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How Is Binance Smart Chain Succeeding Where Other Platforms Have Failed?

Many of the blockchain platforms that launched over recent years have claimed to be the “Ethereum-killer.” So many, in fact, that the term itself almost became a running joke, especially as not one of them even came close. But the latest generation of platforms is proving to be highly popular among developers and users alike, and currently, Binance Smart Chain is the cream of the crop. 

Since launching in September 2020, the BSC has seen impressive growth. At the time of writing, the BSC Project website shows there is close to $31 billion locked, with over five million transactions in the last 24 hours. By comparison, there is currently a little under $55 billion locked in Ethereum. 

Furthermore, just as Ethereum’s dominance in DeFi helped to push ETH prices up to new all-time highs, Binance’s BNB token is currently enjoying a record bull run. If you’d bought BNB in early January when it was still trading under $40, you’d now be able to net gains of over 1,100%. The increases have meant that BNB is now holding firm to the position in the ranking tables previously occupied by XRP and USDT. 

Fee Wars

So what’s fueling the rush to BSC? Part of the reason has got to be Ethereum’s long-standing woes concerning scalability, slow block times, and high fees resulting from congestion. Average fees on the platform have gone as high as $39 this year, making it prohibitively expensive for all but the biggest investors to transact. 

In contrast, BSC is engineered to be faster and with far lower fees than Ethereum. Currently, the average gas price on BSC is around 7.3 gwei, which converted to USD works out to a negligible $0.00000365.

This vast differential in gas fees could well account for the growth of one of the most popular applications on the BSC – PancakeSwap. It has many similarities with Uniswap, its biggest competitor on Ethereum, most obviously that it uses the same concepts of automated market makers to enable swaps between a wide range of tokens. 

However, Ethereum’s high fees mean that Uniswap is unlikely to gain traction among the many crypto users who just want a straightforward and cheap means of token swapping, particularly when they only want to swap low values. 

EVM Compatibility 

Perhaps an even more compelling reason why BSC has proven to be so popular is that it’s compatible with the Ethereum Virtual Machine. This compatibility has made it possible, and even easy, for developers to port their Ethereum applications onto the BSC and offer their users the best of both worlds. By now, there are several examples of DeFi applications that have taken advantage of this capability. 

Projects Bridging BSC and Ethereum

Premia Finance is one such case. The project was established last year, and launched on the Ethereum mainnet in February with its marketplace for writing, exercising, and trading options for a wide range of ERC20 tokens. Options are traditionally used as a hedging tool, providing users with the opportunity to reduce their loss exposure – a much-needed feature in the volatile world of DeFi. 

In late March, Premia also launched on the BSC, supporting many new tokens specific to the BSC ecosystem. It’s seen considerable success on BSC, accumulating over 2 million DAI in open interest. 

Another example is 1inch, the liquidity aggregator service that routes trades through multiple DEXs to ensure that traders can get the best available price. 1inch launched in 2019 and enjoyed significant success on Ethereum. 

However, the decision to expand to the BSC seems to have been made under somewhat acrimonious circumstances. The 1inch CTO stated that the move was “because Ethereum miners killed the Ethereum network by not raising the block gas limit.”

Cook Protocol is another cross-chain DeFi dapp, aiming to bridge the gap between DeFi and professional investors. Cook Protocol is a decentralized asset management platform that’s tapping into the fast-growing crypto asset management market. It allows asset managers access to a single interface through which they can access various DeFi protocols to execute their chosen strategies. 

In early April, Cook Protocol announced it was expanding to BSC by allowing BSC users to stake the project’s native COOK token. It now operates two BSC pools offering APYs of up to 1500%. 

A Winning Formula

With so many projects choosing to make the move, BSC looks set for even more stellar growth throughout the rest of 2021. However, it’s evident that the right strategy for catching up with Ethereum is cooperation, rather than conflict. By making BSC compatible with Ethereum, rather than simply trying to outpace it, it seems likely that BSC could ultimately achieve what has so far eluded competitor platforms. 

 

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