When I began my quest to start exploring Layer-1 blockchains back in May, I immediately found myself gravitating to some of the largest blockchains by market cap.
Considering I already had a lot of experience with Ethereum, I decided to cover Solana and Cardano as the initial blockchains in my research.
Upon completing my reports on these 2 blockchains, I noticed that there was still one blockchain in the top 5 by market cap that I still had basically no exposure to… the BNB chain.
Like most people in the crypto space, I had heard of, and even used, the Binance exchange before; however, their standalone blockchain I understood very little about.
What I encountered was a blockchain that stood in stark contrast to other blockchains I had interacted with. While these other blockchains had strong and active online communities, I struggled to find any sort of real supporters for BNB chain.
This was the case both online and IRL, including my numerous visits to the BNB Chain ‘DAO House’ at Consensus 2022. Even there, I sadly couldn’t find anyone actually building on BNB chain or using dapps on it.
Without burying the lead too much, I must admit that I walked away from my BNB chain research feeling underwhelmed. However, I think it’s important to be aware of one’s personal biases, and to strive to be as objective as possible. Particularly as my audience grows.
That is why I stuck to my previously outlined ‘grading’ criteria that I have been using for all other blockchains.
It’s also important to note that this criteria has been created based upon my world view and my vision for Web3.
I believe Web3/crypto’s ultimate goal should be to build a robust ecosystem of dapps (both financial and other) and online communities that replaces the existing centralized Web2 and financial solutions.
Or put another way, I believe that the future of Web3 should, and eventually will, be based primarily on utility. However, the reality is that in its current state, Web3 is still 99% based upon speculation.
Therefore, a layer-1 blockchain that caters to this current reality, can still succeed from a pure market cap standpoint. I believe BNB Chain is the perfect example of this.
Without further ado, let’s dive into the BNB chain.
The BNB Chain Tech ⚙️
As is the case with any new Layer-1 I explore, I began by diving into the blockchain tech and protocol mechanics.
Below ares some of the primary resources I used to build a base understanding of the tech:
Videos: Coinsider, Finematics, Whiteboard crypto, BNB vs Binance smart chain, Coin Bureau
Docs: BNB Chain documentation (official)
Articles: Coin Telegraph, BNB blog , Coin Telegraph 2, Binance Academy, Messari
Before we begin, there are some aspects to BNB chain that are unique, and that I need to provide some context on in order for anything else to make sense.
The first, is that BNB stands for the ‘Build N Build’ chain. This appears to be a deliberate rebranding exercise by Binance, to make them appear less centralized and to try to better circumvent regulations. This is relevant, considering that it was recently revealed that Binance is currently being investigated by the SEC, in regards to its original BNB token launch.
The second, is that the BNB Chain is actually comprised of 3 (soon to be 4) different chains:
BNB Beacon Chain (previously Binance Chain) - BNB Chain Governance (Staking, Voting)
BNB Smart Chain (BSC) (previously Binance Smart Chain) - EVM compatible, consensus layers, and with hubs to multi-chains.
BNB Sidechain - Ready-to-use PoS solutions for developing custom blockchains and dApps with existing BSC functionality.
BNB ZkRolllup (Coming soon) - ZkRollup solution to scale BSC as an super high performance blockchains.
According to their website:
Binance Chain and Binance Smart Chain have formed together as BNB Chain since February 15, 2022. BNB Chain comprises BNB Beacon Chain (previously Binance Chain) and BNB Smart Chain (previously Binance Smart Chain). While BNB (formerly called “Binance Coin”) has also been renamed as “Build and Build.”
We will dive into each of the chains listed above into greater detail.
There’s a lot of different aspects to cover with the BNB chain, but in an effort to keep this as focused as possible, I will focus on answering the set of key questions I consider for every layer-1 blockchain:
What unique problem is this L1 trying to do better than its competitors?
Like many other layer-1 blockchains, the BNB chain was an opportunistic launch coming off the back of ‘DeFi Summer’ in 2020. With the Ethereum blockchain seeing an explosion of popularity driven by new apps such as Compound and Uniswap, it struggled to keep up with demand.
