Why Binance Smart Chain is the Ideal Protocol for DeFi Projects
Emmanuel Chibuzor Precious
Binance’s new parallel chain, Binance Smart Chain, provides a powerful ecosystem for decentralized finance.
In light of its meteoric growth and the number of new emerging use cases, it is not too far-fetched to believe that DeFi could be the next “big thing” in global finance.
**DeFi stands for Decentralized Finance. **
The DeFi market is an internet-native financial ecosystem that offers many of the products and services available in traditional finance but, instead, built on blockchain technology in the form of decentralized, autonomous applications.
There are different kinds of blockchain networks that DeFi projects can leverage to build decentralized applications. For this reason, one of the most important decisions a DeFi project needs to make is to choose a robust blockchain protocol that offers a reliable cheap, fast, and user-friendly platform for DApps.
Since its launch in September 2020, Binance Smart Chain (BSC) has demonstrated that it is arguably one of — if not the — best blockchains for decentralized finance and DApp development.
What is Binance Smart Chain?
Binance Smart Chain (BSC) is a blockchain protocol from Binance that runs in parallel with Binance Chain. Unlike Binance Chain, however, Binance Smart Chain powers smart contract functionality and boasts compatibility with Ethereum Virtual Machine (EVM).
What’s more, BSC has one of the fastest blockchain transaction times and lowest fee structures, which makes building DeFi apps on the protocol so appealing for developers.
Binance Smart Chain uses a consensus algorithm known as Proof of Staked Authority (PoSA) where 21 validators stake BNB, the native token for the Binance ecosystem, to secure the network.
Unlike many other blockchains, however, Binance Smart Chain does not offer block subsidies or allows minting of fresh BNB in the form of a block reward. Instead, validators receive transaction fees as a reward for securing the network.
Binance Smart Chain’s BEP-20 token uses essentially the same format as the Ethereum protocol’s popular ERC-20 tokens.
Currently, there are already 60+ DApps operating on Binance Smart Chain, with the majority focusing on decentralized finance solutions.
Fascinating Features of Binance Smart Chain
Binance Smart Chain is built with a dual chain architecture, which makes it possible for users to enjoy the flexibility of transferring assets from one blockchain to another. The interoperability of Binance Smart Chain offers users the opportunity of accessing a vast ecosystem with a myriad of use cases. Interoperability is one of the key features held in high esteem by DeFi proponents, and Binance Smart Chain is at the forefront of making this possible.
Transaction fees - also known as blockchain fees - refer to the fee users pay when they conduct a transaction on a blockchain. This fee is collected by miners or validators who ensure that the blockchain only records and processes valid transactions.
Most DeFi applications involve myriads of transactions, which incur transaction fees at every step. For this reason, blockchain fees are an important factor to consider before choosing a blockchain protocol.
**Binance Smart Chain and Ethereum are two of the most common blockchains of choice for DeFi projects. **But when it comes to blockchain fees, Binance Smart Chain is substantially more cost-effective than Ethereum.
Recently, Ethereum has recorded fees over $100 for a single transaction, while Binance Smart Chain charges between $0.01 — $0.05 for the same services.
Blockchain transactions require a number of confirmations before a transaction can be completely processed. The essence of confirmations is to avoid the risk of double-spending. The longer the confirmation time, the longer the time it takes for a transaction to be completed.
Avoiding unnecessary delays in transactions is another factor DeFi developers have to consider before choosing a blockchain.
Ethereum has been handicapped by scalability challenges, which has resulted in congestions and longer waiting times for transactions to complete.
**Binance Smart Chain was specifically designed to enhance scalability in blockchains with high throughput for easy implementation of smart contracts to build scalable decentralized applications. **
Binance Smart Chain was built with a similar structure as the existing Binance Chain, which is a high-performance, low-latency blockchain but as a design choice to enhance speed, it was not able to handle smart contracts.
Binance Smart Chain, which is compatible with smart contracts for decentralized applications, is connected with the high throughput Binance Chain to achieve shorter confirmation times and higher transaction processing speeds while being programmable.
Binance Smart Chain provides faster and cheaper transactions than most blockchains and allows developers to port from Ethereum to Binance Smart Chain with ease.
Moreover, Binance is actively encouraging the development of new DeFi apps on BSC by funding promising projects through a launched $100 million developer fund.
Arguably, the easiest way to access Binance Smart Chain to take part in its growing DeFi ecosystem is using the Trust Wallet DApp Browser. Download Trust Wallet app to access DeFi on Binance Smart Chain today!