If you’re reading this right now you must be aware of Binance Chain and its popular BNB token. The leading crypto exchange is not unknown to many. Binance Chain has successfully shown massive throughput design and high speed after launching in April 2019. The developers proposed a parallel blockchain with Binance Chain in the form of Binance Smart Chain or BSC. So, what is the purpose of BSC? What is the motivation behind coming up with the parallel blockchain? What value does it serve? Let us find the answers to all these questions by reflecting on an introduction to BSC in the following post.
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Background for Developing Binance Smart Chain
Prior to an overview of answers to “What is Binance smart chain network?” you need an understanding of its background. What led to the creation of BSC in the first place when Binance Chain offered high speed and massive throughput? Binance Chain focused primarily on providing the Binance DEX as its native decentralized application. However, it is important to note the inverse relationship of flexibility and usability with performance.
The emphasis on a specific venue for issuing and trading crypto assets draws a fair share of conveniences as well as limitations. Binance Chain is in a dilemma over adding a smart contract feature, as it can slow down the DEX function. On the other hand, introducing new virtual machine specifications or major RPC implementations can create steeper learning curves for existing dApp communities.
Therefore, a parallel blockchain like the Binance Smart Chain serves as the ideal choice for facilitating solutions to limitations of Binance Chain. The developers primarily focused on retaining the high-performance levels of the native DEX blockchain alongside introducing smart contract functionalities. The new parallel chain or BSC would run at par with the existing mainnet, i.e., Binance Chain. Do you want to know more about how the Binance Smart Chain extension works?
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Working of Binance Smart Chain
Binance Smart Chain or BSC is an innovative solution for introducing interoperability and programmability on Binance Chain. It uses a system of 21 validators leveraging the Proof of Staked Authority or PoSA consensus, thereby enabling lower fees and reduced block times.
The best way to understand the use of Binance Smart Chain app is an overview of the underlying design principles. As a matter of fact, the design principles for BSC tell a lot about how it works and the value of its functionalities. Here are some of the notable highlights in the design principles of BSC.
One of the foremost aspects in understanding ‘What is Binance Smart Chain network?’ is the design feature of Ethereum compatibility. Ethereum is undoubtedly the foremost common and practical platform for developing smart contracts. BSC ensures compatibility with the current Ethereum mainnet in order to facilitate access to its community and collections of relatively mature applications. As a result, Binance Smart Chain easily opens up the scope for using majority of dApps, tooling, and ecosystem components based on Ethereum. Therefore, the BSC implementation can create better prospects for catching up with future Ethereum upgrades.
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If you look closely at the design of BSC, you can understand how a Binance Smart Chain wallet ensures better performance. The BSC is basically a standalone blockchain or a layer 2 solution running on the Binance Chain mainnet. Many of the fundamental technical and business functions on BSC are self-contained. As a result, it can ensure availability even if Binance Chain stops temporarily for short periods of time.
Native Cross-Chain Communication
The next crucial highlight in any discussion on the Binance Smart Chain app would obviously refer to native cross-chain communication. Implementations of Binance Chain and BSC feature native support for cross-chain communication among the two platforms. In such cases, the communication protocol is trustless, two-directional, and decentralized.
The primary focus of native cross-chain communication would rest on transferring BEP2 tokens in the Binance Smart Chain token list between BSC and Binance Chain. In addition, the list of compatible tokens on BSC also added many new BEP tokens as later entries. The protocol can take care of other items you can find in the storage of the blockchain state, albeit with few exceptions.
Consensus and Governance Associated with Staking
The focus on staking-based consensus is another crucial highlight of BSC, which draws attention towards the Binance Smart Chain Metamask integrations. Why is BSC becoming popular among Metamask users? BSC offers an environment-friendly approach for achieving consensus and governance through staking, alongside the assurance of rewards from staking.
The flexible approach for community governance through staking on BSC also provides better network performance in comparison to Proof-of-Work blockchains. Staking-based consensus serves as a crucial highlight for improving the transaction capacity and blocking time without any boundaries.
