows users to create DApps quickly or even transfer them from Ethereum. For this reason, BSC offers a wide range of DeFi (decentralized finance) solutions and DApps. In fact, a number of decentralized exchange services (DEX), such as PancakeSwap, are supported by the blockchain.
Users can trade or swap their tokens on DEXs. In addition, users can also participate in other activities, such as yield farming or decentralized lending.
Binance Does Not Own or Control BNB Chain
Some people may need help understanding how BNB Chain and Binance are related. For example, many automatically assume that BNB Chain must be another Binance initiative or product, similar to Binance Pay or Binance Labs, because it was created after the previous debuts of Binance Chain (2019) and Binance Smart Chain (2020). Similarly, it is often assumed that Binance must have some sort of ownership or influence over both the chain and the token, as the BNB token was originally developed to pay transaction fees on the exchange.
However, it is important to recognize an important difference between Binance and BNB Chain: Binance is a centralized company serving the Web3 globe, while BNB Chain is a decentralized blockchain ecosystem.
The Future of BSC
Binance's distinct dual-chain structure is a desirable feature that gives developers freedom. But is it enough to compete with a large community like Ethereum?
Although Ethereum undoubtedly has the strongest network impact, the smart-contract-enabled Binance smart chain sees itself as a potential rival to the ecosystem's largest blockchain. However, it still needs to be determined whether perceived disadvantages, such as high transaction fees, will tip the scales, especially now that Ethereum has merged into a proof-of-stake consensus.