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The Binance smart chain was launched in September 2020 due to an increasing need for a reliable smart-contract platform. It runs parallel to the Binance chain, which launched in 2019.
All smart contracts launching on the Binance smart-chain network take the BEP format, i.e., BEP-20 for Defi-related smart contracts.
The Binance smart chain has helped many crypto projects by providing a hub for their services. Top ones like PancakeSwap, IDEX, Chainlink, and around 33 others have enjoyed the various benefits of the BSC network.
However, BSC has several things that limit its operations. This guide will look into the features and later limitations of the BSC.
Features of the Binance Smart Chain
As a smart contract platform, BSC has various features that distinguish it from other platforms providing similar services. Among the core features include;
One of the key benefits of the Binance smart chain is high scalability. Compared to Ethereum and Polkadot, Binance can be a highly scalable network. According to their page, the platform completes every block in about 3 seconds.
Transactions through the network also take shorter times when compared to other blockchains. On one day, May 14th, the BSC completed over 14 million transactions.
The BSC platform also receives praise for being a low-gas network. The current Ethereum situation leaves investors and developers searching for more affordable alternatives. Binance smart-chain offers transactions from as low as 0.000000001 BNB.
Yield Farming Opportunities
The BSC network has great yield farming opportunities most available on PancakeSwap. Users of the yield farming opportunities will enjoy good yields because of the low fees and transaction costs.
The BNB Coin
This platform provided a better alternative to the newly released BNB tokens, the POSA mechanism, where developers, token holders, and validators benefit from the coin release. BSC links with the Binance chain; therefore, users can enjoy the platform’s interoperability using the BNB. BSC has a coin-burning policy to protect BNB.
Limitations of The BSC
Limited by Centralization
The key concept behind creating Smart blockchain systems was to provide decentralized services, thus, allowing decentralized applications to launch. Therefore, the primary attribute of the Binance smart chain is to be decentralized.
However, BSC has been under criticism from people because it lacks decentralization. Binance Smart Chain does not entirely adhere to the concept of a trusted network.
For instance, when critiquing BSC, Craig Wright once highlighted that Binance is not decentralized. Generally, BSC is a project owned by the Binance network; hence, this network controls all the operations of the BSC.
Even more, BSC has a select 21 validators chosen to operate transaction validation and power the ecosystem. This 21 person team controls the network for 24 hours, thus making this network centralized.
The lack of decentralization makes BSC limited in reach; since all apps based on their services on the BSC will be centralized.
Lagging Governmental Support
The lagging governmental support in the BSC is also a huge limiting factor to the network. The Binance exchange has fallen on the wrong side of the law, including a ban in the US. Binance later released a sister project Binance US, which is only accepted in 41 states.
Why is Binance under many bans in the US? On several occasions, the platform has been accused of many illegal activities such as money laundering and other financial crimes. Even more, Binance has been a center of investigation for tax fraud in the United States.
Binance, when created, had its head offices in China. However, China increased vast regulations for crypto assets making the Binance network move its headquarters from China to Malta. Later, Malta publicly announced that they do not recognize any registration of the Binance exchange in the country.
The regulatory inconveniences facing the Binance exchange have had a direct limiting effect on the BSC.
Slow, stagnant innovation and development is another factor affecting the BSC. All smart-contract networks like Ethereum, Cardano, and Polkadot, are instituting development teams to speed up their development.
Some of these platforms are continuously working to improve their standards and provide the best services. However, the Binance smart chain is comfortable with being the second of Ethereum.
Changpeng Zhao, Binance founder, once in a Youtube interview, noted that they are not competing with Ethereum. Instead, Binance is working to provide a cheaper and more scalable solution to the Ethereum network. Therefore instead of making updates themselves, the platform follows Ethereum’s developments.
This non-professional thinking is one of the primary limitations of the BSC, slowing development.
Binance Smart Chain: The Verdict
The Binance smart-chain network was created and introduced in 2020 to solve the primary problems facing Ethereum. Among the issues include scalability, high gases, and slow transactions. The blockchain has seriously worked on its scalability, speed, and favorable costs.
However, the Binance smart-chain has had several limiting factors that could hinder its growth and development in Crypto. The platform completely goes against the concept of decentralization by providing its services in a centralized manner.
Additionally, Binance has been in many regulatory wars in the US and other countries, reducing the level of investor trust. Finally, due to its non-competitive policy, the platform can only be as good as Ethereum’s second.
Generally, if the Binance team solves some of its limiting factors, it could be the much-awaited Ethereum replacement.