in

How is Ethereum different from Binance Smart Chain?

Binance Smart Chain (BSC) is a hard fork of the Go Ethereum (Geth) protocol. Therefore, it has many similarities with the Ethereum blockchain. However, BSC developers have made significant changes in several key areas. The biggest change is the consensus mechanism of BSC, allowing for cheaper and faster transactions.

How is Ethereum different from Binance Smart Chain? foxcbt.com
How is Ethereum different from Binance Smart Chain?

Introduction

Binance Smart Chain (BSC) and Ethereum look very similar at first glance. DApps and tokens built on BSC are compatible with the Ethereum Virtual Machine (EVM). You may have noticed that your public wallet address is the same on both blockchains. There are even cross-chain projects that work on both networks. However, there are some notable differences between the two series. If you’re wondering which one to use, it’s best to know and understand the differences.

Blockchain Traffic and DApp Ecosystem

As of June 2021, Ethereum hosts over 2800 DApps on the blockchain compared to around 810 on BSC. It’s a significant difference, but considering the young age of BSC, it shows a thriving ecosystem.

Active address is also an important on-chain metric to consider. Despite being a newer blockchain, BSC recorded a high of 2,105,367 addresses on June 7, 2021 – more than double Ethereum’s all-time high of 799,580 addresses on May 9, 2021.

So what is the reason behind the sudden growth of BSC? A lot of it is due to faster confirmation times and low fees. The growth of BSC can also be related to the growing hype surrounding NFT and its compatibility with popular crypto wallets, such as Trust Wallet and MetaMask.

If we consider daily transactions, there is a bigger difference between the two. On BSC, users transfer money and interact with smart contracts faster and more cost-effective. You can see below the peak of BSC with about 12 million daily transactions and its current state of over four million.

On the other hand, Ethereum has never exceeded 1.75 million daily transactions. BSC seems to be the more popular choice for users who need to transfer funds frequently. Daily transactions also need to be seen in the context of active addresses. As written, BSC now has a larger average number of trading users.

Most Used DeFi DApps on Ethereum and BSC

When it comes to decentralized finance, there is a large amount of cross DApp between BSC and Ethereum due to the compatibility of blockchains. Developers can easily port applications from Ethereum to BSC, and new BSC projects often reuse the open source code from Ethereum under a different name. Let’s take a look at the top five Ethereum DApps by users on DAppRadar.

Here you can see a combination of two DeFi Automated Market Makers (Uniswap and SushiSwap), a crypto game (Axie Infinity) and a peer-to-peer marketplace (OpenSea). If you look at BSC’s top 5 companies, you’ll see a lot of similarities.

PancakeSwap was created as a hard fork of Uniswap. Autofarm and Pancake Bunny are productive farms – a category we don’t see in Ethereum’s top year. Biswap and Apeswap are both Automated Market Makers. Since fees on BSC are very cheap and transactions are significantly faster, yield farms tend to be more efficient on Binance Smart Chain. This makes them a popular choice with BSC users.

When it comes to crypto games, Ethereum is truly the home of the most popular titles out there. While there are projects on BSC that are very similar to CryptoKitties and Axie Infinity, they do not attract the same large audience as the classic games on Ethereum.

Transfers between networks

If you have made any BEP-20 or ERC-20 deposits to your wallet, you may have noticed that your Ethereum wallet address and your BSC wallet are identical. So, for example, if you choose the wrong network when withdrawing your tokens from one exchange, you can easily get them from the other blockchain.

If you accidentally withdraw your ERC-20 tokens to BSC, you can still find them in the respective BSC address. If you accidentally send tokens from BSC to Ethereum, you can absolutely do the same process. In either of these cases, your money is fortunately not lost forever. For more detailed instructions, see How to recover cryptos transferred to the wrong network on Binance.

BSC and Ethereum Transaction fee

BSC and Ethereum both use a gas model for transaction fees to measure the complexity of a transaction. BSC users can set gas prices according to network demand, and miners will prioritize transactions with higher gas prices. However, Ethereum’s London hard fork brings in a number of new modifications that are likely to remove the need for high fees.

The Ethereum update helps to create a new pricing mechanism with a base fee per block. The base fee varies according to transaction demand, eliminating the need for users to determine gas prices themselves.

