Key Takeaways
BNB Smart Chain (BSC) was created in 2020 to run in parallel with the BNB Beacon Chain. The two chains were built for different purposes, but both are part of the broader BNB Chain ecosystem.
BSC brought new features and more customization through the use of smart contracts, fostering an explosive growth of decentralized applications and Web3 services.
Soon, the BNB Beacon Chain will be discontinued and merged with BSC, giving birth to a single, unified BNB Smart Chain.
Introduction
BNB Smart Chain (BSC) is a blockchain network that offers a wide variety of Web3 tools and decentralized applications (DApps). It’s a high-performance blockchain that supports smart contracts, which allow developers to create all types of services and applications, including blockchain games, governance and voting systems, decentralized finance (DeFi), and much more.
What Is BNB Smart Chain (BSC)?
BNB Smart Chain was created in 2020 to address the limitations of the BNB Beacon Chain. So, to understand the BNB Smart Chain, it’s helpful to explore its relationship with the BNB Beacon Chain.
BNB Chain was launched in 2019. At the time, the BNB utility token migrated from the Ethereum network to become the native token of the BNB Chain. That early version of the BNB Chain is what we now know as the BNB Beacon Chain.
In 2022, the BNB Smart Chain (BSC) and BNB Beacon Chain were put together under the BNB Chain ecosystem. Since then, the two blockchains have continued to operate separately, serving different use cases.
BNB Beacon Chain vs. BNB Smart Chain (BSC)
Unlike BNB Beacon Chain, BSC boasts smart contract functionality and compatibility with the Ethereum Virtual Machine (EVM). The design goal was to introduce smart contracts to the BNB ecosystem without interfering with the BNB Beacon Chain operations.
BNB Beacon Chain: Adopts the BEP-2 token standard and acts as a governance layer, with staking and voting systems.
BNB Smart Chain (BSC): Created to offer smart contract functionality. Adopts the BEP-20 token standard and works as an EVM-compatible layer with DApps, DeFi services, multi-chain support, and other Web3 applications.
In essence, both blockchains operate side-by-side. It’s worth noting that BSC isn’t a so-called layer 2 or off-chain scalability solution. It’s an independent blockchain that could run even if BNB Beacon Chain went offline.
Because BSC is EVM-compatible, it launched with support for the rich universe of Ethereum tools and DApps. This makes it easy for developers to port their projects over from Ethereum. For users, it means that applications like MetaMask can be easily configured to work with BSC.
The BNB Chain Fusion
In late 2023, the BNB Chain team announced its plan to retire the BNB Beacon Chain, transferring its core functionalities to the BNB Smart Chain network.
The migration is expected to happen through multiple stages, starting in April 2024 and concluding in June of the same year. For more information, please refer to the BNB Chain Fusion roadmap.
How Does BNB Smart Chain Work?
Consensus mechanism
BNB Smart Chain achieves ~3 second block times with a Proof of Stake (PoS) consensus algorithm. Specifically, it uses the Proof of Staked Authority (PoSA) mechanism, where participants stake BNB to become validators.
Validators are incentivized with transaction fees derived from the blocks of transactions they validate. Note that, unlike many protocols, there is no block subsidy of freshly-minted BNB, as BNB is not inflationary. In fact, the supply of BNB decreases over time as the BNB team regularly conducts coin burns.
BEP-20 token standard
BNB Smart Chain adopts BEP-20 as its main token standard. Have you read An Introduction to ERC-20 Tokens? Then, you are already familiar with the format of BEP-20. It uses the same functions as its Ethereum counterpart.
BEP-20 acts as a blueprint for tokens, defining important parameters and rules for token issuance and functionalities. Designed as a technical specification for BNB Smart Chain, BEP-20 allows developers to create a diverse array of digital assets, including NFTs, stablecoins, utility tokens, and more.
Blockchain transactions on the BNB Smart Chain require a small amount of BNB to be paid as gas. Similar to ETH on the Ethereum blockchain, gas fees provide an incentive for validators to confirm transactions and secure the network.
Decentralized finance on BNB Smart Chain
If you use PancakeSwap or other DeFi applications on BSC, you may have noticed digital assets from other blockchains, such as BTC, USDT, ETH, and many more. Such assets exist on the BNB Smart Chain as “peggy coins” or “wrapped tokens”. These are tokens that have their values pegged to the original assets on their native chains.
For instance, the BTCB token on BSC tracks the value of BTC on the original Bitcoin blockchain. This is done through smart contracts that issue a new BTCB token for every unit of BTC locked on the original chain. By doing this, we can effectively port external assets onto the BSC ecosystem.
In other words, due to the flexibility of BNB Smart Chain, assets from a number of different chains can be used in the growing DeFi space of the BNB Chain ecosystem – allowing users to exchange assets, engage in yield farming, vote on proposals, and much more.
Closing Thoughts
BNB Smart Chain (BSC) stands as a dynamic and high-performance blockchain within the BNB Chain ecosystem, offering a multitude of Web3 tools and decentralized applications (DApps). Created in 2020 to address the limitations of the BNB Beacon Chain, BSC has played a pivotal role in fostering the explosive growth of decentralized applications and Web3 services through the implementation of smart contracts.
Further Reading
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