Non-fungible tokens (NFTs) and decentralized finance (DeFi) have experienced exponential growth in recent months. Over US$168 billion has been locked into DeFi protocols, according to DeFi Llama.
Ethereum has been the undisputed leader, with over US$123.66 billion in total value locked (TVL) and with over 200 protocols building on the blockchain, according to DeFi Llama. But other rival blockchains, dubbed “Ethereum killers,” such as Binance Smart Chain (BSC), Cardano, Solana and Polkadot have been nipping at Ethereum’s heels.
“It is a highly competitive space as we all witness the war playing out as various players fight for an ever-growing market dominance,” according to blockchain analytics platform Nansen in its report on BSC published today. “As other players in the market turn their focus on scalability and efficiency, making transactions faster and gas fees lower, it is interesting to see how BSC will evolve and work on strengthening their position in the market.”
BSC, which launched a year ago, is one of the most used blockchains with 1 million active unique addresses. BSC runs in parallel with the Binance Chain, which was designed primarily for ultra-fast trading. The Binance Smart Chain was designed to complement the Binance Chain with smart contract functionality and is compatible with the Ethereum Virtual Machine (EVM), which makes it easy for developers to port their projects over from Ethereum.
At its peak, BSC averaged 10 times more daily transactions than Ethereum, with transactions of PancakeSwap, a popular decentralized exchange (DEX) and automated market maker (AMM) built on BSC, alone exceeding the entire Ethereum network. The number of daily transactions on BSC continues to outstrip that of Ethereum. But BSC’s TVL, the value of crypto assets locked into DeFi protocols on the blockchain, has declined from its peak of over US$30 billion in May to US$21 billion as of publishing time, according to BSC Project data.
See related article: PancakeSwap and controversial SafeMoon turbo boost BSC past Ethereum
DeFi key driver to BSC’s success
BSC’s low gas fees and scalability continue to attract projects and users to the blockchain. PancakeSwap (CAKE), Venus (XVS), Alpaca Finance (ALPACA), Tranchess (CHESS) and Ellipsis Finance (EPS) are among the DeFi projects on BSC with over US$1 billion in TVL, according to DeFi Llama. “BSC offers what the protocol needs — high performance, low gas fees and reliability,” Danny Chong, co-founder of Tranchess, a yield-enhancing asset tracker, told Forkast.News. “Was a natural decision for us.”
BSC’s growth can be largely attributed to the massive growth in DeFi in the summer of 2020, when Ethereum gas or transaction fees hit an all-time high, leading developers to turn to alternative blockchains like BSC, which was built for scalability and mass adoption. In recent months, however, BSC gained notoriety for rug pulls or exploits on the blockchain, which raised questions around its security.
As much as how BSC is negatively looked upon by some, data shows that quite a sizable amount of smart money addresses have dabbled in both BSC and Ethereum, with as much as 7.4% of funds straddling both BSC and ETH, according to Nansen’s Smart Money dashboard, which tracks the activity of prolific crypto traders.
See related article: Why big investors are pouring money into blockchain data analytics for crypto
BSC beyond DeFi
BSC has now evolved beyond DeFi to non-fungible tokens (NFTs) and games.
Binance, the largest cryptocurrency exchange by trading volume, in June, launched its NFT marketplace on BSC.
“Despite facing several challenges like the Venus liquidation or the Garuda exploit, the [BSC] network still leads the industry in terms of usage,” wrote DappRadar in its Binance Smart Chain: Q2 2021 Overview report. “With a myriad of interesting DeFi projects and a boost in the NFT space with the launch of the Featured [NFT] marketplace, it will be worth watching how BSC performs in the upcoming months.”