Historically, Ethereum gas fees have been much higher than those on BSC. The highest average is seen in May 2021 at $68.72. This trend has begun to change, but Ethereum is still more expensive today.

Let’s look at the average cost for Ethereum from Etherscan to get a better picture. The top three metrics show the current gas price on Ethereum. For both BSC and Ethereum, one gwei is equal to 0.000000001 BNB or ETH respectively. If you bid lower, your transaction will take longer to execute.

For a simple transfer of ERC-20 tokens to another wallet, the average price at the time of writing is $2.46. This increases to $7.58 using the Uniswap liquidity pool involving multiple trades.

Below, we can see a transaction on BSC with a fee of only $0.03, which is equivalent to an ERC-20 transfer in the Ethereum gas tracker. BSC calculated this by multiplying the amount of gas used in the transaction (21,000) by the price of gas (5 gwei).

Transaction time of Ethereum and BSC

Measuring average transaction times across blockchains can be a bit complicated. While a transaction is technically complete when miners validate the block it resides in, other aspects can affect how long you wait:

  • If you haven’t set your fees high enough, miners may delay your transaction or even not include it in a block at all.
  • More complex interactions with the blockchain will require multiple transactions. For example, add liquidity to the liquidity pool.
  • Most services will only consider a transaction valid after a certain number of blocks have been confirmed. These additional confirmations reduce the risk of merchants and service providers having to revert payments in the event of a block being rejected by the network.

If we look at the Ethereum gas stats above, we can see that the transaction time ranges from 30 seconds to 16 minutes. These numbers take into account successful transactions but do not take into account additional confirmation requirements.

For example, if you deposit ETH (ERC-20) into your Binance account, you will need to wait for 12 confirmations of the network. With a block mined about every 13 seconds, as you can see from the chart below, this adds 156 seconds when sending ETH to your spot wallet.

On BSC, the average block time is 3 seconds. When we compare this to Ethereum’s 13 seconds, we’re looking at a speed improvement of about 4.3x.

Consensus Mechanism

While Ethereum’s Proof of Work (PoW) consensus mechanism is similar to that of Bitcoin, it is vastly different from the BSC’s Fixed Proof of Ownership (PoSA). However, this difference will not last long. With Ethereum 2.0, the network will use the Proof of Stake (PoS) mechanism instead.

BSC’s PoSA combines aspects of Proof of Authority (PoA) and Delegated Proof of Stake (DPoS). The 21 validators take turns generating blocks and, in return, receive a reward of BNB transaction fees. Becoming a validator requires running a node and staking at least 10,000 BNB to be the elected candidate.

Other users, known as delegators, stake BNB after an elected candidate. The top 21 candidates elected by stake will then process the blocks in turn. This whole process will repeat every 24 hours. Authorizers also receive a reward that is earned by validators.

Ethereum’s PoW is an extremely different system. Instead of the community choosing validators, there is a race to solve a computational puzzle. Anyone can participate, but they will need to purchase or rent specialized mining equipment. The more computational power you have, the more likely you are to solve the puzzle first and confirm a block. Successful miners receive transaction fees and ETH rewards.

While PoW is an effective way to create consensus and ensure network security, developers have explored the use of other mechanisms. Their goal is to find more efficient and eco-friendly alternatives without compromising on security.

For these reasons, the Ethereum network will eventually move to Proof of Stake. Validators will stake ETH for a chance to generate blocks. Other validators will “validate ” the block and check if it is correct. If someone creates a block containing the wrong transactions, they run the risk of losing all their staked funds. Validators will then receive rewards for successful blocks and for any attests they make. Directly depositing and staking large amounts of ETH, malicious validators risk losing their funds.

Closing thoughts

It is clear that there are a lot of similarities between Binance Smart Chain and Ethereum. In part, this is what made it easy for Ethereum users to migrate and start experimenting with BSC. But despite the similarities, BSC has adopted interesting changes to try and improve performance and efficiency. The Proof of Staked Authority (PoSA) consensus mechanism makes it possible for users to enjoy cheaper and faster blockchain transactions.

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

Why is the Lightning Network necessary? foxcbt.com

Why is the Lightning Network necessary?

What can VeChain (VET) be used for? foxcbt.com

What can VeChain (VET) be used for?