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How Binance Smart Chain Became the Home of DeFi

Posted by
Ian Kane

BSC is the most used blockchain in Q2 2021

According to the DappRadar Q2 activity report on Binance Smart Chain. Total value locked (TVL) on BSC grew by 28.9% despite a dip in crypto prices and other challenges. Importantly, the DeFi dapp PancakeSwap is the most used service across all blockchains, attracting more than 5 million unique wallets whilst garnering $1 trillion in total volume. 

The true value of a multi-chain paradigm is being seen now more than ever in the decentralized finance space. Moreover, to feed healthy innovation and competition a multi-chain DeFi sector is arguably preferred to one reliant upon one network. Currently, the TVL on Ethereum is more than $50 billion. Making it by far the biggest chain in the DeFi ecosystem. Binance Smart Chain is currently the second-largest chain with just under $25 billion. 

But, TVL is only one way to measure the size of the blockchain. Nearly 3.5 million transactions take place on BSC every day. This is nearly three times the total number on Ethereum which only has around 1.2 million transactions per day. Importantly, this is where metrics such as the number of unique active wallets interacting with dapps as tracked by DappRadar can shine. The network is currently the most utilized blockchain and has seen its daily unique active wallet average rise an impressive 409% quarter over quarter averaging 421,854 UAW per day during Q2. 

Setting the scene 

Ethereum, in its current state as a  genuinely decentralized proof-of-work network, holds most of the largest protocols facilitating defi services. Namely lending and borrowing. AAVE and Uniswap are examples that are comfortably the largest protocols in all of DeFi when measured by TVL. However, the proof-of-work verification model creates complications for Ethereum. Transaction speeds are slow and transaction fees are much higher than on BSC. Because of this, BSC has been able to offer a much more efficient product in terms of trading during the recent bull run. 

Transactions on Ethereum have regularly cost more than $50 in 2021. On the other hand, it is rare that a BSC transaction will be higher than $0.25. Big difference. These low fees have contributed massively to BSC’s rise more than anything. Simply put, Ethereum is not really suitable for high-intensity trading for retail investors. For developers, BSC can also offer much faster transactions. Something that particularly appeals to DeFi developers looking to create apps that require several transactions to function. Moreover, it allows them to build applications set up for the requirements of their audience. 

The jewel in the crown 

As of the 30th June 2021, BSC’s TVL was close to $25 billion USD. But more interesting perhaps is that approximately 28% was driven by PancakeSwap, BSC’s leading DeFi application. The DEX governed by its native CAKE token surpassed $7 billion USD in TVL, increasing 32.8% quarter on quarter. As a reference, PancakeSwap TVL numbers are still higher than premier Ethereum DeFi dapps like Uniswap, Compound, and MakerDAO. 

The road ahead

BSC’s recent run of form has come about due to Ethereum’s woes. As gas prices escalated, new investors spurred on by the bull run entered the frame. But, unlike Ethereum maximalists and those that had been in the space for a while this new blood held no allegiances and simply wanted low fees and fast transactions. The old saying – right place, right time feels right here – but then again, CZ isn’t the kind of leader to do things by halves. 

Despite all of this, Ethereum updates loom. With a switch from a proof of work to a proof of stake consensus mechanism on its way. Something intended to vastly reduce fees and speed up transactions. Will Binance Smart Chain retain its relevance, more importantly, its activity. 

Go deeper >>> Full Q2 BSC Report

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Binance Smart Chain: Q2 2021 Overview

BSC continues to be the leader in terms of unique active wallets averaging 421,854 in Q2.
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