While developers and users wanted to experiment with new concepts in DeFi, many were priced out by Ethereum’s high gas fees.
Over the years, many different Layer-1s such as Solana, Avalanche, and others would be launched to attempt to capitalize on Ethereum’s scalability issues. However, most of these blockchains took years to develop and launch.
Meanwhile the Binance Smart Chain was able to launch by September 2020. How were they able to do this so fast?
The short answer, is that the Binance devs hard-forked the Go Ethereum (Geth) protocol, and then made their changes on top of this base. This saved them from having to create their own layer-1 blockchain from scratch, while also making their blockchain Ethereum Virtual Machine (EVM) compatible from day 1.
Being an EVM-compatible blockchain is a major advantage, since it means that any Ethereum developer can easily ‘copy/paste’ their dapps over to the BNB smart chain. Considering that Ethereum continues to boast the highest concentration of developers in Web3 (by a long shot), this allowed BNB to easily bootstrap their dapp ecosystem.
On the user side, it meant that they were able to easily integrate with popular wallets from day 1 (most notably MetaMask), and user’s wallet addresses are actually the same between Ethereum and BNB Smart Chain.
So getting back to the original question, what is the BNB chain (namely the Smart Chain) trying to do better?
In short, they wanted to be as close to Ethereum as possible, while making the network faster & cheaper to use. The way they accomplish this is largely around how they implement their consensus mechanism, which we will dive into now.
What mechanism(s) does the protocol use to reach consensus?
The BNB smart chain uses a consensus mechanism known as ‘Proof of Staked Authority’ (PoSA), which is a combination of Proof of Authority (PoA) and Delegated Proof of Stake (DPos).
PoA is what is referred to as a “reputation-based” consensus algorithm, which means that nodes don’t stake coins, but instead stake their reputation via transparent identity. The nodes that are used to secure the network, are usually arbitrarily selected as trustworthy entities, and are quite limited in their amount. For instance, the BNB smart chain relies on just 21 validators.
In order to become a validator, you need to stake at least 10,000 BNB (which equates to $2,175,600 at current prices) to become an “elected candidate”.
Other users can then stake their BNB coins to an elected candidate, and the top 21 elected candidates by amount of BNB staked will earn the right to take turns processing blocks. Delegators then receive a portion of the rewards that the validator they are staking to earns. This is where the DPoS aspect comes from.
The benefits of BNB chains consensus model is that it is: more energy efficient than other consensus mechanisms like PoW, is much faster than Ethereum since the 21 validators can reach block finality faster, and is currently cheaper since there is less congestion on BNB Smart Chain (i.e. less demand on the execution layer) than on Ethereum.
The obvious downside is that this makes BNB chain a HIGHLY centralized blockchain, since 21 validators is nowhere near enough to be considered decentralized on the consensus layer. Not to mention, it’s not clear how involved Binance is with these 21 validators (I wouldn’t be surprised if they have strong influence over them).
In it’s current state, this is a deal-breaker for many when it comes to the BNB chain. I happen to fall in that bucket, which was my first major red flag I found when studying the BNB chain.
$BNB utility + Tokenomics
The native coin of the BNB blockchain is $BNB. Like most layer-1 coins, it is used for different activities on the blockchain including paying transaction fees, buying NFTs, and in a variety of DeFi activities such as a pair in liquidity pools or in token swaps.
Additionally, since $BNB was launched by the Binance exchange, it initially had additional utility, which is that users can use $BNB for trading discounts on the Binance exchange. However, this utility has since been phased out entirely.
In terms of the ICO, Binance pre-mined 200 million Binance coins prior to the public sale 1 in July of 2017. They then distributed the Binance Coins in 3 phases: founders, investors, and a public sale.
The breakdown across these groups was 80M or 40% of $BNB to founders, 20M or 10% of $BNB to angel investors, and 100M or 50% of $BNB in the public sale.
