What is the difference between binance chain and binance smart chain

TL;DR

You’ve probably heard of BNB Chain, the home of the BNB currency. It’s optimized for ultra-fast trading. To achieve this, it had to make certain trade-offs – one being that it wasn’t as flexible from a programmability standpoint as other blockchains.

Well, BNB Smart Chain is here to change that, a new blockchain with a full-fledged environment for developing high-performance decentralized applications. It was built for cross-chain compatibility to ensure that users get the best of both worlds.

Introduction

Binance Chain, which was renamed BNB Beacon Chain in 2022, was launched by Binance in April 2019. Its primary focus is to facilitate fast, decentralized (or non-custodial) trading. Perhaps unsurprisingly, the biggest decentralized application (or DApp) on it is Binance DEX, one of the friendliest decentralized exchanges out there. You can use it via a web interface at binance.org or through its native integration with Trust Wallet.

Due to limitations inherent to blockchain systems, however, the chain doesn’t have much flexibility – smart contracts in a system optimized for fast trading could significantly congest the network. Remember CryptoKitties? At the height of its popularity, it brought the Ethereum blockchain to a standstill.

Scalability remains one of the most challenging hurdles to blockchain development. And that’s where BNB Smart Chain comes in.

What is BNB Smart Chain?

BNB Smart Chain (BSC) is best described as a blockchain that runs in parallel to the BNB Beacon Chain. Unlike BNB Beacon Chain, BSC boasts smart contract functionality and compatibility with the Ethereum Virtual Machine (EVM). The design goal here was to leave the high throughput of BNB Beacon Chain intact while introducing smart contracts into its ecosystem.

In essence, both blockchains operate side-by-side. It’s worth noting that BSC isn’t a so-called layer two or off-chain scalability solution. It’s an independent blockchain that could run even if BNB Beacon Chain went offline. That said, both chains bear a strong resemblance from a design standpoint.

Because BSC is EVM-compatible, it launched with support for the rich universe of Ethereum tools and DApps. In theory, 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. Seriously – it’s just a matter of tweaking a couple of settings. Check out Use MetaMask for BNB Smart Chain to get started.

How does BNB Smart Chain work?

Consensus

BNB Smart Chain achieves ~3 second block times with a Proof-of-Stake consensus algorithm. Specifically, it uses something called Proof of Staked Authority (or PoSA), where participants stake BNB to become validators. If they propose a valid block, they’ll receive transaction fees from the transactions included in it.

Note that, unlike many protocols, there is no block subsidy of freshly-minted BNB, as BNB is not inflationary. On the contrary, the supply of BNB decreases over time, as the Binance team regularly conducts coin burns.

Cross-chain compatibility

BNB Smart Chain was envisioned as an independent but complementary system to the existing BNB Chain. Dual-chain architecture is used, with the idea being that users can seamlessly transfer assets from one blockchain to another. In this way, rapid trading can be enjoyed on BNB Chain, while powerful decentralized apps can be built on BSC. With this interoperability, users are exposed to a vast ecosystem that can cater to a myriad of use cases.

BEP-2 and BEP-8 tokens from BNB Beacon Chain can be swapped for BEP-20 tokens, the new standard introduced for BNB Smart Chain. Have you read An Introduction to ERC-20 Tokens? Then you’ll already be familiar with the format of BEP-20. It uses the same functions as its Ethereum counterpart.

To move tokens from one chain to another (i.e., BEP-2 to BEP-20 or vice versa), the simplest method is perhaps to use the Binance Chain Wallet, available on Chrome and Firefox. Check out Use Binance Chain Extension Wallet for a guide to this.

Decentralized Finance on BNB Smart Chain

You may know that a number of digital assets – such as BTC, LTC, ETH, EOS, or XRP – already exist on BNB Chain as “Peggy coins.” These are tokens that are pegged to assets on their native chains. For instance, you might decide to lock up 10 BTC in order to receive 10 BTCB on BNB Chain. At any time, you can trade your 10 BTCB for 10 BTC, meaning that the price of BTCB should closely track that of native BTC. 

By doing this, you effectively port these assets onto BNB Chain. Interested in how this kind of thing can be achieved? Check out Tokenized Bitcoin on Ethereum Explained.

Because of the flexibility afforded by BNB Smart Chain, assets from a number of different chains can be used in the growing DeFi space. For instance, applications like PancakeSwap allow users to trustlessly exchange assets (much like Uniswap), engage in yield farming, and vote on proposals. Similar projects include BurgerSwap and BakerySwap (if you’re new to crypto, hi! We’re big fans of decentralized exchanges named after foods).

Closing thoughts

BNB Smart Chain greatly extends the functionality of the original Binance Chain and joins a range of cutting-edge protocols designed to bridge the gap between various blockchains. Though still in its infancy, the promise of BNB staking alongside EVM compatibility makes the platform an ideal engine for developers building powerful decentralized applications. 

Questions about BNB Smart Chain? A deep dive into the technical side of things can be found in the whitepaper. 

Decentralized blockchain ecosystem Binance Smart Chain (BSC) announced on Tuesday that the Binance Chain and Binance Smart Chain are uniting under a new name, BNB Chain, in a bid to reflect their connection with the native token of the ecosystem Binance Coin (BNB).

