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What is Binance Smart Chain?

What is Binance Smart Chain?

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 directly trade with each other. It also powers Binance Coin (BNB), which started on Ethereum but was converted via token swap.

Binance Chain was launched relatively quickly and optimized for fast trading, but didn’t have the extensive functionality needed to support a wider array of decentralized apps (dapps).

That’s where the new Binance Smart Chain comes in. As the name suggests, it’s a more advanced blockchain than the original, but it’s 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 wasn’t built to allow such functionality, but the Binance Smart Chain has been designed to provide the same kind of speedy transactions while also greatly expanding the available features and capabilities. It's also compatible with the Ethereum Virtual Machine (EVM), which means it’s capable of running dapps ported over from Ethereum.

However, Binance Smart Chain isn’t a rebranded version of the original Binance Chain, nor is it a layer-two or sidechain platform meant solely to expand upon the original Binance Chain. It’s a completely separate, standalone blockchain that can continue on even should the Binance Chain go offline, but the two blockchains are ultimately designed to work in parallel.

How does Binance Smart Chain work?

Binance Smart Chain utilizes 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 then receive transaction fees when they validate approved blocks on the network.

As mentioned, Binance Chain and Binance Smart Chain are designed to work in unison, and Binance has built-in easy cross-chain compatibility between them. Assets can be quickly transferred between the blockchains, thus pairing the speedy trading capabilities of the former with the smart contract functionality of the latter. Binance Chain’s BEP-2 and BEP-8 tokens can likewise be swapped for the Smart Chain’s BEP-20 tokens.

Additionally, Ethereum Virtual Machine compatibility means that creators of dapps on other blockchains could port them over to Binance Smart Chain with relative ease. This could be particularly compelling to dapp operators as Ethereum continues to grow and gas fees rise, although Ethereum's planned shift to a proof-of-stake model in Ethereum 2.0 could alleviate some of its current scaling concerns.

What’s so special about Binance Smart Chain?

The cross-chain compatibility between Binance Chain and Binance Smart Chain offers an intriguing tandem of possibilities to developers, letting them harness the respective strengths of both blockchains to maximize the functionality and performance of their dapps.

Additionally, EVM compatibility means that dapps can be brought over from Ethereum and then potentially enhanced and expanded on the Binance Smart Chain. There are a lot of up-and-coming 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 advantage of immense name recognition in space, not to mention considerable funding and liquidity given its flourishing exchange and ecosystem.

Token on Chain

Binance’s BNB coin works on both BC and BSC as the method of fee payment for activity on these blockchains. What tokens are on Binance Smart Chain?

Entities can build tokens on both BC and BSC. BEP-2 tokens are built on Binance Chain, for example, while BEP-20 tokens are built on Binance Smart Chain. This is similar to how ERC-20 tokens are one type of asset that is constructible on the Ethereum blockchain.

A Binance Smart Chain wallet holds assets compatible with BSC. While there is a native Binance wallet application for generating a compatible seed phrase, users are also able to use other EVM-compatible wallets such as MetaMask to perform transactions on the network. Since MetaMask is an Ethereum software wallet, it makes sense to ask how to add Binance Smart Chain to MetaMask.

The Ethereum Virtual Machine is basically the Ethereum blockchain’s main foundation. When a blockchain is EVM compatible, it means that it can interact with and understand the Ethereum system.

Since BSC is EVM compatible, one wallet seed phrase controlled by a holder may result in BEP-20 tokens and ERC-20 tokens having the same wallet address, even though the assets are still on their own respective blockchains

Binance has a Binance Smart Chain wallet extension for browser-based wallet usage. Called Binance Wallet, the wallet also works with Ethereum and Binance Chain. The Binance Smart Chain Faucet lets users experiment with BSC in a testnet setting, paying outplay versions of different digital assets.

Wondering how to use Binance Smart Chain? Well, a person might use BSC via trading BEP-20 tokens on a BSC-based DEX. A developer might choose to build a DApp on BSC. A decentralized finance (DeFi) project may also choose to build a token on BSC.

The future

Decentralized blockchain ecosystem Binance Smart Chain (BSC) announced that the Binance Chain and Binance Smart Chain are uniting under a new name, BNB Chain, in a bid to reflect their connection with the native token of the ecosystem Binance Coin (BNB).

BNB now stands for “Build and Build” instead of short for Binance Coin. Powered by BNB, the BNB Chain will introduce advanced capabilities and focus on building Web3 infrastructure.

Under the freshly named BNB Chain umbrella, the chain governance part, the Binance Chain, where staking and voting happens, has become BNB Beacon Chain. Meanwhile, the Ethereum Virtual Machine-compatible, multichain-supporting Binance Smart Chain is simply named BNB Smart Chain, still shortened as BSC.

The BNB Chain will bring all its Web3 development under the umbrella of MetaFi that will bring together developers and projects from the metaverse along with GameFi and SocialFi. The BNB Chain will bring large-scale applications and developer tools while expanding the validator set from 21 to 41 with a focus on scalability.