Initially $BNB was launched as an ERC-20 token on the Ethereum blockchain (since the Binance smart chain had not launched at the time of their ICO in 2017), and during the public sale users could supposedly purchase $BNB on a number of platforms using either $ETH or $BTC 2. It’s important to note, that it’s BNB’s initial public sale that is drawing the scrutiny of regulators in the US. Specifically, if BNB is deemed a security, then they would have issues since it’s likely that there were US-based buyers in the public launch.
After the 2017 ICO, $BNB tokens have since been migrated over to the BNB chain. $BNB that are on the BNB beacon chain are called BEP-2 coins, and $BNB that are on the BNB smart chain are called BEP-20 coins.
It’s a bit unclear to me as to how the $BNB tokens were migrated off of Ethereum. Messari mentions that a token swap took place on April 23rd, 2019, after an initial BNB swap of 5 million BNB “was executed to a wallet belonging to Binance.”
Additionally, an old article by U°Today mentioned that “old tokens that are powered by the Ethereum network [would] be publicly burned”. But then they also mentioned that “once the migration is complete, Binance will no longer allow its users to withdraw ERC-20 tokens. Those who want to keep holding their Ethereum-based BNB tokens are required to request a withdrawal before Apr. 23.”
So either Binance updated the smart contract to burn ALL of the BNB ERC-20 tokens and minted new ones on BNB chain or just burned all of the BNB ERC-20 tokens they had in their custody. Unless someone can provide me an update, I will assume the vast majority, if not all, of $BNB now live on the BNB chain.
The last interesting piece surrounding the $BNB tokenomics is that Binance regularly performs burn events to reduce the total supply of $BNB. Initially, Binance stated that they would use 20% of its profits every quarter to repurchase $BNB and burn it. This in turn reduces supply and theoretically should increase price per $BNB.
However, in 2022, Binance decided to pivot their burn model away from the set 20% of quarterly profits, and instead shift to an auto-burn mechanism that is determined by a set formula.
Binance’s CEO Changpeng Zhao, aka ‘CZ’, claimed that the change was motivated by the fact that they wanted to make the burn more predictable & to speed up the burn so that they would reach their goal of 100M $BNB burned in 5-8 years rather than 27 years3 .
I personally think this is just another step to try to further distance Binance from the BNB chain, but again, this is just my take.
Lastly, it’s important to note that BNB Chain supports the creation of new fungible tokens via their BEP-20 token standard on the Smart Chain and BEP-2 token standard on the Beacon Chain. There have been many tokens launched on BNB, including BUSD which is the stablecoin of choice on BNB chain, and boasts a market cap of ~$17.5 Billion at the time of this writing.
What language is the BNB smart chain written in?
According to the BNB chain documentation, they offer two SDK solutions for the BNB Beacon Chain: Java and Golang. They also list SDK’s for a number of other languages such as Java, Javascript, C++, C#, Python and swift.
As for the BNB Smart Chain, the BNB docs lays out their complete BSC tech stack which outlines their explorers/wallets, core infrastructure, and their Tools/APIs and Languages. Since the Smart Chain is EVM compatible, developers can leverage Solidity and also Vyper to write smart contracts. Which again, is a massive win for developer adoption.
Tech Summary
On the surface, the BNB chain is a superior solution for smart contract developers and DeFi users, as it is cheaper and faster than Ethereum. However, this has come at the cost of MAJOR centralization concerns.
This centralization extends from how BNB chain reaches consensus with only 21 validators, to the heavy concentration of BNB holdings among a few wallets. For instance, 4 of the top 10 wallets holding BNB are BNB team wallets accounting for 40% of the total BNB supply! And there is some speculation that the top wallet, which holds 19% of BNB, may belong to CZ. While these wallets have not dumped major amounts yet, that doesn’t mean there isn’t a future risk of a dump.
