BSC network: A beginner's guide to the Binance Smart Chain blockchain

What is BSC?

The Binance crypto exchange is not just a platform for buying and selling coins, but a full-fledged blockchain infrastructure. In April 2019, ecosystem developers introduced Binance Chain, which offered users fast transactions and sufficient functionality. Later BSC network was created in 2020 to expand the functionality of the Binance Chain. Its main feature is the support of smart contracts.

Before the Binance exchange created its network, the bulk of DeFi projects were opened on the Ethereum network, which at that time already supported smart contracts. The main goal of Binance in creating its own network, which is based on smart contracts, was the desire to reduce the "gap" between centralized and decentralized finance platforms. At the same time, the high bandwidth of the Binance Chain network and the trading speed of the BNB token remained intact. Both blockchains of the exchange work in parallel and independently of each other.

The Binance Smart Chain blockchain was launched on September 1, 2020, and has become an environment for the development of decentralized applications. BSC is compatible with the Ethereum Network, which allows developers of DeFi projects to transfer their developments to BSC without any problems. Since the launch of the Binance Smart Chain network to this day, Binance has been actively supporting DeFi developers of projects using the BSC network.

Technical Features of Binance Smart Chain Blockchain

The Binance team managed to create and launch a new network in a very short time - Binance Smart Chain appeared on the market at the right time. At the moment, the daily turnover in the blockchain even exceeded the volume of Ethereum transactions. The success was ensured by low fees, fast transaction processing, ease of deployment, and transfer of dApps to Ethereum. The developers were offered to check the functioning of applications on the test network for free.

The Ethereum blockchain motivated the development of the DeFi sphere but faced a lack of scalability. Thanks to the involved Proof-of-Stake Authority (PoSA) consensus algorithm, transfers on the BSC network are confirmed in 3 seconds. BNB Chain is known to be more affordable than Ethereum (currently, the maximum charged fee is 0.1%). For this result, decentralization had to be sacrificed.

In February 2022, Binance rebranded and combined both of its blockchains into a single BNB Chain ecosystem. BNB Chain is a decentralized blockchain ecosystem focused on Web3 economy, infrastructure, and services.

The networks themselves were also renamed BNB Beacon Chain and BNB Smart Chain (BSC), respectively. As a result, Binance has become one of the largest centralized exchanges and at the same time one of the largest ecosystems in DeFi.

The two chains continued to operate separately, serving different purposes.

BNB Beacon Chain: Governance layer, with staking and voting. BNB Beacon Chain uses the BEP-2 token standard.
BNB Smart Chain (BSC): EVM-compatible layer with DApps, DeFi services, consensus layers, multi-chain support, and other Web3 applications. BNB Smart Chain uses BEP-20 as its main token standard, while BNB Beacon Chain, the home of Binance DEX, supports the BEP-2 token standard. If you’d like to trade on Binance DEX, you’ll need to use BEP-2 tokens, while if you’d like to use dApps on BSC, you’ll need BEP-20 tokens.

In August 2023, the Binance team launched a second-tier opBNB network based on the Optimistic Rollups technology used in the Optimism L2 network. This solution is designed to scale the BNB Smart Chain network. According to the developers, the opBNB network processes more than 4,000 transactions per second, and their average cost is only about $0.001.

Learn more about how Layer 2 Scaling solutions are accelerating blockchain transactions from our article.

Comparison and compatibility with other networks

Binance Smart Chain participants are attracted by the ease of application deployment and low fees. The blockchain has high bandwidth, and minimal fees, and also works autonomously.

Ethereum

BSC operates based on EVM. This allows you to quickly transfer existing Ethereum solutions to the Binance Smart Chain network and vice versa, as well as create new ones. In 2021, due to increased demand, the Ethereum network faced congestion. This led to a strong increase in commissions, at the moment the fees reached $50 or more. Developers have started to offer alternative solutions.

The native BNB token

The native Binance token is a deflationary asset. When generating a block, no new coins are created, and validators receive only transaction fees.

In the past, the price of Binance Coin has shown a close correlation with the price of Bitcoin. This is so because BNB is the native token of the Binance exchange - one of the largest cryptocurrency exchanges in the world. Thus, the dynamics of Bitcoin prices directly affect the trading volumes on Binance.

