- Binance Smart Chain is a blockchain platform for developers that allows smart contracts.
- It runs in parallel with the original Binance Chain, which is optimized for fast transactions.
- Binance Smart Chain is also compatible with apps originally coded for Ethereum.
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 the space, not to mention considerable funding and liquidity given its flourishing exchange and ecosystem.
What can you do with Binance Smart Chain?
Binance Smart Chain is really targeted at developers of decentralized apps, whether they are looking for a platform to build a new app on or want to port over a project from Ethereum. Between the dual-chain system, EVM support, and Binance’s own backing, the firm hopes to draw developers into its ecosystem, creating value for all stakeholders.
As Binance founder Changpeng “CZ” Zhao explained to Decrypt in October 2020, the company sees Binance Smart Chain as a way to bridge the gap between centralized and decentralized finance. Binance has established a $100 million fund to support decentralized finance (DeFi) projects that launch on the blockchain, including up to $100,000 for certain individual projects.
Did you know?
In Chinese, Binance’s name is 币安, in which 币 means “crypto” and 安 means “safety.”
It’s early days for Binance Smart Chain, which was just launched at the start of September 2020 after the concept was unveiled earlier in the year. Even so, Binance is putting a big push behind the platform thanks to its $100 million support fund for DeFi apps and emphasizing the benefits of the dual-chain approach.
Interestingly, the launch of Binance Smart Chain and strong attempts to court DeFi developers go against Binance’s core business of being a centralized exchange. According to the company, it is continually trying to “disrupt” itself.
“For some people, the emergence of DeFi represents a shift away from centralized blockchain platforms,” reads a blog post about the launch of Binance Smart Chain. “This could be interpreted as a threat to services such as Binance. We beg to disagree. For us, DeFi is an opportunity to offer better solutions to the blockchain world.”
We’ll see whether the blockchain world agrees and turns Binance Smart Chain into a leading blockchain platform for decentralized apps in the years ahead.