Written by KomoDeFi Editorial Team on March 27, 2021

What is Binance Smart Chain?

What is the Binance smart chain?

The Binance smart chain (BSC) is a blockchain developed parallel to the Binance chain. BSC is multi-chain and compatible with the Ethereum virtual machine and is designed mostly to inherit smart contracts. It is developed to bring programmability and interoperability to the binance chain.

The Ethereum network is known for being an extensive and expanding blockchain with a growing number of smart contracts. The previous binance chain was incompatible with the ethereum chain from a programmability standpoint.

Smart contract integration could've risked the binance chain. The binance smart chain allows users to build their decentralized apps and digital assets on one blockchain and take advantage of the fast trading to exchange on the other.

Speed and Liquidity?

Binance smart coin uses Automated market makers and Proof of Staked Authority. This consensus allows BSC to reach a 5 second block time. Users stake BNB coins to validate blocks and receive transaction fees as incentives. BSC profits both stakeholders and liquidity providers.

The automated market maker allows liquidity providers to get their fair share as well. The liquidity providers reserve original assets and traders or takers swap them for a specified fee. This fee is calculated atomically using an algorithm depending on the price movement in the market. Binance smart chain has a minimal fee structure to overcome the Ethereum gas price problem.

Binance Pegged Token (BEP-20)

The smartest move played in the development of BEP-20. These are similar to ERC-20 tokens but with lower fees. They can be received in the Binance exchange. These BEP-20 tokens can be easily converted into any asset without converting them to the original form.

In the image above you can receive BSC based DAI for a minimum fee. This DAI can then be converted to any other asset without converting it into its original ERC-20 form. The Binance smart chain is not restricted to only Ethereum but has multi-chain assets.

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