According to a press release provided to Cointelegraph, BNB now stands for “Build and Build” instead of short for Binance Coin. Powered by BNB, the BNB Chain will introduce advanced capabilities and focus on building Web3 infrastructure.

Under the freshly named BNB Chain umbrella, the chain governance part, the Binance Chain, where staking and voting happens, has become BNB Beacon Chain. Meanwhile, the Ethereum Virtual Machine-compatible, multichain-supporting Binance Smart Chain is simply named BNB Smart Chain, still shortened as BSC.

The BNB Chain will bring all its Web3 development under the umbrella of MetaFi that will bring together developers and projects from the metaverse along with GameFi and SocialFi. The BNB Chain will bring large-scale applications and developer tools while expanding the validator set from 21 to 41 with a focus on scalability.

Related: Binance Invests $200M in Forbes to boost consumer knowledge on Bitcoin

Samy Karim, ecosystem coordinator at BNB Chain, told Cointelegraph:

“The BNB Chain community will benefit from the previously launched $1 billion in funds and receive financial and operational support, as well as an introduction to the industry’s leading experts, mentors, and investors. The ecosystem will bring a range of these programs from live mentorship events and workshops to hackathons and in-person meetings.”

Binance Smart Chain was launched in September 2020 as an alternative to the Ethereum blockchain and mimicked the platform in its operation with a lower transaction cost and time of processing. In a short time span, BSC became a popular choice for decentralized finance (DeFi) developers and nonfungible token projects due to ease of operations, interoperability and low cost. The rebranding comes as an attribute to the next leg of the journey that will combine DeFi and virtual reality in the metaverse.

Main Takeaways

  • Binance is a centralized organization behind an expansive ecosystem that includes the largest digital asset exchange in the world by trading volume, among a vast range of other products and services.

  • BNB Chain was originally initiated by Binance but has since grown to become a community-driven, permissionless, and decentralized blockchain ecosystem.

  • Binance is now simply one of the many contributors operating within the BNB Chain ecosystem rather than some kind of dominant force wielding unilateral power over it. Binance does not own or control BNB Chain.

Binance is a company that exists to take crypto to the masses and help move the world to a decentralized digital future. Learn more about how Binance helped launch the world’s largest smart-contract blockchain by transaction volume. BNB Chain now exists as a fully decentralized ecosystem run by its community and a distributed network of validators.

Today, Binance runs the largest digital asset exchange in the world by trading volume. Back in 2017, it launched the BNB utility token, with the initial use case of allowing users to receive discounts when paying their trading fees. That token has since added hundreds of other use cases. One of them is paying fees to use BNB Chain, which, as of October 2022, is the largest smart-contract blockchain in terms of transaction volume, with an ecosystem of more than 1,300 active decentralized applications (DApps). 

Because of the fact that Binance was originally involved in initiating the blockchain, many people mistakenly assume that Binance and BNB Chain can be spoken of as one and the same — that it is “Binance’s chain”. This, however, is not the case.

This article will explore the history of Binance, the history of BNB Chain, and explain why — in reality — the company founded by Changpeng Zhao and Yi He has no ownership of the decentralized blockchain ecosystem it once helped create, and still supports today.

What Is Binance?

Binance was launched in July 2017 as a cryptocurrency exchange driven by a vision of providing a simple, usable platform for people to trade digital assets such as Bitcoin and Ethereum. Binance’s co-founders were Changpeng Zhao, known as CZ, and Yi He. 

Within 180 days of launch, they managed to grow Binance into the largest digital asset exchange in the world by trading volume. Five years later, the platform remains top of that chart, processing tens of billions of dollars in transactions per day. In April 2022, The Washington Post reported that Binance has four times the spot trading volume of its nearest competitor on a typical day. 

Over the years, however, Binance has grown into more than a trading platform. Today, the exchange is just one part of the company’s product suite, with Binance establishing itself as the world’s leading blockchain ecosystem. This includes initiatives such as:

Binance Labs — an accelerator that incubates and invests in blockchain projects.

Binance Pay — a contactless, borderless and secure crypto payment technology.

Binance Academy — an open-access learning hub providing free blockchain education.

Binance NFT Marketplace — a platform to create and trade digital art and collectibles.

Binance Charity — a not-for-profit foundation advancing blockchain-enabled giving.

All these strands feed into Binance’s mission to be the infrastructure service provider in the crypto space and contribute to building a world where blockchain helps people achieve financial freedom. Everyone should be able to make their own decisions and control their own affairs — no matter who they are or where they’re from.

These are the ideas that fuel the Web3 revolution, the push towards the next generation of the internet where decentralized blockchain tech lets people control their own data and online lives. As CZ has said: “Centralized exchanges provide an incremental step for users to access crypto and can act as a bridge between centralized and decentralized systems.” Binance stands at the forefront of that vision for change, paving the way to freedom for millions, and potentially billions of people around the world.

What Is BNB Chain?

Build N Build (BNB) Chain is a distributed blockchain network upon which developers and innovators can build decentralized applications (DApps) as part of the move to Web3.  

