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3 Mar 2022

A Use Case All-Rounder: Binance Ecosystem Explained

Ananda Banerjee

What comes to mind when you hear the name Binance? A crypto exchange, right? True as that may be, the exchange is just the tip of the iceberg that is the Binance Ecosystem.

Built on several disparate use cases, the Binance Ecosystem is more like every crypto project rolled into one. It is a blockchain, an asset exchange platform, a BUIDLer for diverse blockchain projects, a research platform…and a lot, lot more.

Read on to find out more about all that the Binance Ecosystem is and has the potential to be in the near future.

Key Takeaways

  • Binance was initially launched to be a standard crypto trading platform.
  • BNB or the Binance Coin was developed and deployed over Ethereum.
  • At present, the Binance Ecosystem has two blockchains running in parallel.
  • The Ecosystem is all about ‘dual-chain’ architecture.
  • BNB is an ecosystem-wide fuel and has massive growth potential.

The Binance Ecosystem has significantly outgrown what the company started out as—a crypto-asset exchange. With two separate blockchains and the Binance Coin (BNB) powering it, the Ecosystem in 2022 is a lot more than just a Decentralized Exchange* and a trading platform.

Simply put, Binance is now a visionary thing—a stepping stone for those new to crypto and looking for a comprehensive resource to help them wrap their heads around the concept and its nitty-gritties.

A detailed discussion about this topic could go on for days, but if you want a bird’s eye view of the Ecosystem, you are at the right place. In this article, we will focus on its technical schema, use cases, native token, and the extent of cross-chain compatibility that it promises. So let’s dig right in?

*A decentralized exchange signifies a peer-to-peer crypto trading marketplace built on a Blockchain and offering wallet control to the users

A Quick History of the Binance Ecosystem and BNB

Binance was conceptualized as an online exchange for crypto assets. To make transactions easier, the company launched the Binance Coin or BNB as a utility token in 2017. In this initial period, the coin was only meant to be used to settle the on-exchange transaction fees.

It has been close to five years, and BNB is now the third-largest asset in the crypto space (stablecoins excluded), with a market cap of over $66 billion. Users can still use fiat or other crypto assets, but paying in BNB attracts higher discounts.

Here are a few other aspects of BNB that deserve a go-over:

  • BNB was originally deployed on the Ethereum blockchain.
  • It started out as an ERC-20 token.
  • It was initially offered as part of an ICO (Initial Coin Offering).
  • BNB appeared first, and Binance.com was launched 11 days after the ICO.
  • BNB was approximately priced at $0.15 during the launch.

Since then, BNB, along with the Binance Ecosystem, has grown in spades.

The Blockchain Side of the Story

BNB may have its roots in the Ethereum network, but the Binance Ecosystem now has two of its own blockchains.

Binance Chain

Set up in April 2019, Binance Chain is the first blockchain to be a part of the Ecosystem. It is the platform that houses the Binance Decentralized Exchange (DEX)*, one of the largest crypto trading platforms in the world.

There are a few things about Binance Chain that need detailing:

  1. It follows the Byzantine Fault Tolerance and Delegated Proof of Stake consensus mechanisms. 
  2. It comprises validator, witness, and accelerated nodes to manage transactions and security. 
  3. Binance Chain lets you issue tokens and send-receive-burn them.
  4. It enables crypto trading pairs and supports buying/selling of crypto assets.

In conclusion, every trading-specific activity relevant to the Binance DEX takes place on the Binance Chain.

Binance architecture

Binance Smart Chain

The fact that Binance isn’t just about the crypto trading platform or the DEX is made possible by its second blockchain, the Binance Smart Chain (BSC). Set up in September 2020, BSC was designed to lend additional qualities to the Binance Ecosystem.

BSC comes equipped with:

  1. Dedicated platform for building dApps;
  2. A Proof-of-Staked-Authority consensus algorithm;
  3. EVM-compatibility, which means Ethereum-based resources do work on BSC;
  4. An interoperable blockchain; and
  5. Transaction finality that hardly exceeds the 5-second mark.

While the Binance Chain forms the trading-specific part of the ecosystem, everything—from dApps and developer resources to smart contracts—is supported by the BSC.

Token Standards

Both the Binance Chain and BSC follow some guidelines to let participants create new tokens within the ecosystem. On Binance Chain, issued and approved tokens need to follow the Binance Evolution Proposal (BEP)-2 standards. These standards are therefore relevant to on-chain assets, asset launches, and every trading-specific task.

BSC supports the BEP-20 token standard. These tokens are compatible with ERC-20 (Ethereum-powered) and the BEP-2 tokens.