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Rules for Consensus in Binance Smart Chain
The consensus protocol is one of the core components driving the functionalities of Binance Smart Chain. The design principles of BSC showcase a lot about its work. However, you can dive deeper into how BSC works by exploring the details of its consensus protocol. The consensus protocol of BSC aims at achieving the following objectives.
- Reducing the blocking time to 5 seconds or less, in competition with the Ethereum network.
- Limited time requirement for confirming transaction finality, within the range of 1 minute or lesser.
- Complete freedom from inflation of native token by distribution of block rewards from transaction fees in the form of native token.
- Support for modern proof-of-stake governance for blockchain networks.
- Explicit compatibility with Ethereum systems.
The different objectives for consensus in BSC show how the Binance Smart Chain token list can include all Ethereum-based tokens.
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Proof of Stake Authority
The exact answer for how Binance Smart Chain consensus works is evident in the Proof of Stake Authority consensus mechanism. Proof of Work consensus presents many detrimental impacts on the environment due to resource consumption. On the other hand, Proof of Authority presents better efficiency and safety against 51% of attacks, commonly noted in Proof of Work systems.
However, Proof of Authority protocols has been criticized for setbacks in decentralization. At the same time, Delegated Proof of Stake or DPoS consensus enables token holders to vote on selection of validators. Therefore, DPoS serves as a favorable consensus mechanism for improved decentralized and community governance.
- BSC introduces the best of Proof of Authority and DPoS consensus mechanisms by focusing on the following precedents.
- A limited set of validators takes on the work of creating blocks.
- Validators have to create blocks according to the Proof of Authority manner by taking turns, a design similar to the Clique consensus design of Ethereum.
- Finally, a staking-based governance mechanism facilitates the election of a validator set.
Want to know about the differences between PoW and PoS? Read this guide: PoW Vs. PoS: A Comparison Between Two Blockchain Consensus Algorithms
Are the Validators Reliable in Binance Smart Chain?
The answers to “What is Binance Smart Chain network?” and its working would also draw references towards validator quorum. What are the rules for validators in the working of the Binance Smart Chain extension? In the initial step or the genesis stage, only a selected collection of credible nodes would serve as the first Validator Set.
Once the blocking begins, any individual could start competing by joining as candidates for election as a validator. The staking status is responsible for determining the topmost staked nodes eligible as the next validator set. The election process repeats at an interval of every 24 hours, and BNB serves as the token for staking in BSC.
Interestingly, the Binance Smart Chain relies on Binance Chain for staking management with a dedicated staking module on the latter for BSC. The platform would accept BSC staking sourced from BNB token holders alongside determining the highest staked node-set. In the event of generating new blocks, the existing BSC validators have to verify the periodic relay of the ‘ValidatorSetUpdate’ message to the BSC.
Token Economy of Binance Smart Chain
If you want to use the BSC blockchain for accessing all the supported tokens through Binance Smart Chain wallet, then you must know about the token economy of BSC. Binance Chain and BSC feature the same token components and functionalities for BNB and BEP2 tokens. The token economy of BSC specifies the following rules.
- One token could circulate on two networks with a bi-directional flow through cross-chain communication mechanisms.
- The supported entries in Binance Smart Chain token list can be created on BSC in the same format as ERC-20 token standards.
- The complete circulation of one token must be managed throughout the two different networks.
Want to know the different types of ERC standards? Check: The Ultimate List of ERC Standards
The detailed overview of Binance Smart Chain shows how it can serve as an effective DEX alternative. It can work as a game-changer in the world of DeFi with the advantage of programmability and interoperability. Most important of all, the operations of BSC as a standalone blockchain with Ethereum compatibility can guarantee retention of high-performance levels of Binance Chain.
Running in parallel to the Binance Chain, BSC introduced many improvements such as cross-chain communication and staking-based consensus. Even in the initial stages, BSC has successfully managed to create a lot of hype. Explore the details of BSC and how to use it with credible resources.
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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!