Binance Holdings Ltd not only operates a leading cryptocurrency exchange, but is also developing other promising distributed ledger technologies. One of the most popular functions is an algorithm for automatically fulfilling the terms of a commercial transaction, or, speaking about another, a smart contract. Until now, the Ethereum project was in the lead in this area and all other blockchains working with smart contracts lagged behind it. But after Changpeng Zhao’s team launched the modified blockchain on Ethereum, a very serious competitor emerged. In this review, we will tell you about the features and main advantages of the new service.
The difference between Binance Chain and Binance Smart Chain
The Binance Chain launched last spring to issue and exchange tokens. The digital fuel of the chain is the BNB cryptocurrency. Binance Chain has high bandwidth but is not suitable for dApps development. Therefore, binance specialists launched a new Binance Smart Chain network. It works in parallel with the main blockchain, is completely autonomous and compatible with the Ethereum virtual machine. In contrast to the core network, a full-fledged working environment is available here for the release of decentralized applications, while maintaining high throughput and reliability. The time to create a block in a new network is approximately 5 seconds, which ensures efficient trading for users.
Programmers can migrate their already released apps from the Ethereum blockchain. Even if all projects do this at the same time, they will not be able to significantly slow down the ecosystem, which is very important when performing financial transactions. Thanks to cross-chain compatibility, the new network allows for the transfer of assets between chains. The internal Smart Chain BNB token is used to pay fees when launching smart contracts and dApps.
How Binance Smart Chain Works
BNB will work for BSC in the same way that ETH works for Ethereum, so it will remain a “native token” for both BSC and BC. Clients can use internal BNBs to:
- Fees for deploying smart contracts on BSC;
- Bets on selected validators;
- Performing cross-chain operations.
When a new branch was launched, a certain amount of BNB was burned on BC and then minted on BSC. This is how a start-up fund was created to support the network. Assets are used to pay transaction fees to reallocate BNB between BC and BSC networks using a cross-chain mechanism.
BSC uses the Proof of Staked Authority consensus algorithm. Validators place bets in BNB tokens to participate in block creation. The protocol does not provide for block subsidies of BNB, that is, when creating new blocks, trusted nodes do not receive a dime, being content only with transaction processing fees. To prevent inflation, the Binance team regularly buys and burns coins.
BSC can work with the Ethereum blockchain, and ERC 20 tokens, which are designated BEP2E in the new binance network. BSC and BC work synchronously so that one token can be used in both formats. BEP2 tokens will be expanded to accommodate a new attribute to link the token to the BSC BEP2E contract. Issuers can either create BEP2 first or BEP2E and they can be linked later. All issuers are encouraged to set the peg immediately upon release.
Binance Chain has piebald tokens backed by cryptoassets BTC, LTC, ETH, EOS or Ripple. The extensive functionality of Binance Smart Chain allows not only exchanging crypto coins, but also investing them in DeFi projects or using them when voting.
Binance Smart Chain will drive the evolution of decentralized financial services. DeFi interoperability will be improved through cross-chain mechanisms.
Users will be able to earn income through staking BNB cryptocurrency, or participating in DeFi projects. The money earned can be withdrawn to the binance exchange or converted through the Panama service.
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