Binance Coin or BNB, which fuels both the blockchain networks, is compatible with BEP-2 and BEP-2 token standards.

Binance Ecosystem: Use Cases

Now that we have discussed the technical aspects, it is time to shift our attention to the diverse use cases that together lend heft to the overall Binance Ecosystem. The main ones are:

  • Binance Exchange and DEX: Meant for standard and peer-to-peer crypto exchanges;
  • Binance Labs: Targets the development of new blockchain-specific projects as part of the BUIDL initiative;
  • Binance Launchpad: Primarily a token-launch platform for new crypto projects, it also has a research arm;
  • Binance Academy: Dedicated towards crypto and blockchain education;
  • Binance Info: One-stop solution for crypto-relevant information and blockchain data;
  • Binance Earn: Meant for generating passive income via staking, liquid swap, and more; and
  • Trust Wallet: Binance’s official software wallet with enhanced security.

Apart from this, the Binance Ecosystem also comprises fiat exchanges, charity foundations, and separate research wings.

For every sub-platform, application, or blockchain project developed on one of the aforementioned units of Binance, BNB acts as the fuel. Therefore, the expansiveness of the Binance Ecosystem lends additional credibility and massive value to the native token.

Cross-Chain Compatibility

In no way is the Binance Ecosystem a disparate collection of the branches and use cases. The best thing about the network is that the Binance Chain and the BSC are interoperable. Any app or project you create using one of the two blockchains can interact with the resources available on the other blockchain.

To sum this segment up, Binance’s cross-chain functionality hinges on the following:

  • Dual-chain architecture (Two Blockchains working in Tandem);
  • Cross-chain asset transfers, primarily BNB;
  • Speedier transactions and easier application development over blockchains.

Like a legal tender relevant to a country or economy, BNB or the Binance Coin is the task facilitator within the Binance Ecosystem. Every use case, utility, and cross-chain interaction can be incentivized using the Ecosystem’s native token.

Features of the Binance Coin

The Future of the Ecosystem and BNB

With BNB being used even outside the ecosystem, primarily for real-estate, gaming, and eCommerce transactions, there is no limit for Binance’s spread as a network. In the foreseeable future, we can expect it to strengthen its DeFi, DEX, and NFT portfolio significantly by allowing users to build relevant apps on the Binance Smart Chain.

But that’s just the short-term view.

As far as the BNB token or crypto asset is concerned, its relevance in paying gas fees, staking, and performing cross-chain tasks is expected to keep it on the investors’ radars. And these aren’t the only good things about it.

Other BNB features that make it worth a second look include the following:

  • Has a deflationary token supply, courtesy of the built-in Burn Mechanism;
  • Helps acquire unique voting and participation rights within the network;
  • Owning and using BNB across the Binance exchange lets you get a sizable discount on the transaction fee;
  • Relevant in the real world with its use cases expanding to in-app payments, travel and utility-specific remittances, and more,
  • It can be used as a mode of payment via the Binance Card.
  • It supports the allocation of crypto loans.

And the list keeps growing!

Wrap-Up

It is clear that the Binance Ecosystem isn’t just a crypto project. Instead, it is a crypto consortium that combines several use cases, platforms, utilities, and even blockchains into a single community.

From a broader perspective, it has two separate blockchains that allow Binance to experience the best of both worlds. That is, market dominance as one of the leading DEXs, and the unmatched ability to create decentralized apps, complete blockchains, and use case-specific projects.

And what sweetens the pot further for the ecosystem’s inhabitants is the cross-chain compatibility, which allows them to move data, information, and resources over the blockchain with BNB as the fuel.

Common FAQs

Q1. What is the BNB Ecosystem?

A1. The BNB Ecosystem is the reach of BNB across the Binance Ecosystem. Simply put, the BNB ecosystem concerns everything from a traditional exchange to specialized decentralized applications and even into the real world of payments, shopping, gaming, investments, and more.

Q2. Is Binance running on a blockchain?

A2. Yes, the Binance DEX is currently running on a blockchain—the Binance Chain one. However, the entire Binance Ecosystem runs on two parallel blockchains, namely the Binance Chain and Binance Smart Chain.

Q3. What is the Bitcoin Ecosystem?

A3. The Bitcoin Ecosystem is what connects miners, traders, and consumers. Miners sit atop the chain as they earn coins by mining new tokens. Traders take up the Bitcoin-to-Fiat transactions and cycles. And consumers use the Ecosystem to move Bitcoin from one wallet to the other.

Interested in learning more about other key crypto concepts and ecosystems!  Read and learn more at CoinSwitch and get better at Crypto.

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.

writer

Ananda Banerjee

Content Writer

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