Binance Smart Chain is undoubtedly the topic of the last few days, along with the 750% increase in its digital currency BNB in the last two months. The blockchain network is the relatively new network launched by the Binance crypto currency exchange, at a time when high Ethereum transaction fees were a deterrent to small investors looking for alternatives to sending or exchanging their crypto currencies.
Of course we are in the triptych of blockchain infrastructure evaluation which can be summarised in the speed and cost of transactions, security and how decentralised the network is. Binance Smart Chain is aimed at a very specific audience, copying the Ethereum ecosystem, offering very low transaction fees. Most web applications are copies of successful Ethereum applications, and even tools such as the spreadsheet and e-wallet have a design reminiscent of Ethereum.
The exchange announced the BSC in April 2020, paying particular attention to compatibility with the Ethereum virtual machine – without going into technical details this means that any application running on Ethereum could run on the BSC with minimal effort.
Unlike other algorithms, Binance Smart Chain adopts the Proof of Authority algorithm which means that the transaction nodes are confirmed by 21 administrators, who are known and because of their prestige their community trusts them. This solves many problems of Proof of Work (mining) and Proof of Stake networks (which require the synchronisation of decentralised node managers).
Technically, the more administrators, the more complicated the synchronisation system and transaction verification. For these reasons the BSC can verify transactions at a very low cost and speed of 3 seconds. In recent months, the corresponding transactions on Ethereum have been approaching minutes if not hours, reaching more than $100 for several days.
The main disadvantage is Binance, an organisation that can control or even change or freeze transactions on the network. Centralised systems are more sensitive to the legal framework, cyber attacks, and system failures.
However, a key component of the network’s success is Binance, which has the largest customer base in the world. The exchange has already created a $100 million investment fund to accelerate network use and reach out to developers.
Binance Smart Chain has already surpassed $9.6 billion in network application, thus approaching an increase of more than 740% over a 30 day period. This is compared to the $40 billion in deposits in decentralised Ethereum applications.