Binance Smart Chain vs. Ethereum: Can BSC Disrupt ETH?

Due to Ethereum's scalability issues and high transaction fees, it has seen a growing number of competitors lately.

One of them is the Binance Smart Chain (BSC), which has taken away a significant portion of Ethereum’s market share thanks to its highly scalable blockchain platform and fast-growing ecosystem.

So, can Binance Smart Chain replace Ethereum as the new king of the smart contract blockchain?

Recap: Ethereum and its scaling problems

In July 2015, Ethereum changed the cryptocurrency industry forever by launching a blockchain platform with smart contract capabilities.

Based on this, developers can easily create, run and program their decentralized applications (DApps) through self-executing digital protocols, and be able to launch their own on-chainERC-20 tokens。

andDeFiandNFTThe field provides power.

Nonetheless, the smart contract platform has recently struggled with scalability issues, which have resulted in network congestion and significant increases in transaction fees.

According to Ethereum, the average transaction cost increased from $0.15 between April 16, 2020 and April 16, 2021jump upIt was up nearly 16,200% to $24.42.

So this makes ETH and all ERC-20 tokens unsuitable for small transfers (you'll pay over 50% for a $30 transaction).

At the same time, network congestion also makes it difficult for investors with limited funds to use DeFi solutions, because smart contracts have higher gas fees (currently on Uniswap, the gas fee for a simple token exchangeGundam$68.11).

Ethereum identified this problem early on, and the project's developers turned most of their attention to rolling outETH 2.0 upgrade version, which will allow the network to scale more efficiently.

However, with ETH 2.0 still at least a year away, projects in the ecosystem have been hard at work developing second-layer Ethereum scaling solutions such asOMG Network, Matic and Optimistic and ZK-Rollups.

But such solutions will take time to integrate, and it is clear that the crypto community needs a highly scalable alternative smart contract blockchain platform, and the sooner the better.

Although

AlthoughMost of Ethereum's competitorsStill in development, but Binance Smart Chain is a fully functional blockchain network.

For this reason, and thanks to its high scalability, low transaction fees, and 3-second block time, BSC has emerged as a leader among Ethereum competitors.

Binance Smart Chain is the second public blockchain launched by cryptocurrency exchange Binance.

The first Binance Chain has the characteristics of high throughput, but lacks the support of virtual machines and smart contracts. Therefore, it is mainly used to operate Binance DEX and some other native DApps.

BSC leverages the Staked-of-Staked-Authority (PoSA) algorithm for consensus, running in parallel with Binance Chain, giving it the same level of scalability and speed.

However, while Binance Chain lacks most of Ethereum’s features and flexibility, Binance Smart Chain is compatible with the Ethereum Virtual Machine (EVM) and supports smart contracts.

Therefore, developers can launch their Ethereum DApps on Binance Smart Chain with minimal configuration, which allows many crypto projects to quickly migrate to the latter chain to avoid high transaction fees on the Ethereum chain .

Having said that, I have to talk about the degree of centralization of the BSC network.

Unlike Ethereum's labor-intensive Proof-of-Work (PoW) consensus mechanism, Binance Smart Chain's PoSA algorithm does not require miners to continuously operate physical equipment to solve complex mathematical problems, so it is extremely efficient.

Instead, the BSC requires only 21 validators – purportedly vetted by Binance – to reach consensus by staking the project’s native BNB token.

Although using such a limited number of validators to verify blocks makes the network highly scalable and fast throughput, it also means that the blockchain is becoming more and more centralized.

In contrast, the Beacon Chain of ETH 2.0 hasMore than 120,000 validators, the Ethereum network has5246full nodefull node。

In addition, if users want to transfer assets from Ethereum to Binance Smart Chain, they must use Binance Bridge or Binance’s exchange platform, and both platforms operate in a centralized model.

To this end, in theory, Binance can block the IP addresses of users in restricted countries, effectively restricting users' access rights, and strengthening control over the BSC ecosystem.

Ethereum vs,Binance Smart Chain: Who is Leading the Battle of the Smart Contract Platforms?

With the basics out of the way, let’s see how Binance Smart Chain and Ethereum compare in terms of market cap, transactions, and network activity (Source: Etherscan, BscScan, DappRadar, DefiPulse, Defistation, 17 April 2021)

As can be seen from the above table, although BSC is becoming more and more popular, among the top cryptocurrencies, ETH occupies the second place with 3 times the market capitalization and 5 times the daily trading volume of Binance’s BNB token.

On the other hand, the average gas price of Ethereum is more than 21 times that of BSC.

Meanwhile, Binance Smart Chain has taken the lead in terms of daily transaction volume and new addresses, which are important indicators of network activity (although, Ethereum still has 24.5% more daily active addresses than its competitors).

In other words, the number of DApps on Ethereum is 5.6 times that of BSC, and the TVL lead is 64%, which means that Binance has not yet been able to match the huge DeFi market of ETH.

In terms of growth, while ETH surged 235% in 2021, BNB achieved a year-to-date (YTD) ROI of more than 1,300%, likely due to increased adoption of the Binance Smart Chain within the crypto community.

Based on the above data, it can be said that Ethereum has managed to maintain a slight lead over BSC in the field of smart contract blockchain.

However, due to high Ethereum gas fees, Binance Smart Chain is expected to continue to take market share from competitors in the smart contract blockchain platform.

Will Binance Smart Chain finally upend Ethereum’s leadership in smart contracts?

With a fully-featured, highly scalable network and fast-growing ecosystem, Binance Smart Chain quickly became one of Ethereum's top competitors.

Due to the ultra-low gas fee of BSC compared with the ETH blockchain and good compatibility with Ethereum, many encrypted projects have been partially or completely transferred to BSC.

On the other hand, while BSC has gained a lot of market share in recent months, Ethereum is still the king of the smart contract blockchain.

Although, Binance Smart Chain can topple Ethereum in the short term, it may not be able to do so in the long run.

As soon as Ethereum resolves its transaction fee issues – through layer-two scalability solutions like Optimistic Rollups and the long-awaited ETH 2.0 upgrade – it will experience a significant spike in activity as many users and developers will revisit Get started with the platform.

Although BSC has proved itself to be a good project to create value in the encryption industry, it is difficult for many people to deny the fact that its architecture is becoming more and more centralized.

On the other hand, like Bitcoin, Ethereum has been a big proponent of decentralization.

That said, even if Ethereum fixes its scalability issues, Binance Smart Chain could still be a significant player in the smart contract blockchain platform space.