Binance Chain and Binance Smart Chain (BSC) are the two key elements of the Binance ecosystem. They are two completely separate blockchains built by Binance, a global crypto exchange. However, most users tend to confuse the two and sometimes even think they are the same thing. But they differ, and how.
In this article, we will break down both the terms, make sense of their differences, and try to understand why Binance came up with two blockchains.
- Binance Chain and Binance Smart Chain are two independent blockchains that run parallelly.
- Binance Chain has a higher throughput for faster transaction processing.
- Binance Smart Chain is an upgraded version of Binance Chain, which supports the development and running of dApps and cross-chain communication that allows the transfer of assets to different blockchains.
What is Binance Chain?
Binance Chain has an interesting history. It dates back to when Binance launched its ERC-20 standard token, Binance Coin. Binance Chain was meant to be employed by users to pay trading fees on the Binance exchange. The users were offered a discount on the trading fee whenever they paid using it.
Binance Chain uses the Delegated Proof-of-Stake (DPoS) consensus mechanism.
The first use case of Binance Chain was Binance DEX, a decentralized exchange platform that allowed participants to carry out crypto trades in a decentralized setting. Decentralized exchanges in general are secure marketplaces to exchange crypto assets directly in a person-to-person (P2P) fashion and also offer low trading fees.
Binance Chain was primarily designed to build and run Binance DEX and offer limited functionality to developers outside the Binance ecosystem looking to build and run dApps on the Binance Chain.
For instance, users can perform the following functions on Binance Chain:
- Send and receive BNB tokens
- Exchange or swap crypto tokens instantly
- Issue new tokens as per the BEP-2 standard
- Create new trading pairs and list them on the DEX platform
In 2019, Binance launched its own public blockchain called Binance Chain and replaced its ERC-20 Binance Coin with its native BNB token. BNB stands for “Build and Build”.
BNB also acts as a governance token, where BNB holders can vote on protocol updates and decide on the next new trading pair to be listed on the DEX.
What is Binance Smart Chain?
Binance Smart Chain (BSC) is an independent blockchain network that runs parallel with the Binance Chain. It was launched in September 2020, introducing two major functionalities: smart contracts that were compatible with the Ethereum Virtual Machine (EVM), and interoperability—both features that were lacking in the primary Binance Chain.
EVM-compatible smart contracts allow developers to create and run dApps built on top of the Ethereum blockchain on BSC. Furthermore, BSC allows cross-chain communication with different blockchains.
The primary aim of BSC is to make DeFi affordable and accessible for users. It does this by offering lower gas fees and faster block time compared to Ethereum.
Technical Features of BSC
Cross-chain compatibility: BSC uses a dual-chain architecture that allows it to seamlessly transfer assets from one blockchain to another. For instance, users can build dApps on BSC and at the same time take advantage of trading or transfer assets on the Binance Chain.
Cross-system communication: BSC is integrated with Chainlink’s oracle solutions, which connects smart contracts with the outside world. Blockchain oracles help to connect many types of real-world data in a way that is compatible with the blockchain smart contract. It is the key to building the DeFi ecosystem and bridging the gap between decentralized finance and the traditional financial system.
Consensus Mechanism: BSC uses the Proof-of-Staked Authority (PoSA) for its consensus mechanism, a combination of the Proof-of-Authority (PoA) and the Proof-of-Stake (PoS) consensus algorithms. With the mechanism in place, users need to stake their identities as well as BNB tokens to validate transactions. It enables a faster block time or faster transaction compared to other consensus mechanisms.
Binance Smart Chain has a block time of 3 seconds or less.
Differences between Binance Chain and Binance Smart Chain
Binance Chain Asset Standard
The Binance Chain and BSC use two different token standards: BEP-2 and BEP-20, respectively. Let’s understand how they differ.
BEP stands for Binance Evolution Proposal. BEP-2 is the standard token for BNB Coin used for all transactions on Binance DEX and centralized exchange platforms. There are no more use cases for BNB coins on the Binance Chain, and it is not compatible with other blockchains.
However, BEP-2 standard tokens can be converted into BEP-20 standard tokens for use on other Binance ecosystems.
BEP-20 is the standard token for BNB coin on the Binance Smart Chain. It follows Ethereum’s ERC-20 token standard. It is also compatible with Ethereum’s smart contract and is designed for interoperability. It is used to meet all transactional needs on dApps created on the BSC chain.
In a very short period, BNB together with Binance Chain and BSC, has created its own self-sustainable ecosystem. As of 02 March 2022, BSC is processing close to 5 million transactions daily and with a current daily high of 16.2 million transactions.
The launch of the BSC was intended to address the limitations of both Binance Chain and the Ethereum blockchain, making it one of the key players in the DeFi segment. It offers a platform for creators, developers, and entrepreneurs to build innovative dApps, DeFi applications, and MetaFi* on top of the BNB Chain that would power the world’s virtual ecosystem.
*MetaFi is a combination of Metaverse and DeFi, which brings together Metaverse, DeFi, GameFi, NFTs, SocialFi, and Web 3.0 applications.
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Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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