Lastly, I can’t really consider BNB chain innovative in any sort of way. Considering they basically just ripped off the Ethereum tech instead of building from scratch. As a result of this decision, I believe that the BNB chain did not build a strong organic community of developers & users; but rather, an ecosystem of mercenaries. We will now analyze how this has played out across their dapp ecosystem and community.
The BNB Smart Chain dapp + NFT Ecosystem 📱
The BNB Smart Chain supports smart contracts and is EVM compatible, which means that it has a host of dapps available. According to dappradar, there have been 3,614 dapps launched on BNB Chain; however, only 458 of them have seen more than 100+ MAUs. It becomes an even smaller group of dapps when you only include dapps that have 1,000+ MAUs, with only 159 hitting this mark.
For context, Ethereum has 3,342 dapps listed on dappradar, with 347 of them crossing the 100+ MAUs threshold, and just 82 of them surpassing 1K MAUs.
At first glance, this may make it seem as if the BNB Smart Chain has a more robust and active dapp ecosystem. However, I believe that the data on dappradar is a bit misleading and also doesn’t speak to the complete picture.
For starters, many of the dapps on BNB Chain are derivatives or exact copies of the original dapps on Ethereum. For instance, BNB Chain’s top app PancakeSwap, is a direct fork of Uniswap.
Additionally, I suspect that the active users numbers might be skewed, as dappradar looks at active wallet addresses. My hunch is that BNB Chain has less users, but because of it’s low fees, users are incentivized to create a bunch of different wallets in an attempt to generate the most yield on the blockchain.
Let’s dive into some of the specific dapp categories to get a better sense.
BNB Chain Wallets
From my personal experience, there was A LOT of friction involved with onboarding to the BNB Chain. While BNB Chain does support integrations with major wallet providers/exchanges, it’s difficult to get $BNB in the first place if you live in certain parts of the world.
As a US citizen, the only exchange that I could find that supports the purchasing of $BNB was Binance.us. However, when I tried to recover my old account the confirmation texts/emails never arrived. Not to mention, the sign-up flow was also broken for me.
This meant I had to resort to bridging USDC from Ethereum over to the BNB Smart Chain via Any Swap. Once I had the funds over I realized that I couldn’t swap my $USDC for $BNB without some $BNB to cover the initial transaction fee on Pancakeswap. I ultimately had to ask my friend to send me over some $BNB to cover the cost of this initial transaction.
So in summary, while there are actually a lot of BNB Chain wallet integrations/options, the onboarding experience is hindered by the inability to easily purchase $BNB in the United States due to restrictions + bugs in the Binance.us registration & recovery flows.
Top BNB Smart Chain dapps
Assuming you are able to eventually move some funds over to a $BNB wallet, you can begin to explore the BNB Smart Chain dapp ecosystem. BNB Chain actually does a decent job of highlighting it’s dapps over at DappBay.
As I scrolled through the different dapps, I noticed that there were plenty of the typical DeFi dapps available such as borrow/lend platforms and DEXs. I also saw a few familiar names such as STEPN, 1 inch, DODO, etc.
One category of dapps that BNB Chain seems to focus heavily on is the ‘gaming’ category. Admittedly, this is an area that I tend to focus less on so there may be some blind spots in my understanding.
However, I walked away still feeling pretty unimpressed with my gaming experiences. Specifically, SecondLive (which is a top5 dapp on BNB chain), was a terrible experience. From an overly complicated onboarding, to empty rooms & banners showcasing events that were over a month old, the app was very underwhelming. I detailed my experience in more detail in this twitter thread.
I also tried out a play to earn called Bomb Crypto which felt like a ripoff of the classic game Bomberman. Again, the onboarding here was a bit confusing and I didn’t really understand the gameplay after I bought BCoin and minted my hero. Perhaps I am just a gaming noob, but hard to picture a game like this going truly viral.
In fairness to BNB Chain, there haven’t really been any true killer dapps in all of Web3 yet. However, what rubs me the wrong way about many of the BNB Chain dapps is that they are either complete rip-offs of other teams hard work or available on other blockchains that are less centralized.
