Binance Chain 101: All You Need To Know
Enter The Binance Chain
While Binance is known mainly for being the biggest crypto exchange in the world, the company has for a while been extending beyond just that, and into other crypto-related projects. The biggest of them is the Binance Chain – that is, a native blockchain.
Yet, it can be difficult to understand why a crypto exchange site would create its own blockchain. It feels, to some of us, like a bank deciding to print its own money. However, since the blockchain technology has many uses, Binance Chain is, more than a goal, it is a means to several goals.
What is Binance Chain set out to accomplish?
Binance’s current position in the market gives it both credibility and power, and it seems to be attempting to use that power to shape the crypto market as it readies to enter the mainstream.
The main reason for Binance Chain is a simple one: A blockchain allows Binance to launch a distributed crypto exchange, in this case in the form of Binance DEX.
While a distributed exchange might sound strange, distributed systems and blockchains aren’t at all rare to the blockchain world.
Distributed systems are inherently safer and much harder to take down than centralized ones. For a crypto exchange, whose goal is to be available 24/7 and work regardless of how heavy activity is, a distributed system is ideal.
That’s nice! Does it have its own cryptocurrency?
It has lots of cryptocurrencies. The first one, the Binance Coin (BNB) launched a few months back and it is the preferred payment method for your fees on the exchange. However, that’s far from the only crypto token that can be traded there.
Another advantage of having its own blockchain is that Binance can now create pegged tokens that represent other cryptocurrencies. That effectively allows you to trade other crypto on Binance Chain.
While doing that might sound odd (it does, doesn’t it?) there’s logic behind it. Some of the most important crypto tokens on the scene today are old.
The biggest token, Bitcoin, is a decade old now – and the blockchain it is traded on is poorly optimized, slow, and costly.
By trading on Binance Chain, you get to keep trading Bitcoin, but on a much faster, more efficient, and cheaper blockchain.
You’ll get your transactions done in less time, and they will cost less to boot, giving you all the advantages with none of its downsides.
Will people use Binance Chain at all to trade other tokens?
The expectation is that they will.
Most Binance users keep their crypto on the exchange already. Having the tokens as tradeable bits on Binance Chain is only logical and allows them to use their crypto without needing to withdraw it from the exchange.
While more advanced users might shun this, non-hardcore traders will find it much more convenient.
So all currencies are traded there, right. Anything else?
Wait. Not all currencies are traded on Binance Chain – in fact, the pegged token system is still in the works.
At first, it’s expected that only the biggest tokens will be represented (with Bitcoin confirmed) but with time, this should extend to cover all types of token traded on Binance – which still isn’t all tokens.
But there’s more, of course. Binance has announced the impending release of a new token on the Binance Chain. In this case, the token will be a stablecoin pegged to the USD.
Stablecoins are important because they allow regular users to perform soft withdrawals, where they effectively sell their investments in BTC, ETH, or any other crypto, without necessarily leaving the market for good.
Still, it looks good. Does it have all other features we’ve come to expect from blockchains?
No, it doesn’t. Specifically, one of the most hailed features of blockchains isn’t there, in this case the smart contract feature.
The Binance Chain wasn’t built to be a killer app, and therefore it isn’t aiming to fulfill all tasks blockchain can do. The decision to not support smart contracts was made to improve system performance, and it’s not likely it will revert this decision.
Can I mine Binance Coin or its stabletoken?
Binance Chain doesn’t use Proof-of-Work methods, which are the ones that allow people to mine. Instead, Binance Chain generates tokens using the Proof-of-Stake method, so mining isn’t a part of it. If you want to generate Binance Coin, you’ll have to do it by staking.
Will it be costly to trade on Binance Chain?
It shouldn’t be. Binance Chain has no costs to use its API or wallets. Moreover, while transaction fees do exist (as they’re necessary to keep the blockchain running and for security reasons,) no additional gas is charged.
In other words, Binance Chain’s fees represent exactly the amount of money it costs to process a transaction, with no earnings for the company.
Is it private? Or can others see what I do?
Following the transparency blockchains seek, all transactions on the chain can be seen by anyone without needing additional permissions. As long as a person knows, or runs into, your wallet address, they can see both your transactions and your balance.
Do note that this doesn’t mean you’re exposed – your wallet address is simply a code, and it contains no direct links to you as a person. Your personal privacy is guaranteed, as is the case with blockchains in general.
Sounds good. Where do I sign up?
But not for the reasons you’re thinking; you can use Binance Chain right now if you wish. You just don’t need to sign up to Binance DEX in the way you would sign up to Binance or any other exchange.
Instead, all you need is a crypto wallet that supports Binance chain. As long as you have it, you can trade on Binance Chain.
Even better. One last thing, will Binance Chain get more features? Or is this it?
Binance chain is being constantly upgraded, so it will get new features in time. The feature to trade pegged tokens, for example, is one of them – since it was revealed only recently. However, there’s no roadmap with specific goals.
The Binance team decides what to add and what not to add depending on the state of the market and whether that new feature would make Binance a better chain.
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