What Is BNB Chain and How Does It Work?

what is BNB chain and how does it work
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The ultimate guide to the BNB Chain and its ecosystem

UPDATE: Guide on How to Move Assets Between Ethereum, BSC, and Polygon

Binance merged Binance Smart Chain and the Binance Chain to form the new BNB Chain in February 2022. It is one of the largest cryptocurrency ecosystems in the world, with its native token BNB ranking third, boasting a market cap of $40.9 billion (list excluding stablecoins). 

As a competitive player in the crypto space, Binance provides a high-performing infrastructure to some of the world’s most popular dapps across various sectors, including metaverse, DeFi, marketplaces, gaming, and more. 

As shown in the figure below, among all the protocols tracked by DappRadar, BNB Chain has maintained second place in user numbers over the last 12 months. 

DappRadar Industry Overview Binance BNB Chain

In February this year, Binance rebranded its Binance Chain and Binance Smart Chain (BSC) into BNB Chain, highlighting BNB’s evolutionary journey towards greater innovation and decentralization. 

Content:

What is BNB Chain?

BNB Chain is a community-driven, open-sourced, and decentralized ecosystem. The rebranded BNB Chain comprises the BNB Beacon Chain and BNB Smart Chain. BNB Beacon Chain, previously Binance Chain) serves the purpose of governance (i.e., staking and voting). The BNB Smart Chain remains Ethereum Virtual Machine-compatible, performs consensus mechanisms, and becomes a multi-chain hub.

What is BNB Beacon Chain?

BNB Beacon Chain, originally Binance Chain, was launched in April 2019 with a primary focus on facilitating fast, decentralized trading. In doing so, it had to make some choices regarding operations. Unfortunately, due to limitations from those choices, BNB Beacon Chain didn’t have the versatility to support developers to run smart contracts in that network.

Notably, BNB Beacon Chain adopts BEP2, the fundamental token standard for the network’s native token or BNB. BNB was initially designed to facilitate asset transactions within the Binance Chain network and cannot be used in any other blockchain beyond Binance.

As Binance moved forward to compete in a fierce blockchain technology landscape, that’s where the idea for Binance Smart Chain (now the BNB Smart Chain) originated.

What is BNB Smart Chain?

Binance Smart Chain was launched in September 2020 and cultivates an environment for developing high-performance decentralized applications (dapps). Moreover, it is built for cross-chain compatibility with BNB Beacon Chain to ensure smooth operations for the community. 

Unlike BNB Beacon Chain, BSC boasts smart contract functionality and compatibility with the Ethereum Virtual Machine (EVM). Therefore, it leaves the high throughput of the BNB Beacon Chain unaffected while introducing smart contracts into its ecosystem and encouraging the deployment of dapps.

Fundamentally, the blockchains operate side-by-side; hence, BSC isn’t a layer two or off-chain scalability solution. Instead, it’s an independent blockchain that could run even if BNB Beacon Chain went offline. 

For users, applications like MetaMask can work with BSC. Because BSC is EVM compatible, it launched support for Ethereum tools and dapps. This makes it easy for developers to port their projects from Ethereum.

How does BSC work?

Binance Smart Chain can achieve a 3-second block processing time by using Proof of Staked Authority (PoSA), where participants stake BNB to become validators. If they propose a valid block, they receive fees from the transactions included. Importantly, there is no subsidy of newly minted BNB, as BNB is not inflationary, and the supply decreases over time as Binance regularly conducts coin burns.

The idea of dual-chain architecture is that users can seamlessly transfer assets from one blockchain to another. In this way, rapid trading can be enjoyed on BNB Beacon Chain, while BSC serves the purpose of running powerful dapps. 

Unlike native tokens on BNB Beacon Chain, those on BSC adopt the BEP-20 token standard. Without getting into much detail, BEP-20 is inspired by Ethereum ERC-20 and offers compatibility with the Ethereum smart contract. Furthermore, tokens from BNB Beacon Chain, such as BEP2 BNB, can be swapped for BEP-20 tokens using Binance Wallet. 

