My Review of Binance Smart Chain

HISTORY OF SMART CONTRACT PLATFORMS

Let me just say preface this that I ❤️ Ethereum. I am fascinated by its potential as to decentralized finance and smart contracts (and potentially revolutionary impact on our shitty financial system). It could do so much more than Bitcoin. By way of interesting side note, the original Bitcoin code included the capability for smart contracts but after a major exploit was found in that code that allowed the creation of tons of extra Bitcoin and required a hard fork to undo the damage, the smart contract code in Bitcoin was turned off. That decision to not permit smart contracts paved the way for Ethereum. But just as Ethereum rose in prominence to challenge Bitcoin, so have other smart contract platforms risen to try to challenge Ethereum. None are close to Ethereum in terms of actual useful projects up and running mainly because the vast majority of smart contract devs want to build on Ethereum.

LAUNCH OF BINANCE SMART CHAIN

But Binance, a company headquartered in Malta (although it has undeniable ties to China) that runs a large centralized crypto exchange, has launched its own decentralized* smart contract platform. (*Note: Binance Smart Chain or BSC bills itself as decentralized but given that Binance itself is very centralized and appears to be responsible for a lot of the development on BSC, it is not clear how truly decentralized Binance Smart Chain is.)

A NOTE ON DECENTRALIZATION

The use of the term decentralization in this context refers to the method of control of a smart contract platform. A centralized platform is controlled by a single entity or person (or group of related entities or group of persons) - for example, Binance's exchange is centralized. It is controlled by a small number of entities who are in turn controlled by a small number of individuals and investors. A decentralized platform, in contrast, is controlled by holders of its governance tokens, who are typically the users of the platform. Various proposals are put up for a vote and the tokenholders can vote on them. At a centralized platform like Binance or Coinbase, decisions are not made by users of the platform. Read more about decentralization versus centralization.

As I mentioned the vast majority of smart contract development is occurring on Ethereum, which has been around for over five years. But Binance has managed in a relatively short period of time to create a serviceable smart contract platform called Binance Smart Chain. When I first heard about BSC, I was quite skeptical. I didn't like the concept of a centralized entity like Binance basically masquerading as decentralized and winning over a large share of the market. (Similar concerns to some of my issues with venture capital and DeFi.) Because Binance itself is centralized and has a lot of money to throw around, it can move a lot faster to play catch up. In a pretty short amount of time BSC has lapped many smart contract competitors and has made significant strides in catching up to Ethereum.

I am not directly addressing whether Binance Smart Chain is truly decentralized because I honestly don't know. But use of BSC does benefit Binance itself (for one thing you need to use BNB, Binance's token, to pay fees on Binance Smart Chain) and it brings people into the Binance ecosystem, which again benefits the centralized (and, in my opinion, often predatory) Binance. In some ways, it does not matter whether BSC is decentralized or not if it brings significant benefit to an entity that we know is centralized. That's not even to mention the fact that many people have asserted that Binance is essentially a Chinese company, regardless of the fact that it is incorporated, and its headquarters are located, outside China. If this is true, then Binance, like other Chinese companies, may be expected to do the bidding of the Chinese government. That may be an ethical concern for some people.

INITIAL EXPERIENCE AND OPINION ON BINANCE SMART CHAIN

In spite of my hesitation I was drawn into trying BSC by a few events. The first was the airdropping by Ellipsis Finance (BSC's clone of Curve) of EPS to holders of Curve's veCRV. I set up Binance Smart Chain on my Metamask wallet and seeded my wallet with some BNB (Binance's token, which you need to pay fees on BSC). Then I headed over to Ellipsis and claimed my EPS token based on having veCRV in my corresponding Ethereum wallet. They drop the EPS once a week so you have to repeatedly return to claim it (perhaps to create a habit?). And I can't lie - the process was very simple and, most notably, cheap, compared to Ethereum.

Of course BSC can be cheap specifically because it has centralized elements. It doesn't have miners. Ethereum is taking steps to reduce its fees but with thousands of devs and miners it is not as simple a process as it is for Binance. That being said, aside from picking up my airdropped EPS, withdrawing it with a 50% penalty so that I can stake it to earn a lot more EPS (the tokenomics leave my head spinning), there is not too much else going on on Ellipsis at this point. There is, I think, one pool where you can swap BUSD (Binance's stabelcoin) for a few other stablecoins, and there is a place where you can buy EPS. Compare that to Curve which has around 30 different pools where you can swap a large variety of stablecoins as well as equivalent coins (e.g., renBTC for wBTC or stETH for ankrETH, etc), and Curve recently created crv.finance where DeFi protocols can create their own additional pools for swapping.

When compared to Curve, there is very little you can actually do on Ellipsis besides collect EPS and earn a metric ton more EPS plus a little BUSD if you lock it. The economic value you get at this stage mainly comes from other people deciding to withdraw their EPS at a penalty so that they too can lock it and make money from later withdrawers.

Here is the link if you'd like to read the rest of my Binance Smart Chain review

Curious to hear your comments and experiences with BSC.