After several months of incoming bullish dynamics, Bitcoin's dominance may begin to lose ground, which will become the catalyst for a new wave of the altcoin season. The altcoin season is a period when the prices of altcoins (all cryptocurrencies except Bitcoin) show significant growth relative to Bitcoin. Most altcoins are currently trading at bear market lows relative to bitcoin, but experts predict that this trend will change soon.

Connection between BSC and BNB token

The coin of the Binance exchange is BNB. BNB and the Binance Smart Chain network are closely linked, which completely dominates the price of BNB tokens. The main functions of BNB are payment of transaction fees, commission for creating dApps, and staking. The BEP-20 standard is used to quickly launch new tokens. It is based on the Ethereum code, but it operates on the BSC blockchain.

The BEP-20 token standard is a set of rules that new tokens must comply with, which uses the same features as its Ethereum counterpart ERC-20. This allows you to launch the project as quickly as possible. A team of programmers is not required to create the code-even a novice user can handle the work (template options are available online). The client can change any BEP-20 asset to DEX PancakeSwap.

Payment of the commission. Only the BNB coin is used to pay transaction fees on the BSC network.
Widespread use of BNB. With the opening of Binance Smart Chain, the BNB coin began to be used in many DeFi projects. So, the coin went beyond the Binance exchange and significantly expanded its functionality with ‌a new network.
Listing of new coins. Many DeFi projects enter the Binance exchange with their coins, and use the exchange's internal platform, LaunchPad, to exit. Listing through this platform implies using BNB coins to buy new tokens, or staking with a reward in new coins.

All the above-mentioned points have a positive effect on the price of the BNB token and are related to the Binance Smart Chain.

Best Binance Smart Chain wallets

Despite the high-security standards of the Binance exchange, it is recommended to use personal storage for long-term asset retention. You need to choose the interface based on your preferences:

The method of storing private keys. That is the most secure are non-custodial wallets, the codes of which are in the possession of users.
Supported platforms. Investors may need to access money from different devices, so it is more convenient to use online storage or mobile versions.
The number of blockchains. You can store only BEP-20 tokens or use the same interface for all assets.
Access to dApps. If the wallet supports this feature, you can stack coins or block them for a reward in DeFi projects.

TOP 5 wallets for BEP-20 tokens:

1. Binance Chain Wallet (merged with Trust Wallet) - the interface is launched to support the native chain. Here you can store tokens in the BC, BSC, and Ethereum networks. Investors can connect to DeFi applications in the built-in browser, send ERC-20, BEP-20, and BEP-2 tokens from Binance and back in one click, transfer and receive compatible cryptocurrencies.

2. Trust Wallet - Binance’s official cryptocurrency wallet, provides support for 65 blockchains and access to over 4.5 million crypto assets. With the help of Trust Wallet, you can connect to dApps in supported networks, place assets in a stack, buy coins from cards, and change them through the built-in service. One-click transfers from the exchange are available to Binance clients. To do this, you need to link accounts.

3. MetaMask - the most famous DeFi wallet application with support for BNB Chain and other networks. This is also the most popular interface for storing Ethereum tokens. MetaMask supports over 30 blockchains compatible with EVM, including Binance Smart Chain. To transfer assets, connect to dApps, and add custom BEP-20 tokens, you need to change the network to BSC at the top of the screen. MetaMask can be run on a PC as a plug-in, in the mobile version on Android and iOS. Users can purchase assets from cards and exchanges in the same blockchain using an internal service.

4. SafePal - a hardware wallet provider that also has a decentralized application for mobile devices. In particular, its most famous model is the SafePal S1. For the price, this option is much more affordable than Ledger or Trezor, and it is not inferior to them in terms of security. The application supports working with DeFi, but for this, you need to transfer assets from a cold wallet to a hot one.

5. MathWallet - launched by MATH Global Foundation in 2017. The developers raised $12 million in a funding round involving Binance Labs. The wallet supports more than 40 blockchains. A mobile version, a browser extension, and an online interface are available. Users can change tokens and buy with fiat. The interface is compatible with Changely and MoonPay payment gateways. To increase security, investors can activate two-factor authentication or log in using a hardware wallet.