BNB Chain NFTs
After my surprisingly positive experience with Solana and Cardano NFTs (which I didn’t know were such a big deal), I went into BNB chain hoping to be pleasantly surprised once again.
Instead, what I found was a pretty dead NFT ecosystem. There are a number of things an NFT can provide, ranging from art, to community, to utility.
From what I could see from the BNB Chain NFTs, none of the collections offered any sort of serious community or quality art. If anything, there may be some amount of utility tied to the game-related NFTs. However, even the gaming NFTs seemed to have very weak communities based on their Discord and Twitter activity.
The BNB Community 🤝
For this section I could have honestly just pasted a bunch of 🦗🦗🦗’s and it would have been accurate.
As far as I can tell, there is basically no core community behind the BNB Chain. And I don’t say that from a point of ignorance. I honestly put a lot of effort into finding true BNB Chain supporters and builders. However, everywhere I looked all I seemed to find were bots/spam.
For instance, I tweeted multiple times from my Twitter account, and didn’t receive a reply or follow from a SINGLE supporter of the BNB chain. Just take one look at the #BNB tag on twitter, and what you find is a feed of spammy bullshit giveaways and bots.
I also tried to find some semblance of a community at IRL events, most specifically, the DAO House that BNB Chain hosted at Consensus 2022. While the venue was amazing, and I was able to have great conversations with the attendees, there was one major trend. None of these people considered themselves members of the BNB Chain community or serious builders.
The closest I got to finding a BNB Chain builder, was a guy who had told me he had launched a dapp on BNB Chain during the DeFi summer period, but then hadn’t touched it since.
Overall, the lack of the BNB Chain community was a major let down and frankly made this entire process pretty unenjoyable. With nobody to share this experience with, I had to waste a lot of time digging around for answers myself, and I couldn’t shake a feeling of loneliness during the process.
What made this experience even more jarring, was that it came on the heels of my positive experiences with the Solana and Cardano communities, which are some of the strongest in all of Web3.
Conclusion
BNB Chain takes the unfortunate title of the first blockchain that I have dove into and walked away with a bad taste in my mouth. These feelings are driven by the fact that the BNB blockchain is one that embodies centralization, speculation and a mercenary culture. Whereas I am pushing for a future of Web3 that is driven by real utility and strong online communities.
On the one hand, this puts the BNB Chain in a perfect position to take advantage of the currently speculative nature of Web3. With the backing of the largest centralized exchange, as well as the richest man in all of Crypto, the BNB Chain has the tools it needs to continue to grow its marketcap.
However, people shouldn’t confuse this blockchain for something it’s not. Despite the name ‘Build n Build’, this is not a blockchain full of innovative builders and users. Instead, it is a blockchain that was launched opportunistically and thrives on degenerate DeFi dapps and tokenomics/liquidity driven by Binance. It is nothing more than a side project for the largest exchange in crypto.
While everyone is entitled to their own opinions, I have spent enough time on this blockchain to form my own conclusion.
The BNB Chain is not one that I do not currently plan to engage with any further, and for the good of Web3, I hope it’s not one that continues to hold a top place by market cap in the coming years.
I will caveat this take by saying, that crazier things have happened in crypto, and if BNB Chain is able to turn things around or if anyone is able to convince me my take is wrong, I am always open to changing my mind.
-Alex Valaitis
I don’t charge any $ for my content, but if you want to support me, here’s 3 different ways that you can:
1)Tip me in $BNB, tokens or NFTs at my $BNB wallet address (I promise to keep it all within the BNB ecosystem) 👇
0xA4fA59414209524ee620C16182Ed2eeA9e2cc1b8
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Disclaimers:
None of the information above is meant to be financial advice. Please DYOR.
https://messari.io/asset/binance-coin/profile/launch-and-initial-token-distribution
https://www.youtube.com/watch?v=Jwo4rwik6WM
https://www.gfinityesports.com/cryptocurrency/bnb-burn-schedule-next-binance-coin-burn-date-how-much-bnb-burned-meaning/