There is no doubt that the past few weeks have been dominated by decentralized finance and Ethereum . But the strong demand in the DeFi sector once again revealed the weaknesses of the Ethereum blockchain in terms of scalability and transaction costs. Binance has now presented a possible solution to this problem with a specially created blockchain: the Binance Smart Chain (BSC).
In this article we would like to briefly show you what is behind the Binance Smart Chain (BSC) and what advantages it has over Ethereum (in its current state).
Binance Smart Chain (BSC): competition for Ethereum?
The basis of our article is the Binance blog post, which was published at the beginning of this week (01.09). Binance announces the launch of its in-house Smart Chain BSC. According to the company, the launch will take place at the right time for.
This refers to the Decentralized Finance (DeFi) revolution, which is attracting the interest of many crypto investors, especially through price explosions for Aave, Compound and other tokens such as Yearn.finance (YFI) . We don’t want to comment at this point on whether the hype DeFi is a bubble or not.
In any case, the numbers show massive growth in the area of market capitalization and demand. And it is precisely these two aspects that lead to the Ethereum blockchain reaching its limits. The now introduced Binance Smart Chain (BSC) attacks these points.
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BSC solves many of Ethereum’s problems
The BSC is a blockchain that is compatible with the Ethereum Virtual Machine (EVM for short). As a consensus algorithm, Binance does not use a PoW algorithm, but instead uses a Proof of Staked Authority (PoSA for short) algorithm. The native Binance Token BNB is used for this.
BSC creates an ecosystem in which validators, token holders, developers and users all benefit from the advantages of a blockchain, which is characterized by high performance and provides plenty of scope for further innovations.
Without a doubt, the Binance Smart Chain is a direct competitor of or for Ethereum. Wilson Withiam, researcher at the analysis firm Messari, shares this view. In his opinion, BSC offers the functions of Ethereum with a better implementation.
So there is logically a smart contract functionality. In contrast to the Ethereum Blockchain, the BSC is designed in such a way that transaction costs are lower, performance is better and cross-chain mechanisms are built in, which in turn improves interoperability.
What is your opinion on the Binance Smart Chain? – Can it establish itself as a competitor to Ethereum and will BNB benefit from the new consensus mechanism?