Exploring the Binance Smart Chain (BSC) - MONDAY ON-CHAIN

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Hey DEFI TIMES community,

We talked a lot about Ethereum lately. Why? Because it has the most prominent developer ecosystem, the largest funds, and the most significant network effect.

That doesn't mean other chains are not catching up - they certainly do!

While Ethereum struggles with high network fees, more centralized chains like BSC gain traction like never before.

That's why we want to cover them as well. A lot is going on in the BSC ecosystem, but there are many controversies as well!

You either love BSC, or you hate it! Today, we want to take a neutral approach and look behind the scenes of the blockchain. Sure, BSC has 21 validators… it's more centralized than Ethereum… CZ is aggressively marketing it… 

But that doesn't mean… it cannot bring value to the crypto space!

Crypto is not a zero-sum game. It's a pie, and we're growing it together! Every blockchain is onboarding new users to our space. These users get excited and onboard new ones - the cycle repeats.

And BSC is definitely onboarding a lot of new users!

So, let's explore BSC's new ecosystem together!


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Exploring the Binance Smart Chain Ecosystem

BSC has 21 validators

What's the most important thing when you analyze a new blockchain? Of course, decentralization.

The Binance Chain uses a consensus mechanism called Proof of Staked Authority (PoSA). Even though BSC is built in a very similar way to Ethereum, it doesn't use Proof of Work. That's one of the reasons why BSC is so fast and cheap.

However, it comes with a very significant trade-off. 

As of today, the blockchain trilemma still exists, which basically means that you can only choose two out of these three:

  • Decentralization

  • Scalability

  • Security

BSC is secure and scalable but not decentralized. It sacrifices decentralization for scalability.

That's probably the most important thing to know when you decide to use BSC. It's not all that different from a central server because there are only 21 validators.

These 21 validators can decide about everything that's happening when they collaborate. And coordinating 21 people is not the most complex challenge on earth.

So keep that in mind while using BSC to store part of your assets. Centralization is an important risk that you need to consider.

Unique Addresses

How many people are using BSC today? We can only estimate that number by looking at the unique addresses that have used BSC in the past.

As you can see, that number went almost 50x since early February.

However, sometime in early March, this exponential growth stopped. Since then, unique addresses on BSC grow steadily at approximately 1M+ per week - still an incredible number!

How is that possible? 

Ethereum's gas fees priced out small investors a long time ago! It costs $50 to swap tokens on Uniswap, $40 to send a simple ERC-20 token, and $5 to send ETH. People, who only have a few hundred dollars to play with, cannot afford such prices.

They need different (cheaper!) alternatives - BSC is one of them. It's very similar to Ethereum. Former Ethereum users have no difficulties switching to BSC. 

BSC is also EVM compatible, making it easier for developers to deploy applications previously built on Ethereum → Users and Developers can easily switch between BSC and Ethereum!

BSC profits from Ethereum's growth and vise versa!

That's one of the reasons why BSC took off in the first place. Of course, there are several others I'm not thinking about.

Daily Transactions

In contrast to the unique addresses, daily transactions show the actual active users. A chain can have millions of unique addresses but no real users at the same time. Let's take a look at BSC's active addresses.

At the moment, BSC has close to five million active addresses, which is pretty impressive.

For comparison: Ethereum only has half a million active addresses. How is that possible? There are several reasons I can think about. First of all, BSC is way cheaper and more scalable than Ethereum, which is why many people are willing to transition from Ethereum to BSC. But does that really explain that BSC has 10x the number of users than Etherum? Probably not.

Another reason could be that BSC users have several different addresses that they frequently make use of. For example, a single user could potentially have 20 separate addresses, which is very much possible in a low fee environment.

Some people even claim that Binance is faking transactions and active addresses to make BSC look better. But I'm trying to distance myself from such claims because, in the end, we have no evidence.

The reasons ultimately don't matter. On paper, BSC has ten times more active users than Ethereum.

Top tokens on BSC

What are the most prominent tokens on BSC? Apart from BNB, which is the native coin on the BSC blockchain, there is a whole ecosystem of tokens.

But what are these tokens, and what can you do with them? Let's take a look!

As you can see, some tokens are wrapped versions of the top ten cryptocurrencies in general.

This is particularly interesting because it shows how important interoperability has become. People use ETH, XRP, USDT, and ADA frequently in the BSC ecosystem. Those are assets that can be used to stake and yield farm in BSC-based protocols.

Now, let's take a look at the top BSC tokens based on activity.

Particularly interesting here is that ETH is only the 10th most used crypto! I don't want to mention all by name because I'm not sure about the legitimacy of all of them! You can go through them by yourself!

Top Dapps

Now that we know the general state of the Binance Smart Chain let's explore the biggest Dapps building on top of it.

As you might have guessed, PancakeSwap is the biggest Dapp with almost 70k active users. PancakeSwap is BSC's decentralized exchange. It's very similar to Uniswap but a lot faster and cheaper (due to how BSC is designed).

PancakeSwap is by far the most used protocol - not a single one comes close.

Check out the difference in users between the top seven protocols!

Conclusion

There is no denying that the BSC ecosystem is growing at light speed. BSC is fast and cheap - making the blockchain attractive to new users.

However, the blockchain makes some significant trade-offs to achieve this kind of scalability without much effort: It sacrifices decentralization for scalability.

That doesn't mean it cannot bring value to the crypto space. Quite the opposite is true: On BSC, new users can easily learn about crypto, play around without having to pay high gas fees, and get comfortable with DeFi services.

On the other hand, there are some legit concerns about the legitimacy of BSC-related projects. We see lots of scams and pumps and dumps. That's why I think you should be especially careful with everything that's going on there.

One thing is sure: BSC is ready to welcome many crypto newcomers! Let's see what the future holds!


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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.

Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.