Bitcoin dominated the crypto industry ever since its inception. However, for the first time, Ethereum yielded more returns in the last year. While BTC saw approximately 8x gain, Ethereum observed about 14x gain over the course of a year. Although BTC's price is still some considerable distance off the stern of the flagship ETH, the gap is bridging, and Ethereum's hold is overflowing with the kind of stores Bitcoin didn't have at the same point on the map. The growing popularity of Ethereum network is attributed to its thriving ecosystem of NFTs (Non-Fungible Tokens) and DeFi (Decentralized Finance).
While Ethereum is clearly the preferred choice for developers to create decentralized exchanges (DEXs), it has its own unpleasant attributes. Which is why we are observing a huge influx of DEX protocols building on other networks like Binance Smart Chain. Truth be told, BSC has outcompeted Ethereum in terms of the number of daily transactions. As of writing, the total number of daily transactions on the BSC network is 7,569,117, whereas Ethereum is struggling to go past the 1.5 million mark. If this statistic tells us anything, in particular, entrepreneurs and innovators are moving away from the Ethereum ecosystem.
So, why are projects, decentralized exchanges (DEX), in particular, building their protocols on BSC instead of Ethereum? This article highlights the reasons why Binance Smart Chain is the go-to network for DEXs.
Though it's been close to a decade since the launch of the Ethereum network, it still can't handle more than 20 transactions per second. To give you a context, the VISA payment system manages over 60,000 transactions per second. The reason why transactions on Ethereum are yet to scale is its proof-of-work consensus mechanism for validating transactions. The data in a PoW consensus algorithm takes a lot of time to travel between blocks. Currently, a transaction's size on the Ethereum network is about 150 bytes, which is even lower than the internet speed nowadays.
BSC uses a proof-of-stake authority (PoSA) algorithm to reach the consensus on the network. Twenty-One validators stake their native token BNB to validate transactions. Binance Smart Chain's ability to achieve approximately three-second block time makes it a tough competitor to Ethereum, wherein one block is mined in over twenty seconds.
Skyrocketing Gas Fees
With the daily transactions surpassing the 1 million mark, Ethereum is undoubtedly one of the busiest networks. This, in turn, leads to much higher gas fees. The average cost for processing each transaction on the Ethereum blockchain is more than $13. The transaction fees on BSC are calculated in Gwei. As per BSCSCAN, the average gas fee is about 5 Gwei - which roughly equates to $0.000138. Ethereum's rising gas fee has allowed BSC to become a go-to choice of many decentralized exchanges as traders prefer platforms with near-zero transaction fees.
ETH 2.0 Remains A Dream
Serenity, also known as Ethereum 2.0, is an upgrade to the network from PoW to PoS consensus mechanism. The upgrade is expected to increase the speed, scalability, and efficiency of the network. However, this remains a distant dream of the crypto community as the launch is far behind its rollout date. Though phase 0, the Beacon Chain, went live in December 2020, the launch date of its final upgrade is still unforeseen.
Since Eth2.0 remains a distant dream, BSC has become the primary choice of DeFi protocols. Besides, Binance Smart Chain has all functionalities similar to Ethereum - and at a lower cost.
BSC is Great - But, Sadly, it is CeDeFi
While Ethereum is a community-driven open-source blockchain run by more than 6000 independent nodes, Binance Smart Chain is run by 21 nodes elected by BNB holders. Binance controls a huge amount of Binance Coins and is categorized under a central entity. It defies the core idea of decentralization behind the development of the first cryptocurrency, Bitcoin. Binance may get financial incentives for fairly operating its network, but its centralized nature remains an entry barrier for major decentralized exchanges.
The Need for Decentralization
Ethereum has the first-mover advantage, but it has started to lose its supremacy to its alternatives; BSC being the most prominent of all. Due to its CeDeFi nature, Binance will always be the least preferred choice for decentralization admirers.
There is a huge demand for a scalable, low-fee, and decentralized
exchange in the market, which is being filled by Pancake Swap, Soku Swap, and other DEXs. Until the arrival of Eth 2.0, a huge gap needs to be filled by such players. Moreover, there is an ideal opportunity to capture the market share.