How to get started with Binance Smart Chain

To send a transaction, you need to have some BNB on your balance. Cryptocurrency can be purchased on CEX (Binance, KuCoin), through the payment gateway of the vault from the card. To interact with the network, you will need to download and install a wallet with BSC support. The developers recommend using Trust Wallet and Binance Chain Wallet.

Transfer of funds

Users can send and receive coins. The functionality is available in the Wallet menu:

Send. You can create a new transaction in that section. You will need to enter the recipient's account and the number of coins. Users can send assets in cash and exchange vaults. The BSC network does not support the transfer of BEP-20 tokens to the BNB address (as ETH). Each asset must have its own account.
Receive. On the page, you can copy the wallet address to send coins.

Bridge

One of the easiest ways to transfer BNB (or other BEP-20, BEP-2, and BEP-8 tokens) between networks is on the Binance exchange. The instructions are as follows:

1. Transfer the coin to the trading platform account.

2. Open the "Output" section.

3. Find a coin in the search and select a network from the list.

4. Specify the volume of the transaction and sign the transaction.

If the user does not have a valid CEX account or does not want to undergo verification, assets can be exchanged in a decentralized manner. To do this, the developers of Binance Smart Chain suggest using Binance Bridge:

1. Go to the official website of the bridge.

2. Connect the wallet.

3. Specify between which blockchains the coin should be transferred.

4. Enter the asset and its quantity.

5. Sign the transaction.

Find out more about blockchain bridges and how to move your crypto assets from one blockchain to another here.

The advantages and disadvantages of Binance Smart Chain

Among the advantages of Binance Smart Chain are:

Independency. Binance Smart Chain is a completely independent and autonomous blockchain;
Compatibility. Binance Smart Chain supports smart contracts and is compatible with EVM;
Various tools. All the tools and features of Ethereum are available;
Integration. Binance Smart Chain is integrated with the Binance Chain blockchain;
Easy to use. dApp applications scale easily;
Security. Binance Smart Chain provides high-speed operation and system safety;
Social interaction. Binance Smart Chain provides increased community engagement.

Among the disadvantages of Binance Smart Chain are:

Centralization.
Resource consumption. All validators on the network are selected by Binance, and they are subject to increased requirements in terms of technical capabilities.
The backlog. Binance Smart Chain is technically a modified fork of Ethereum – meaning it reacts to innovations much more slowly than the "mother" blockchain. That is, new solutions are implemented first in Ethereum, and only after a while they get into the BSC network. This means that BSC users will always be inferior to Ethereum users in terms of capabilities and potential.

Popular dApps on the BSC network

One of the main tasks of the developers of the Binance Smart Chain blockchain is to provide a convenient platform for launching DeFi platforms and games. The most successful dApps have a strong community and a high trade turnover.

PancakeSwap. The protocol was launched in 2020 for the decentralized exchange of tokens on the Binance Smart Chain network. The exchange became one of 6 projects that received funding from Binance Labs. The technical part is copied from the popular Uniswap (AMM) platform. However, the developers have offered more earning options: lotteries, betting on forecasts, and NFT sweepstakes. The native CAKE token is used to stimulate the supply of liquidity, pay commissions, and as incentives.
BurgerSwap. The project was created in 2020 to increase the popularity of the Uniswap protocol. The following options are available to users:

- Fast exchange with minimal slippage of ERC-20 and BEP-20 tokens.
- Earning on the supply of liquidity.
- DAO incentives (participants must vote at least once a week).
- Lending. Users can block stablecoins and the native BURGER cryptocurrency for a fee, as well as use them as collateral for loans.
- Participation in IFO BURGER-USDT. As a result, they receive a synthetic BURGER asset-USDT BLP, which can be exchanged for the currency of new projects.

The developers chose the BSC blockchain because of the high transaction processing speed and low fees. The project is managed by the community. To initiate an offer, you need to send a Burger token to the staking. Asset holders can vote to change the size of commissions, distribute the pool of rewards, increase incentives in pools, add new cryptocurrencies and other options. To place projects in the DEX listing, you need to create an application and pay a fee. The coin will be added when a majority of votes are received. The placement fee is distributed among all active members.

