NewdexOfficial

Oct 19, 2021

6 min read

Binance Smart Chain is catching up with Ethereum

Original from Newdex Influencer: Ruslan Stulov

The fast-growing blockchain from the leading cryptocurrency exchange Binance — Binance Smart Chain, is rapidly catching up with its main competitor — Ethereum.

Binance Smart Chain (BSC) is a new blockchain with a full-fledged environment for the development of high-performance decentralized applications (dApps). Its feature is the preservation of flexibility in terms of programmability, which is not typical for many other blockchains. BSC boasts the functionality of smart contracts and compatibility with the Ethereum Virtual Machine (EVM). Since the BSC network is compatible with EVM, it supports many Ethereum and dApps tools. BSC is optimized for fast trading and is designed to solve the limitations inherent in other blockchain systems, including the scalability problem.

Binance Smart Chain (BSC) was launched in September 2020, running in parallel with Binance Chain. At the same time, BSC is an independent blockchain that can work even when the Binance Chain is disabled.

BSC is turning into the largest source of liquidity, along with the leader of the blockchain industry — the Ethereum network. In a relatively short time of existence, a huge number of tokens and decentralized financial projects (DeFi) have already been launched on Binance Smart Chain. BSC is a modern and flexible blockchain with high bandwidth, which is rapidly gaining popularity, and more and more DeFi projects are choosing BSC as the main network.

According to a study conducted by the analytical service of DeFi projects Dappradardapp, in the 2nd quarter of 2021, BSC became the most frequently used blockchain, overtaking the industry leader — the Ethereum network. The total volume of TVL placed in DeFi contracts on the BSC network has increased by 28.9% since the beginning of this year, demonstrating the highest indicator.

The volume of DEXes TVL in the Binance Smart Chain network

The volume of TVL (total value locked) funds placed in DEX contracts on the Binance Smart Chain network, according to the analytical portal Defistance, is about $ 22 billion, while the volume of DEX TVL in the Ethereum network, according to DeFi Pulse, is a little more — about $ 25 billion.

The volume of DEXes TVL in the Ethereum network

Ethereum is still the leader in the field of DeFi services. Ethereum’s leading position in the DeFi market is largely due to the maintenance of the 3 largest decentralized financial protocols: Compound, AAVE and Uniswap.

However, Ethereum may soon lose its palm in the DeFi market and there are several reasons for this, one of which is the high amount of commissions on the Ethereum network.

In the last few months, the Ethereum network has faced the problem of high gas fees. In May 2021, the gas fee on the Ethereum network exceeded 300 Gwei, which was the highest gas price in the last few years. At the same time, the analytical cryptocurrency service BitInfoCharts notes that the average amount of commissions in the Ethereum network can be even higher and is about $23 per transaction.

It is noteworthy that the gas price increase occurred shortly after the Berlin hard fork on the Ethereum network, which took place on April 15, 2021, at block №12,244,000.

The Berlin update is the zero phase required to launch the Ethereum 2.0 network. The update was designed to improve the scaling of the original Ethereum network and reduce the size of commissions.

Practically it was not possible to solve the problems posed, the number of commissions remained too high for microtransactions, which makes the use of the Ethereum network unsuitable for the use of DeFi services.

In addition, due to the existing problems with the scalability of the Ethereum network, which still cannot be solved with forks, the network is experiencing constant high loads, which leads to an even greater increase in gas prices as network activity increases.

BSC, thanks to the use of flexible modern protocols, has a much lower commission rate, which makes the use of this blockchain a more preferable option for developers to create new DeFi services and protocols. The average price for gas in the BSC network at the moment is only about 6 Gwei.

The difference in the number of commissions, as well as the use of flexible innovative protocols in terms of scalability and bandwidth, predetermined the rapid growth of the popularity of BSC among DeFi developers.

So, in May, the BSC network set a record for the number of daily transactions in the amount of 9.7 million, which is the largest indicator among all blockchain networks. For comparison, the Ethereum network also in May set a record for the number of transactions on the network in the amount of 1.7 million. This is almost six times less than transactions in BSC.

This indicator demonstrates the growing use of the BSC network, as more and more DeFi protocols give priority to this network. Despite the huge number of transactions, the BSC network does not experience overload — the congestion rate at these values is 54%, while Ethereum’s figure was 98%.

Another important issue of falling Ethereum TVL volumes is the declining popularity of the leading Swap decentralized exchanges (DEX). As mentioned earlier, one of the largest DeFi protocols operating on the Ethereum network are the decentralized platforms Uniswap and SushiSwap, and other DEX, which allow for the decentralized exchange of DeFi tokens.

Reduction of TVL of the leading DeFi protocols in the Ethereum network

However, DEX has several problems associated with low liquidity, which leads to slippage of orders with sharp price movements and high commissions for transactions. Also, a big problem of trading on DEX is the lack of a user-friendly interface for trading, transaction history, and order feeds, which customers of centralized exchanges (CEX) are used to.

The problem of low DEX liquidity has been solved with the advent of DEX aggregators, which allow users to make transactions at the best prices from the sources of liquidity supported on the platform.

Until recently, the only platform supporting the BSC and Ethereum liquidity sources at the same time was the 1inch platform.

On August 8, 2021, an important event took place in the DEX aggregator market when the decentralized aggregator (DEX) Newdex launched a beta version of the platform for trading on Binance Smart Chain (BSC-Beta). At the moment, the 1inch and Newdex BSC platforms are the only DEX aggregators on the Binance Smart Chain network.

For the convenience of trading on the Newdex BSC platform, the Newdex team implements many useful functions, including K-Line, Price market and others. In addition, unlike most DEX, Newdex BSC allows users to track the history of transactions and the order feed of the entire network, necessary to obtain accurate information about current trades in the market so that users can experience the same trading experience as on CEX.

Newdex offers its users the best experience of decentralized trading by supporting liquidity pools on Ethereum platforms (including Layer 2), HECO, liquidity pools of the main swap services on the EOS network (Defibox, Defis Network, and others), as well as the rapidly gaining popularity Binance Smart Chain.

Newdex strives to use all the advantages of DeFi-tools, supporting the most liquid and popular sources of liquidity to become a single tool for decentralized multi-chain trading, providing its users with the best liquidity in the market and trading without limits!