What is the Difference Between Binance Smart Chain and Ethereum?

Binance Smart Chain (BSC) and Ethereum may seem very similar at first glance. DApp and tokens developed on BSC are compatible with Ethereum Virtual Machine (EVM). You may have noticed that public wallet addresses are the same on both blockchains. There are even cross-chain projects operating on both networks. However, there are some notable differences between the two chains. If you're not sure which chain to use, it can be helpful to know and understand the differences.

Blockchain traffic and DApp ecosystem

As of June 2021, Ethereum hosts more than 2,800 DApps on the blockchain, compared to about 810 on BSC. The difference is considerable, but considering that BSC is still very young, it can be seen as a strong and growing ecosystem.

Active addresses are also an important on-chain metric to consider. Despite being a newer blockchain, BSC set a record 2,105,367 addresses on June 7, 2021. This is more than double Ethereum's record of 799,580 addresses on May 9, 2021.

So, what could be the reason behind the sudden growth of BSC? BSC's fast approval times and low fees have contributed greatly to this growth. The growing popularity of NFTs and their compatibility with popular crypto wallets such as Trust Wallet and MetaMask may also play a role in BSC's growth.

If we look at day-to-day transactions, there is an even bigger difference between the two chains. In BSC it is faster and less costly for users to move their funds and interact with smart contracts. Below, you can see BSC's daily record of 12 million transactions and its current status of over 4 million.

On the other hand, Ethereum's daily transaction count has never exceeded 1.75 million. For users who need to move their funds frequently, BSC appears to be the more popular option. Daily transactions should also be evaluated in the context of active addresses. At the time of writing this article, BSC has a higher number of users, and their average transaction count is also higher.

Most used DeFi Dapps on Ethereum and BSC

When it comes to decentralized finance, there are numerous DApps available on both BSC and Ethereum due to the compatibility of blockchains. Developers can easily migrate their applications from Ethereum to BSC, and new BSC projects often use open source code from Ethereum under a different name. Let's take a look at the top five DApps on Ethereum by number of users, according to DAppRadar.

Here you can see that there are two DeFi Automated Market Makers (UniSwap and SushiSwap), a crypto game (Axie Infinity) and a peer-to-peer marketplace (OpenSea). If you look at the top five of the BSC, you'll also find many similarities.

PancakeSwap was created with a hard fork from Uniswap. Autofarm and Pancake Bunny are yield farms. This is a category we haven't seen in Ethereum's top five. Biswap and Apeswap are Automated Market Makers (AMA). Yield farms tend to be more efficient on Binance Smart Chain as transaction fees are lower on BSC and transactions are much faster. These factors make AMAs a popular option for BSC users.

When it comes to crypto games, Ethereum is indeed the home of the most popular games. Although there are games similar to CryptoKitties and Axie Infinity on BSC, they have not been able to reach as large audiences as the classic games on Ethereum.

Transfers between networks

If you have deposited BEP-20 or ERC-20 in your wallet before, you may have noticed that the Ethereum and BSC wallet addresses are the same. So if you choose the wrong network when withdrawing your tokens from one exchange, you can easily get those tokens back from the other blockchain.

If you have accidentally withdrawn ERC-20 tokens to the BSC, you can find these tokens at the corresponding BSC address. You can do the same if you accidentally sent tokens from BSC to Ethereum. In either case, fortunately, you won't lose your funds permanently. For a more detailed guide, How to Recover Cryptos Transferred to Wrong Network on Binance? You can read our article.

Transaction fees

Both BSC and Ethereum use a gas model for transaction fees, which measures the complexity of the transaction. BSC users can set a gas fee based on network demand, and miners will prioritize transactions with a higher gas price. But the London hard fork of Ethereum introduces some new regulations that will likely eliminate the need for high transaction fees.

The Ethereum update creates a new pricing mechanism where a base fee is applied per block. The base fee varies depending on the demand for transactions. Thus, users will not have to determine the gas price themselves.

In retrospect, gas fees on Ethereum are much higher compared to BSC. The highest average was seen in May 2021 with 68.72 USD. Although this trend has started to change, Ethereum is still more expensive.

To see the picture more, let's take a look at Ethereum average gas costs from Etherscan. The top three numbers show the current gas prices of Ethereum. For both BSC and Ethereum, one gwei is equivalent to 0.000000001 BNB and ETH. If you pay at a lower price, it will take much longer for your transaction to be processed.

For a simple transaction such as sending an ERC-20 token to another wallet, the average price at the time of writing this article is $2.46 USD. This amount increases to $7.58 when using a Uniswap liquidity pool with multiple transactions.

Below you can see that a transaction equivalent to an ERC-20 transfer on the Ethereum gas tracker took place on BSC with a transaction fee of only 0.03 USD. BSC calculated this amount by multiplying the gas (21,000) used by the transaction by the gas price of 5 gwei.

Processing time

Measuring average transaction times on blockchains can be a little tricky. While a transaction is technically complete once miners confirm the block it is in, other factors can also affect your wait time:

If you haven't set your transaction fee high enough, miners may delay your transaction or even not include it in a block.

Building more complex interactions with the blockchain requires multiple transactions. Adding liquidity to a liquidity pool is an example.

Most services will only accept a transaction as valid after a certain number of blocks have been confirmed. These extra confirmations reduce the risk that vendors and service providers will have their payments canceled if the block is rejected by the network.

If we look at the gas statistics above for Ethereum, we see that transaction times range from 30 seconds to 16 minutes. These numbers take into account successful transactions, but do not take into account any extra validation requirements.

For example, if you deposit ETH (ERC-20) into your Binance account, you have to wait for 12 network confirmations. As you can see from the chart below, considering that each block is mined in about 13 seconds, you will have to wait an extra 156 seconds before depositing ETH into your spot wallet.

In BSC, on the other hand, the average block time is 3 seconds. When we compare this with Ethereum's 13 seconds, we see an improvement of about 4.3 times in speed.

Ethereum's Proof of Work (PoW) consensus mechanism is similar to Bitcoin's, but very different from BSC's Proof of Staked Authority (PoSA) mechanism. But this difference will soon disappear. The network will start using the Proof of Stake (PoS) mechanism with Ethereum 2.0.

BSC's PoSA combines elements from Proof of Authority (PoA) and Delegated Proof of Stake (DPoS). 21 validators sequentially generate blocks and in return receive BNB transaction fees as a reward. Being a validator requires running a node and staking at least 10,000 BNB to become an elected candidate.

Other users, known as Delegators, stake BNB behind an elected candidate. According to the staked amount, the first 21 selected candidates then process the blocks in order. This whole process starts over every 24 hours. Delegates also receive a share of the rewards earned by validators.

Ethereum's PoW is a very different system. Instead of the community choosing validators, there is a race to solve a computational puzzle. Anyone can participate, but you need to buy or rent special mining equipment. The higher the computational power you have, the more likely you are to solve the puzzle before others and verify a block. Successful miners receive transaction fees and ETH rewards as rewards.

While PoW is an effective way to achieve consensus and ensure network security, developers have also tried using other mechanisms. Their aim is to find more efficient and environmentally friendly alternatives without sacrificing safety.

For these reasons, the Ethereum network will transition to Proof of Stake. Validators will stake ETH for a chance to generate blocks. Other validators will "certify" the block and check that the block is correct. If a person generates a block containing fraudulent transactions, they risk losing all their staked coins. After that, validators receive rewards for successful blocks and confirmations. If large amounts of ETH are directly deposited and staked, malicious validators risk losing their funds.

Source: https://academy.binance.com/