How to Make Money on Binance Smart Chain

Categories: Binance
Posted: June 21, 2021

Those who use, hear and read Binance know that it is the largest cryptocurrency exchange by transaction volume. The distinctive feature of this platform is that it combines innovative features with its user-friendly design and its functionality. Binance Smart Chain is a blockchain with smart contract functionality developed by Binance as a parallel chain to Binance Chain. So maybe we can call it Binance Chain 2.0.

Binance Smart Chain (BSC) main net was launched on September 1, 2020. BSC aims to increase the functionality and interoperability of the Binance Chain.

According to the BSC white paper, the working architecture is based on a system of 21 validators with the Proof of Staked Authority (PSA) consensus algorithm (Consensus).

BSC; Better solution than Binance Chain in terms of functionality, speed and versatility. It has interoperability features with new generation solutions such as passive income in the Defi world and stands out with the high transaction fees, intensive use of Ethereum and the slow operation of the ETH 2.0 process.

BSC offers high-speed transactions and lower fees, with a 5 second block generation time. However, the fact that it is a very new solution creates a handicap. On the other hand, BSC can go beyond its potential by being supported by interoperability with other blockchains and "Oracle" solutions.

The easiest way to connect to this new generation chain is to download Binance Chain Wallet, a browser extension similar to MetaMask, and log into the wallet after a very short setup process.

BNB token

Binance Coin (BNB) is a cryptocurrency owned by Binance, one of the world's largest cryptocurrency exchanges. Since BNB is Binance's own coin, it can only be traded on Binance. The name Binance consists of the combination of the word binary, which means "binary" in Turkish, and the word finance.

In April 2019, Binance decided to develop its own blockchain and launched Binance Chain. Following this, Binance DEX, Binance Chain's largest decentralized application, was launched. BNB is used as the local token of this chain. At the same time, BNB carries various functions on the Binance exchange. For example, BNB holders get discounts on commissions they pay in the exchange.

How does it work?

Binance Smart Chain works with a 3-second block processing time using the consensus mechanism called Proof of Staked Authority (PSA), in which participants stake BNB to be verifier. If validators propose a valid block, they charge commission fees on transactions involved in it. More importantly, there are no subsidies for newly introduced/minted BNB because BNB is not inflationary, and as Binance is burning money regularly, the supply decreases over time.

While cross-chain and oracle modules are at the forefront in Binance Chain, we see that EVM compatibility and smart contracts are at the forefront in BSC.

Binance Chain tokens were originally based on the ERC-20 standard. With subsequent updates, BEP-2 has been made compatible with BEP-8 and BEP-20 Smart Chain. In this way, the BNB token can be used easily when desired between two chains bridged to each other.

Weaknesses

  • Little recognition
  • Documentation not suitable for all levels of users
  • Absence of complete decentralization stability for Defi
  • Whitepaper's weakness in creating a technical solution
  • Only 21 validators dominate the entire network

Strengths

  • Low transaction fees
  • EVM compatibility (supporting its software on Ethereum, running applications and software tools).
  • A high-performance function that can generate one block every 3 seconds
  • Supports Cross-chain Defi transfers
  • The advantage of being supported by the Binance ecosystem
  • Advanced security and safety

Gas fee

Just as a tool needs gas to run, the Ethereum blockchain needs Ethereum gas to run. All transactions on the Ethereum network cost a certain amount of gas depending on the current gas demand and the size and speed of the contract being executed. If you do not use enough gas while performing a transaction, the transaction will not be transmitted to the other party. Gas is essentially a small piece of Ethereum token and is used to pay miners. Gas price is determined in Gwei.

Keeping the gas amount low extends the approval time of the transaction. Oftentimes, the wallet or service you use automatically determines the gas amount. The more complex the process, the higher the amount of gas should be. Therefore, it is not wise to try to save gas.

When it comes to Ethereum Gas, you will often hear two terms:

  • Gas Limit
  • Gas Price

To explain these two terms.

Gas Limit

The total cost of an operation is calculated by multiplying these two variables above. Usually, if someone speaks of the term "Gas", they mean "Gas Limit" here.

Gas Limit refers to the maximum unit of gas you want to spend on a transaction. The gas limit for standard operations is 21,000.

Gas Price

Gas Price means the amount of Gwei the user is willing to spend on each Gas unit. Gas Price directly affects the rate at which miners on the network confirm transactions and put them on the new block. The higher the price the sender is willing to pay, the higher the reward for the miners, so the time to confirm that transaction is much faster.

 

The Binance Chain wallet uses a standard gas fee of 20 Gwei for BSC. Any transaction is recorded in just a few seconds.

Here are some current estimates for gas fees in Defi transactions included in the common Binance Smart Chain with a 15 Gwei gas fee :

  • Token swap transaction (PancakeSwap): $ 0.226
  • Adding liquidity (BurgerSwap): $ 3,466
  • Liquidity removal (BurgerSwap): $ 0.519
  • Deposit (Venus Protocol): $ 0.230
  • Borrowing (Venus Protocol): $ 0.568
  • Withdraw collateral (Venus Protocol): $ 0.279