Binance Ecosystem Explained

Author: Abdul Sami Jawed
February 22, 2021

 |3 min read

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This article focuses on the Binance Ecosystem to explain how does it work.

Introduction

Binance is the largest cryptocurrency trading platform & decentralized exchange. It has built its decentralized exchange (DEX) on top of the Binance chain. Binance & its community developed this separate blockchain. Binance built the DEX to create an alternative marketplace for trading & exchanging cryptocurrencies in a decentralized manner.

What Is Binance Chain?

Binance Chain is a separate blockchain that powers the Binance DEX. It uses Tindermint BFT to reach a consensus. The chain has 3 node roles. Validator nodes, Witness nodes, and Accelerated nodes. The validator nodes take part in validating transactions & producing blocks. The witness nodes do not take part in producing blocks, they exist to support the network by receiving and broadcasting the transactions to the network. Special nodes built around validator nodes are called Accelerator Nodes. They provide faster transaction routing secure lines to access the Binance chain. The wallet address used for this chain is a somewhat similar way to generate keys as Bitcoin. The prefix used for the Binance address is BnB.

Also learn about Flash Ecosystem.

Key Features :

  • Through trading pairs created on the chain, users are able to send orders to buy or sell assets on DEX.
  • Create a trading pair between two different tokens on the chain.
  • Send, receive, burn/mint, and freeze/unfreeze tokens.
  • Issue new tokens on the platform.
  • Binance chain explorer is built to inspect the transaction history and blocks on the chain.

What Is The BEP2 Token?

Tokens issued on the Binance chain should be Binance Evolution Proposal 2 (BEP-2) compatible. BEP2 is a token management set of rules and pre-defined criteria implemented to launch on-chain assets on the Binance Chain. Thus, for a token to be tradeable on DEX they need to be BEP2 compliant tokens.

What Is Binance Smart Chain (BSC)?

Binance smart chain is an independent blockchain that runs parallel with the Binance chain. It works as a facilitator for the Binance chain and also as a standalone blockchain for dApp development, and the Binance smart chain has smart contract functionality and it is also EVM compatible.

The Binance chain uses PoSA to reach consensus. The users can participate in producing blocks by staking their BNB.

Key Features:

  • ~3-5 seconds block time confirmation.
  • EVM compatibility.
  • Interoperable.

What Is The BEP-20 Token?

BEP20 represents a token standard on Binance smart chain. It extends ERC20 and contains more interfaces. BEP20 is compatible with BEP2 & ERC20 tokens.

Cross-chain Compatibility

A Binance smart chain can work independently, it does not necessarily require a Binance chain to operate. The dual-chain architecture is used so that users can transfer assets between the two chains easily. Doing so will enable them to trade rapidly on Binance Chain and build decentralized applications on BSC. The tokens can be moved from one chain to another (i.e; BEP2 to BEP20 or vice versa) using the chrome and firefox wallets available.

Source: https://mk0asiacryptotopf9lu.kinstacdn.com/wp-content/uploads/2020/08/image-54-696×383.png

Conclusion

Binance has put in a great effort in developing a flexible dual-chain architecture that enables fast trading of crypto assets on one hand and developing decentralized applications on the other. Due to the interoperability of both chains, it can transfer assets from one chain to another, providing users an option to never miss out on an opportunity on either the DeFi app or high profiting crypto assets. 

You can use Binance at https://www.binance.com/en

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