How to Use Binance Smart Chain

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Contributor, Benzinga
December 13, 2023

As momentum builds in the cryptocurrency market, institutions are readying for an explosion of participants to usher in a brand new all-time high. With a bird’s eye view of the action, the world’s top crypto exchanges can see the current trend most clearly.

Binance, the world’s No. 1 cryptocurrency exchange, saw the writing on the wall years ago. Today, BinanceCoin (BNB), the native token of the original Binance trading platform, stands out as the 4th largest cryptocurrency by market cap. With a valuation above $80 billion, BNB has become known the world over, as users of the exchange pay their trading fees with the company’s flagship coin.

But BNB and the centralized exchange it's linked to run on an independent blockchain known simply as Binance Chain. Binance Smart Chain (BSC) is a parallel blockchain offering by Binance. Importantly, BSC functions with smart contracts — allowing it to compete directly with Ethereum (ETH). 

Disclosure: ²Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts

Why Use Binance Smart Chain?

At its core, BSC is a platform for developers to create decentralized applications (DApps). Originally a fork of Ethereum, BSC offers all the functionality of its parent blockchain but allows for faster transactions and perhaps most importantly — cheaper gas fees.

While similarly utilizing smart contracts, transactions on BSC are faster and cheaper than those on the Ethereum blockchain. And saving money on transactions is probably the best reason to switch over. 

Decentralized Apps on Binance Smart Chain

The decentralized exchange (DEX) Pancake Swap (CAKE) has pulled the lion’s share of traders to BSC. This popular DEX and its associated token are now worth over $5 billion. A BSC alternative to Uniswap (UNI), CAKE continues to make headway against its larger, ETH-based rival.   

DeFi tokens such as Alpaca Finance (ALPACA) also stand out among a bustling crowd of BSC altcoins vying for your attention. ALPACA is trading near $1.30 in August 2021. 

As DApps continue to develop on the platform, the offerings on BSC are sure to grow, meeting the demand of a burgeoning market. 

Binance Smart Chain vs. Ethereum

While not as diversified as Ethereum’s DApp selection, BSC still holds incredible potential. PancakeSwap alone has shown that BSC DApps can pull market share from their ERC-20 competitors. But the platform doesn’t come without its share of drawbacks.

BSC is a much more centralized blockchain than Ethereum’s. Despite the DeFi ecosystem BSC has championed, the cheaper fees and faster transactions of the chain ultimately came at the sacrifice of decentralization. Dubbed the blockchain trilemma, decentralization, security and scalability are intricately linked; improvement of 1 requires the sacrifice of the others. In the case of BSC, decentralization was sacrificed for scalability. 

In general, the offerings found on BSC are more volatile and considerably less robust than their ERC-20 counterparts. Allowing a number of low quality DApps into the space has done some damage to the chain’s reputation. Besides, as the Ethereum blockchain transitions to Eth2, the need for cheaper, faster transactions may become moot.  

How to Use Binance Smart Chain

For many traders, the benefits of using BSC are worth the effort involved in setting up a Binance account and transferring a little BNB. The following step-by-step guide will show you exactly how to use Binance Smart Chain.

  1. Make a Binance account.

    As you’ll need BNB in your wallet to explore DApps in the BSC ecosystem, a Binance account is in order. Binance offers a large array of cryptocurrencies and some great tools for trading. For U.S. consumers, try Binance.US. 

    Before you create your account, make sure you have the appropriate documentation at your disposal. Remember, your identity will have to be verified through the exchange’s Know Your Customer (KYC) process. You may also need to connect your bank account for fiat transfers into the exchange. The ACH process for deposits and withdrawals may take a while, depending on your bank’s response to the initial request. 

    When you’ve passed your identity verification process and successfully transferred Bitcoin (BTC) or fiat to the exchange, you’re ready for step 2.

  2. Buy Binance Coin (BNB).

    Binance Coin (BNB) is available for trading against a number of base pairs on the Binance exchange. Purchasing the coin is as easy as clicking a few buttons. When you’ve chosen your base pair, the buy button is prominently displayed. 

    Should you choose to move forward, the Binance app leads to another screen where parameters for limit and stop prices can be set. You can also buy BNB directly at the current market price.

    With the order placed, you’ll have to verify the transaction. Check your email for the confirmation. Make sure you check your spam folder if you aren’t immediately notified of new mail. Click the verification button within your email and voila, you’ve done it. Just hang tight as the transaction is processed. 

    Remember, Binance Chain is the original blockchain running parallel to BSC. The token standard for BNB on Binance Chain is different from the BEP-20 standard necessary for transactions on BSC. When withdrawing BNB from the Binance exchange to your wallet, as described further in step 3, be sure to specify Binance Smart Chain (BSC) as your transfer network.

  3. Download a cryptocurrency wallet.

    In order to transfer your BNB out of the exchange and interact with DApps on BSC, you’ll need to download a cryptocurrency wallet with connectivity features. MetaMask and Trust Wallet are 2 of the most popular options. Each connects seamlessly with the BSC network. 

    Whichever wallet you choose, you’re going to want to make note of the seed phrase. Keep this phrase secret and secure it in a safe place — it's the only way to access your crypto should you need to recover your wallet.

    With your wallet downloaded and your seed phrase secured, reopen your Binance app and withdraw your BNB. When you’ve successfully transferred BNB from the Binance exchange to your wallet of choice, you’re ready for step 4.

  4. Connect your wallet to Binance Smart Chain

    When your transaction has been confirmed, your BEP-20 token should show up inside your wallet. 

    Depending on the wallet you chose, the BSC network may need to be manually added. Within MetaMasks mobile app, you will see the BSC network available inside a dropdown menu of network options. If you accidentally skip this step, the Ethereum network the wallet defaults to will not connect to BSC DApps. 

    With your wallet connected to the BSC network, you’ve made it into the growing world of Centralized DeFi (CeDeFi). 

Is PancakeSwap Worth it?

By far, the largest and most popular DApp on BSC is PancakeSwap. Trading as CAKE, the token associated with the coin has risen to unicorn levels.

Offering the best farms in DeFi and a lottery for CAKE, the benefits of the platform help to explain the explosion of recent interest in the DEX. Users of the PancakeSwap DEX are able to earn passive income through both staking and yield farming. Similar to staking for interest, CAKE is rewarded to users for simply holding CAKE on the exchange.

There appears to be plenty of room for growth moving forward. DEXs and the benefits they offer are sure to expand alongside the crypto market. As a popular option with fantastic benefits, CAKE is likely not finished taking market share from larger competitors in the space, like UNI.

Frequently Asked Questions

Q

Is Binance Smart Chain a good investment?

A

Yes, Binance Smart Chain can be a good investment, but you must be careful when investing and track the asset as carefully as you can.

Q

Is Binance a good exchange?

A

Binance is a good exchange, but remember that no exchange is perfect. Pick the one that you feel is best for you.

Q

What are the advantages of Binance Smart Chain?

A

Binance Smart Chain offers high scalability, low transaction fees, and compatibility with the Ethereum Virtual Machine (EVM). It provides faster transaction processing times, lower fees, and the ability to migrate Ethereum-based projects. These advantages make it appealing for decentralized applications and blockchain projects.

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