In April 2019, Binance launched the Binance chain. The goal of the Binance chain in the blockchain ecosystem was to facilitate swift trading. While other chains in the crypto ecosystem were not really outstanding in terms of executing transactions instantly, Binance saw the need to fill this gap and came up with the Binance chain.
The Binance chain (BC) was ultra-fast, however, it was not compatible with other blockchains like the Ethereum blockchain. It was also not so flexible from a programming point of view and was not scalable. Even if the Binance Chain was known for its instant execution of transactions, it lagged when tested with smart contracts.
Binance thus saw the need to unite network speed and scalability in its ecosystem, hence, the world’s leading exchange came up with the Binance Smart Chain. The BSC is not a replacement of BC. Rather, it serves as a network that complements the Binance chain. Binance Smart Chain is a smart contract functional blockchain that is compatible with the Ethereum Virtual Machine as well as the Binance chain. This makes the Binance smart chain different from the Binance chain. BSC runs parallel to the BC.
The goal of developing the smart chain was to maintain the optimum functionality and speed of the Binance chain, while making it flexible enough to accommodate smart contracts in the ecosystem. This goal was achieved and the smart chain network has solved multiple problems that existed in the crypto ecosystem since its inception.
Interestingly, the smart chain blockchain could run on its own, even without the Binance chain. Hence, the BSC is not a layer two solution to the BC. However, the design and code on which both chains are based are closely similar.
The BSC network supports tools and decentralized applications from the Ethereum network. This makes it possible for developers to easily cross over from the Ethereum network to the BSC network if they so wish. As for users, the compatibility makes it possible for them to utilize tools like metamask that was initially built for the ETH network. To do this, the user simply needs to alter a few settings on the DApp.
How Does Binance Smart Chain Work?
Binance smart chain works based on a Proof of Stake (PoS) algorithm. The PoS algorithm ensures that only successfully mined blocks on the network are paid for by users. Hence, users need not wastefully spend gas fees like it occurs on the ETH blockchain.
The PoS algorithm makes it possible for users on the network to pay less fees for transactions. This explains why transaction fees on the BSC network are much lesser than that of the ETH network which makes use of the Proof of Work (PoW) algorithm at the moment.
On the smart chain network, participants can stake BNB, the major currency of the network and earn transaction fees if they propose a valid block. Since BNB is not an inflationary token however, there is no block subsidy of freshly minted BNB. The regularly burnings of the token conducted by the Binance team makes the supply of BNB decrease. A limited supply helps to drive the price or the value of the token up.
In summary, the Binance smart chain network has helped to fill the gap the Binance chain had. The compatibility of the BSC with the ETH network has made it easier for smart contract developers to migrate or alternate between different blockchains. As for users, the smart chain has made it possible for transactions to be charged with lesser fees while maintaining its high speed.