Binance Chain is the original blockchain of Binance. It, however, had some progammability limitations. Binance Smart Chain (BSC) was built to overcome these limitations. Using BSC, the platform can support Ethereum Based applications and smart contracts.
Binance was founded in 2017 in the Cayman Islands by Changpeng Zhao, a software developer. Changpeng Zhao had previously also built high-frequency trading software. Being a developer himself, he patched together a team of talented developers and created what we know as Binance today. Binance has become the largest cryptocurrency exchange in the world in terms of daily volume traded. However, we sometimes confuse Binance Chain and Binance Smart Chain.
What if we told you these two are not the same but not a substitute for another? It’s true. Binance Chain and Binance Smart Chain are two different entities although both built by Binance. Let us break it down for you.
In 2017, after its quick jump to popularity, Binance had an ERC-20 token and called it Binance Coin. Binance Coin was used for trading fees and a percentage of it was burnt every quarter. In 2019, the ERC-20 token was replaced by Binance’s native token, Binance Coin (BNB).Binance launched its own public blockchain and called it the Binance chain. Binance chain provides a marketplace for exchanging crypto assets. The team also constructed a Binance decentralized exchange called Binance DEX. Binance Chain also allows users to develop decentralized applications on top of the chain. It is a decentralized and transparent blockchain and also offers low trading fees. Using Binance Chain, you can store your crypto funds securely and create trading pairs with other cryptocurrencies.
Binance Smart Chain
In September 2020, Binance decided to build another blockchain and named it Binance Smart Chain. It is not a replacement for the original Binance Chain. It runs in parallel with Binance Chain. Since Binance Chain did not support Ethereum based applications, the developers decided to pivot. They built Binance Smart Chain which is equipped with Ethereum Virtual Machine (EVM) compatible programmability.
This implies that applications built on the top of the Ethereum blockchain can successfully run on the blockchain. Not just that, it also enables smart contracts. These contracts have made it more convenient for users in terms of lower trading and transactional fees in an agreement. Now, let’s dive into what you can do using these chains.
In terms of consensus used in both the chains. Binance Chain uses Delegated Proof of Stake (DPoS) whereas Binance Smart Chain uses Proof of Staked Authority (PoSA). In PoSA network users stake their identities and reputation. PoS algorithm incentivizes users to confirm network data after staking some collateral. A DPoS algorithm adds a voting and delegation mechanism on top of PoS. Any user that proposes a valid block can become a validator. Now, let’s dive into what you can do using both chains.
What can you do with Binance Chain?
- Send and receive BNB (Binance Coin).
- Issue new tokens to digitalize assets
- Use Binance Chain as underlying exchange network for your assets
- Send, receive, burn/mint and freeze/unfreeze tokens
- Create trading pairs with different tokens.
What can you do with Binance Smart Chain?
- Send and receive BNB and other BEP2 tokens (Binance Coin is a BEP2 token)
- Explore transaction history and blocks via bscscan and API.
- Stake BNB and earn block rewards.
- Issue new tokens to digitalize assets.
- Become a validator on BSC.
Both the chains work in parallel. Together they offer decentralized exchange functionality, smart contracts, decentralized application and lower transactions cost.