How does BNB token work?

BNB is BNB Chain’s ecosystem token, which made its debut in 2017. It was first issued and launched during an Initial Coin Offering (ICO) crowdfunding event between the 26th of June to the 3rd of July 2017.

Binance initially issued BNB as an ERC-20 token on the Ethereum blockchain but quickly transferred it to the main Binance Chain as a BEP-2. With the emergence of the BNB Smart Chain, BNB can also exist on BSC as a BEP-20 token. The initial total supply of BNB was set as 200,000,000 coins, but the supply is gradually decreasing due to regular coin burn events. 

BNB comes with many use cases. For example, within the Binance Exchange ecosystem, BNB enables users to receive discounts when paying trading fees. Most importantly, BNB continues to evolve to achieve the goal of interoperability. Already it can be used in many projects in various areas, including Decentraland, TravelbyBit, BitTorrent, HTC, and many more. 

Is BNB Chain good for DeFi?

BNB Chain is built for DeFi. Tokens from several chains can be used within the growing DeFi ecosystem on BNB Chain. Applications like PancakeSwap allow users to trustlessly exchange assets in the same way as its Ethereum counterpart Uniswap, engage in yield farming, and vote on proposals.

Since its launch, BSC has held a heavy lean toward DeFi applications, attempting to go head-to-head with the Ethereum ecosystem while offering users lower costs. A strategy that would appear to be working in Binance’s favor. 

In January 2021, PancakeSwap and Venus were the most significant contributors to the BNB DeFi ecosystem. These generated $1 billion and $14 billion, respectively, of the total transaction volume of $15 billion in January 2021. 

One year later, BNB’s DeFi ecosystem has grown even more vibrant with the addition of several innovative DeFi dapps. So let’s look closely at who’s leading on the DappRadar Rankings.

Popular DeFi dapps on BNB Chain:

Is BNB Chain good for NFTs?

Binance developed a unique non-fungible token ecosystem that brings artists, creators, and crypto enthusiasts together. Binance NFT is the native platform for users to create and trade NFTs smoothly and cost-effectively. 

It is also worth mentioning that Binance NFT is at the forefront of play-to-earn gaming. It features a massive collection of high-quality gaming drops, a Mystery Box gimmick, and an Initial Game Offering (IGO) platform for NFT gaming projects to engage users deeply.

As BNB Chain has evolved into an all-encompassing crypto ecosystem, many other marketplaces also find their places in BNB Chain’s ecosystem with a unique value proposition. The list of popular marketplaces is as follows.

What are the popular play-to-earn games in BNB’s ecosystem?

The BNB chain has one of the most dynamic gaming ecosystems and has spared no effort in contributing to the industry. As mentioned above, the Binance NFT marketplace provides a one-stop platform for gaming teams to launch their NFT-powered projects.

In addition, Binance, one of the biggest cryptocurrency exchanges, offers various GameFi tokens for investors to trade efficiently and securely. On top of everything else, Binance Labs, the venture capital arm of Binance, continues to incubate outstanding gaming projects for the industry. 

Undoubtedly, gaming dapps have become an essential pillar in the BNB Chain ecosystem. For GameFi savvy, they will probably find some familiar names in the list of popular games on the BNB Chain.

How to track crypto assets on BNB Chain using DappRadar?

BNB Chain users can now find their assets from BNB Chain in their DappRadar Portfolio Tracker. The DappRadar Portfolio gives users an intuitive overview of everything in their BSC wallets, from DeFi positions to token holdings and NFT collections.

There are some helpful links for users to keep track of the latest development of dapps on the BNB Chain.

DappRadar will continue to monitor and report on BNB Chain and its ecosystem as they evolve. Follow us on Twitter, Discord, and Youtube to keep up with the dynamic blockchain world. 

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