What is Binance Smart Chain?
The Binance Smart Chain or BNB Coin is the native token of the massive Binance ecosystem – which comprises of the Binance Centralized Exchange or CEX, a Decentralized Exchange or DEX, Binance chain, Binance Smart chain and a host of financial services such as crypto loans, liquidity pool mining, and more. So if this sounds like a lot, don’t worry, we’re gonna break it all down over the next few minutes. Let’s lift the curtains for a peek.
Binance was launched in July 2017 by Chang Peng Zhao, otherwise known as CZ, who has previous experience developing the Tokyo Stock Exchange, Blockchain.info and serving as the Chief Technology Officer of OKCoin. In April 2019, Binance decided to launch its own blockchain, the Binance Chain, with the goal of enabling fast and decentralized, or permissionless, trading. The Binance DEX was also born and is the Binance Chain’s largest decentralized application or DApp to date. But, despite the Binance Chain being built for speed and instant finality, it lacks extra programmability, flexibility and functionality, particularly smart contract functionality and compatibility with Ethereum’s universe of tools and decentralized applications.
In April 2020, Binance decided to give users the best of both worlds by creating the Binance Smart Chain and setting up a powerful parallel, dual-chain structure. The Binance Chain and the Binance Smart Chain are two separate blockchains that run side by side to offer different features and functionalities. Users can take advantage of the fast transfers and trading of the Binance Chain, while harnessing the extendable Smart Contract programming functionalities of the Binance Smart Chain, all within the same user interface and tooling environment.
As a parallel chain, the Binance Smart Chain not only introduces Smart Contract programming functionality, it is also an Ethereum Virtual Machine or EVM compatible chain. This means that developers can deploy DApps built for Ethereum, on the Binance Smart Chain with minimal effort.
Some DeFi DApps already built on the Binance Smart Chain include PancakeSwap, BurgerSwap and BakerySwap. With this dual parallel-chain system, users can enjoy added functionality and cross-chain interoperability without compromising speed and performance. Digital assets between both chains like BEP-2 and BEP-8 tokens from the Binance Chain are easily swapped with the Binance Smart Chain’s BEP-20 tokens.
Both blockchains also run independently of each other, so if either blockchain should fail for a period of time, the other one will be still running. Now, what about the Binance coin AKA the BNB token?
It the native token of both blockchains and serves multiple uses. Firstly, BNB is used to pay transaction fees on Binance Chain and Binance DEX. Traders who pay with the BNB token are able to enjoy discounts off their transaction fees on the Binance exchanges. Secondly, BNB is used as “gas” with developers paying the token to deploy Smart Contracts on the Binance Smart Chain. BNB is also used to stake, help validate and maintain the Binance Smart Chain, with stakers receiving rewards.
All Binance Smart Chain validators are rewarded with transaction gas fees in BNB. Finally, the BNB coin may also be used as a currency for owners to pay their bills, purchase smartphones or book flights, and accommodate a wide range of participating partners. The BNB coin is deflationary because it is burned every quarter according to a schedule. This is done to permanently remove coins from circulation, reduce total supply and increase its value.
At every quarter, Binance will use 20% of its total exchange profits to buy back and burn BNB coins until 50% of the total supply—or 100 million BNB—is depleted.
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