- Beginner's Guides
The Beginner’s Guide to Binance Smart Chain
As the world of cryptocurrency extends its reach and capability to more corners of the financial world, more and more crypto trading platforms are becoming accessible.
One of these is a platform developed by the company known as Binance, which already provides a decentralized crypto exchange service known as Binance Chain. In April of 2019, Binance launched what is known as the Binance Smart Chain.
Binance Smart Chain is a blockchain that, unlike the regular old Binance Chain, does not fashion itself primarily as a decentralized cryptocurrency exchange.
Instead, the central purpose of the Binance Smart Chain is for users to develop high-performance and completely decentralized applications.
In this article, we will provide an introduction to Binance Smart Chain, outlining what it is and how it works in plain and simple language. So let’s get into it!
What is Binance Smart Chain?
Simply put, Binance Smart Chain can be described as a blockchain, or a specific public ledger, that runs parallel to the regular Binance Chain.
While Binance Chain is a platform that allows users to exchange cryptocurrencies between one another in a decentralized manner, Binance Smart Chain was designed for a different function.
Binance Smart Chain (BSC) is designed to serve users with smart contract functionality. In simple language, smart contracts are programs that are stored on a blockchain. These provide ways for parties to automate the execution of a previously established agreement without having any intermediaries involved.
The program known as a smart contract is set to run when certain predetermined conditions are met. This means that once the program runs automatically, all parties can be immediately certain of the outcome without the need for a third-party intermediary.
Other than boosting its smart contract functionality, Binance Smart Chain is also designed to be compatible with the Ethereum Virtual Machine (EVM). Due to this particular function, BSC allows users to port their projects, as well as any decentralized applications, over from Ethereum to BSC.
This is especially important and has contributed greatly to the increasing popularity of the Binance Smart Chain as it allows users to easily configure their Ethereum wallet, like MetaMask, to work smoothly with BSC.
How Does Binance Smart Chain Work?
There are two key features that Binance Smart Chain makes use of to provide its users with a platform on which to develop smart contracts and decentralized applications. These two are as follows:
The main way in which Binance Smart Chain achieves some of the fastest transaction times of any crypto platform today is through a technology known as Proof-of-Stake Consensus Algorithm.
In plain English, this is a way for strangers across the crypto sphere to be able to trust one another so that every transaction that takes place on the Binance Smart Chain can be verified. In other words, a consensus algorithm is a mechanism by which users who are distributed across the crypto sphere can coordinate amongst themselves.
The Proof of Work Consensus algorithm is by far the most dominant of the blockchain consensus algorithms. While it was first implemented by Bitcoin, the mechanism has now been adopted by most, if not all, cryptocurrency exchange platforms.
On the Binance Smart Chain, participants stake or invest in BNB, the Binance coin, which makes them validators over the transactions. By proposing a valid block on the BSC blockchain, these stakers receive transaction fees as an incentive to continue validating the blockchain.
It must be noted at this point that this is quite different from the way in which other cryptocurrency blockchains validate their transactions. Most other platforms use cryptocurrency mining to validate transactions and maintain the public ledger known as a blockchain.
However, Binance Smart Chain makes use of Proof of Stake Consensus algorithm and cryptocurrency stakers because of the fact that the Binance Coin, or BNB, is not an inflationary asset. In other words, the supply of BNB decreases over time.
2. Cross-Chain Compatibility
While Binance Smart Chain was designed as a complementary system to the already existing Binance Chain, it is entirely independent of it. This means that BSC is not a ‘layer two’ solution to the Binance Chain, and both run independently from one another.
That being said, Binance Smart Chain does make use of what is known as Dual-Chain architecture, due to which users are able to seamlessly transfer assets from one blockchain to the other.
In this way, users can participate in rapid trading on the Binance Chain while also using these assets to build decentralized applications on the Binance Smart Chain. This provides users with an almost complete cryptocurrency and smart contract ecosystem that can cater to a variety of uses and needs.
The tokens that are used on the Binance Chain are known as BEP-2 and BEP-8. These can seamlessly be swapped for the standard Binance Smart Chain token known as BEP-20. This BSC token is designed to have the same functions as the Ethereum token known as ERC-20.
In order to move crypto tokens from one blockchain to another, users can avail the option of the Binance Smart Wallet, which is available on both Chrome and Firefox as an extension.
For those dealing with NFTs and decentralized application development, the Binance Smart Wallet is compatible with the Ethereum Virtual Machine, allowing users to port their assets or NFTs from one chain to another as well.
The main purpose of the Binance Smart Chain is to provide users with a platform that acts as a bridge between various cryptocurrency blockchains. By doing this, Binance Smart Chain extends the original functionality of the regular old Binance Chain while also providing compatibility with other blockchains in the crypto sphere.
While it is used for a variety of functions, Binance Smart Chain is today mainly used by those who want to develop decentralized applications. For this function, Binance Smart Chain provides an ideal engine that is only growing in size and accessibility with time.
All in all, the addition of the Binance Smart Chain to the world of cryptocurrency has truly changed the ways in which users can manage and put their crypto to use.
This post may contain affiliate links, meaning I get a commission if you decide to make a purchase through my links at no cost to you. Please read my disclosure for more info. Clicking any of the links on this website does not increase the cost or affect the price for any item you purchased. Our main purpose is for informational purpose and not for just earning 🙏
Things to avoid while trading crypto
TOP 50 COMMON MISTAKES
NEWBIES MAKE THAT CAN BE AVOIDED!