Decentralization is one of the core properties of Web3 blockchain technology and its applications. The key design principle of such systems is that there is no one person or organization in charge. Rather, the tech allows users to transact safely without having to rely on a third party to maintain trust. It also opens the door for computer software known as smart contracts to automate many of these interactions, allowing for the  creation of decentralized applications that support a wide array of products — from financial services (DeFi) to games (GameFi) and digital collectibles (NFTs). 

As of October 2022, BNB Chain is the world’s largest smart-contract blockchain in terms of transaction volume and daily active users. At the time of writing, it has processed 3 billion transactions from 163 million unique addresses, and has an ecosystem of more than 1,300 active DApps. The decentralized nature of the network means anyone can build a product on BNB Chain without having to ask for permission, and potentially reach a massive audience.

The history of BNB Chain stretches back to April 2019 when Binance launched what was then known as Binance Chain. At that point, the BNB utility token — which was originally designed to lower the trading fees users pay on Binance — switched over from the Ethereum network, where it was launched in 2017, and became the token of Binance Chain. September 2020 then saw the launch of what was formerly called Binance Smart Chain. The key feature of this new chain was the addition of smart-contract functionality and the ability for developers to build DApps.

All this came together with the February 2022 launch of BNB Chain, which consists of BNB Beacon Chain (previously Binance Chain) and BNB Smart Chain (previously Binance Smart Chain). The former is focused on governance (staking and voting) while the latter continues to serve as the infrastructure for building a sprawling ecosystem for large-scale decentralized apps. Crucially, BNB Chain exists as a community-driven, open-sourced, and decentralized ecosystem.

Binance Does Not Own or Control BNB Chain

The nature of the relationship between BNB Chain and Binance can appear confusing to some people. The fact that BNB Chain came into existence following the earlier launches of Binance Chain (2019) and Binance Smart Chain (2020) leads to many simply assuming that it must be another Binance product or project — much like Binance Pay or Binance Labs. Similarly, because the BNB token was originally created to pay fees on Binance, it’s also often assumed that there must be some kind of ownership or control of both the chain and the token on Binance’s part.

However, there’s one key difference between BNB Chain and Binance that needs to be understood: BNB Chain is a decentralized blockchain ecosystem whereas Binance is a centralized company seeking to serve the Web3 world.

In practical terms, no one person or organization has ownership of the BNB Chain. Yes, Binance introduced the original idea, contributed some code for BNB Chain, and remains a committed supporter. But at the same time, Binance’s original vision for BNB Chain was for the network to be independent and decentralized. Anyone can gather BNB stakes to become a network validator. At the time of writing BNB Smart Chain is already on its way to 41 active validators.

On the other hand, Binance, even though it is a highly distributed and horizontally structured organization, is centralized. Ultimately, it is the company’s leadership that has the power to determine the direction in which the ecosystem moves — even though it is the user’s needs that are always at the center. Binance can’t dictate what BNB Chain does, because that is up to the chain’s community and validator consensus.

Centralization Versus Decentralization

One of the advantages of Binance’s centralized nature is that people know who is behind the services they are using. It also means they have someone to turn to if they need help. Binance prides itself on being user-focused, with customer service on hand 24/7 to assist with information, complaints, security, or any other matter. This is how Binance serves as a reliable on-ramp for millions of people embarking on their Web3 journey.

A user can never lose access to their crypto stored on Binance because of a forgotten or lost password. Customers can also use the platform’s services safe in the knowledge that Binance meets all legal requirements when it comes to regulatory compliance and anti money-laundering policies. 

BNB Chain, meanwhile, is — as discussed above — decentralized. This means it provides more freedom for users to explore Web3 with greater independence and full control of their own data and security. Anyone can access the chain and its apps without permission, as long as they have a crypto wallet and some BNB to pay for fees. But they also need to be more experienced as there’s no one to turn to should anything go wrong.

Read more: CZ on Centralization vs Decentralization (2022)

Working Towards Web3

Ultimately, Binance and BNB Chain are part of the same push to Web3. Both exist with the purpose of helping everyday people around the world achieve the freedom and security they deserve to control their own online transactions, data, and digital lives. 

Binance exists with that very mission in mind. As a centralized digital asset exchange, it offers an easy and safe way into the world of crypto and Web3 for millions of people across the globe. When those users have become more experienced, they can then dive deeper into exploring the decentralized internet through the DApps on BNB Chain.

As Binance’s CZ says: “We are a big proponent of decentralization. At Binance, we believe in taking incremental steps as well as providing users with options for all available tools. Binance invests heavily in the development of both CEX [centralized] and DeFi [decentralized] solutions and we will continue to be advocates for a future where freedom and security can go hand in hand.”

BNB Chain as a decentralized network will always have a history and relationship with Binance the company, but there is zero ownership or control involved. The chain has its community and validators, and there’s no one single entity that can dictate the decisions taken, least of all a centralized exchange. Above all else, Binance is but a humble part of the BNB ecosystem, rather than the other way around.

Read the following helpful articles to learn more about BNB Chain, DApps and CZ’s views on centralization vs decentralization:

Written by Jane