Venus Protocol. The project was created by the Swipe team (the issuer of crypto cards) in 2020. Venus Protocol aims to close the gap between traditional and decentralized finance, as well as provide customers with an alternative to similar Ethereum projects. The protocol combines the functionality of Compound (lending secured by cryptocurrency) and MakerDAO (synthetic stablecoins). Users block digital coins for a reward that depends on the market situation and is determined by the yield curve. After that, customers can:

- Keep assets in their wallet. Each time their number will grow.
- Use collateral to obtain a loan.

Venus allows you to use the same collateral for both options — issuing stablecoins and lending. Unlike other projects, VAI stable coins are provided with a set of cryptocurrencies (and not a single token or fiat). This increases their reliability.
Autofarm. The project appeared in December 2020 and quickly gained popularity. Within a few months, the amount of blocked funds in the protocol reached $1.71 billion. The key role in the DeFi project is played by the digital currency AUTO - it is used to pay commissions and rewards. The total stock of the asset is limited to 80 thousand units. The issue was completed in October 2021. Since that time, there has been an outflow of funds from the site. Users are offered the following options:

- Increased revenue for locking assets in other DeFi pools using Autoform (Vaults).
- Stacking of service coins of popular monetary protocols for increased remuneration.
- Cryptocurrency exchange. The protocol is looking for the best option among DEX. If direct conversion is not possible, an exchange is offered in several stages — for example, BNB-USDT-ALPACA. Users can prohibit searching for workarounds in the terminal settings (double or triple commission is charged for such transactions).
Cream. The project appeared in 2020 as an offshoot of the DeFi application of the money market Compound. The credit protocol works on the Ethereum, BSC, Polygon, and Arbitrum networks. The project combines the best options of Compound and Balancer. Users have the access to:

- Landing page. Customers can block coins for a reward and receive loans secured by the placed assets. It is allowed to take out a loan of up to 60% of the deposited funds. Interest rates depend on the market. The higher the demand for a coin, the more they pay to block it.
- Native cryptocurrency staking. Funds can be blocked for 3 or 4 years. Early repayment of investments is not allowed. 26-34% are paid for placement in the PoS protocol.
- Ethereum bets. Clients have the right to participate in the staking of the ether. You can bet any amount.
- Farming. You can receive rewards for supplying liquidity to pools.
- Token exchange. 0.25% is charged for the operation, and commissions are distributed among farmers.
- Flash Loans. Users with insufficient collateral can take out micro-loans. You need to repay the loan within one block.
Spartan Protocol. That DeFi project was launched in 2020. Spartan became the first major liquidity provider for the Binance Smart Chain network. The developers took the AMM (Automated Market Makers) model as a basis and added innovative solutions. The protocol has the following features:

- Strives for full automation. Decisions on the development of the project are made by a vote of the DAO.
- The code was developed by the community from scratch. The project is not a fork like other protocols.
- The amount of commissions depends on the liquidity.
- Users can profit from locking coins in pools of synthetic assets (BEP-20 tokens are combined with the internal SPARTA coin). Unlike other protocols, there is no need to calculate token rates in the pool. Cryptocurrencies are valued relative to synthetic assets. With significant deviations in the exchange rate, there is an opportunity for arbitrage traders to earn money. Therefore, coin prices are rapidly stabilizing.

Conclusion

In conclusion, it can be noted that the BSC network is an excellent analog of the Ethereum network, since low commissions, high transaction speed, and rapid development of the network's "infrastructure" are what Binance Smart Chain benefits from. Given the high demand for DeFi (decentralized finance), as well as new directions (GameFi, metaverses), blockchain is beginning to be used more often, because it is a good alternative to expensive and slow Ethereum.

BNB Chain has been promoting its reliability and increasing the number of active users and transactions. Binance Smart Chain provides the opportunity to make fast and affordable transactions. Creating solutions that provide inter-network interactions is one of the priority tasks facing developers of blockchain systems. BSC aims to simplify user interaction with the Web 3.0 space, as well as speed up the processes of this interaction.