The BNB token and Binance Chain are likely familiar if you’re reading this. However, (BSC) has since been rebranded as the BNB Chain. The expansion of Binance prompted the evolution of the BSC, which led to the announcement of the merger of the Binance Chain and (BSC) to create the BNB Chain.
Binance officially announced the merger on February 15, 2022, highlighting the connection between BSC, the BNB token, and the BNB ecosystem. But readers may wonder why this merge took place and what benefits it brings. To get a clearer picture, let’s delve into the history of Binance Chain and (BSC) and explore the motivations behind this move.
From Burgers to Cryptocurrency
From Macdonald’s to the Tokyo Stock Exchange and Bloomberg Tradebook, Changpeng Zhao (CZ) worked his way up to becoming the founder of Binance. Originally from China and now a Canadian immigrant, CZ’s journey to success is an inspiring story of hard work and perseverance. With his expertise in developing trading software, CZ’s legacy in cryptocurrency is here to stay.
Binance Chain vs Binance Smart Chain
Binance Chain was Binance’s initial foray into blockchain development. However, its limited programmability led to Binance Smart Chain – a more intelligent alternative. BSC emerged as the game-changing blockchain as the world sought novel financial solutions.
What is Binance Chain?
In April 2019, Binance Chain was launched to revolutionize the trading experience by providing a seamless and decentralized option. Binance introduced its original token, the BEP-2 token, which became the heart and soul of the Binance Chain.
In its initial stages, Binance had high hopes for its blockchain and aimed to introduce a decentralized exchange (DEX) to compete with other DEXs with poor user experience (UX). However, the DEX functionality has yet to be implemented, and as of now, Binance Chain only provides a decentralized trading option. Nonetheless, Binance is continually expanding and innovating, and we can expect more exciting features from the Binance ecosystem.
What exactly is Binance Smart Chain?
Binance has been making significant strides in the blockchain space, particularly with the introduction of Binance Chain and Binance Smart Chain. Binance Chain was a huge success, but the team at Binance knew there was still room for improvement. This led to the development of the Binance Smart Chain, designed to offer a user-friendly intelligent contract function with the Beacon Chain.
In the whitepaper, Binance explained that focusing on providing a convenient digital asset issuing and trading platform could limit flexibility and usability. Hence, they created Binance Smart Chain to overcome these limitations.
Another significant development is the evolution of the Binance Coin (BNB) token. Binance launched BNB as an ERC-20 token on the Ethereum network in 2017 before transitioning to the Binance Chain in 2019. Binance Smart Chain’s development was also supported by BNB, which played a vital role in its formal introduction in September 2020.
BNB’s role has since expanded, with Binance viewing it as the token for a more extensive ecosystem encompassing Binance Chain and Binance Smart Chain. The move is part of Binance’s plan to expand outside its core business.
One intriguing feature is that, while being a sibling of Binance Chain, Binance Smart Chain may operate as a solo blockchain. Binance Smart Chain would continue to work typically even if Binance Chain had a short downtime or malfunction.
Now that we have covered Binance Chain and Binance Smart Chain let’s take a closer look at Binance Coin (BNB) and its role in this ecosystem.
What is BNB Chain?
The BNB Chain boasts of a vibrant ecosystem, and as it is set to be owned by everyone, making the BNB token easily accessible is crucial. Acting as a governance token used to pay gas fees on the BNB Chain, the BNB token has transformed its former name, Binance Coin.
With a mission to develop the infrastructure for a global parallel virtual ecosystem, the BNB Chain prioritizes openness, decentralization, and community involvement, according to Binance. The platform seeks to foster a multi-chain environment that includes creators and inventors and is subject to public approval.
Binance’s announcement emphasized that the BNB Chain would remain community-driven, open-source, and decentralized, in line with its commitment to fostering a thriving ecosystem.
Benefits of Binance Smart Chain
Surprisingly, BSC was able to convince so many consumers in such a short period. Finally, it has defects and strengths like every other blockchain. Is this, however, making the intelligent contract less enticing compared to other platforms on the market? These are some of the benefits:
Independence: As previously stated, BSC is a stand-alone blockchain. It may work independently of Binance Chain.
Low Gas Fees: Binance recognized the importance of gas fees in cryptocurrency. Compared to Ethereum, Binance Smart Chain has lower gas prices, making it a good alternative for developers and consumers.
Cross-chain Compatibility: Binance Smart Chain is Ethereum Virtual Machine compatible and accepts pegged currency from other blockchains.
Drawbacks of Binance Smart Chain
Nevertheless, BSC has various limitations that may or may not be necessary for individual users.
Centralized: Yep, you read it correctly. Since BSC is centralized, it depends on its parent firm Binance to handle all cryptocurrency transactions.
Highly Dependent: BSC is comparable to Ethereum since it is a hard fork of the GoEthereum (Geth) protocol. Binance cannot create anything that exists on the Ethereum network.
High Scam Potential: Scammers would take advantage of the cheap transaction costs. This increases the appeal of fraudsters.
Despite the growing popularity of (BSC), Ethereum remains the undisputed leader in the blockchain industry. With a substantial head start and a well-established reputation, it seems unlikely that BSC will be able to dethrone its powerful adversary anytime soon.
One major factor contributing to Ethereum’s continued dominance is its reputation for high transaction costs, which many developers and users still find worthwhile for the platform’s unparalleled infrastructure. On the other hand, BSC’s lack of decentralization may hinder its ability to attract a broader user base.