As BNB Price Grows, Will the Binance Smart Chain Overtake Ethereum?
As BNB continues to gain popularity, it seems that a growing number of analysts are pointing to the Binance Smart Chain (BSC) as a serious threat to the Ethereum network. Citing faster and cheaper transactions, these analysts believe that the BSC could overtake Ethereum as the ‘backbone’ of the decentralized finance (DeFi) ecosystem.
This increase in user activity has been reflected in the price of the Binance token (BNB), which has continued to rally as the Binance Smart Chain continues to rise in popularity. BSC, which was launched in September of 2020, acts in parallel to the Binance Chain. BSC allows for smart-contract functionality and provides a staking mechanism for BNB tokens.
According to data from CoinMarketcap, BNB surpassed Polkadot to become the third-largest cryptocurrency by market cap on Friday. BNB went on to hit a new all-time high on Saturday, with a price above $342. At press time, BNB was holding strong at $271.
”If You Want More Users for Your Dapp, You Need to Be on #BSC Now.”
As the BSC ecosystem continues to grow (and the price of BNB along with it), BSC has become the chain of choice for a growing number of DeFi protocols.
Indeed, a handful of projects have left Etheruem in favor of BSC, including Value DeFi and yield aggregator, Harvest Finance. Binance Chief Executive, Changpeng Zhao has encouraged projects to migrate to BSC since the chain was launched in the fall. However, as BNB has continued to grow over the past week, he has taken to Twitter with renewed enthusiasm.
On Saturday, February 20th, Zhao commented that: “there are almost 2x more transactions on #BSC than on ETH. If you want more users for your Dapp, you need to be on #BSC now.”
There are almost 2x more transactions on #BSC than on ETH. If you want more users for your Dapp, you need to be on #BSC now. pic.twitter.com/ZYnbFOVysc — CZ 🔶 Binance (@cz_binance) February 18, 2021
“#BNB started as a token on #ETH, but maybe #ETH will end up as a token on #BSC,” he wrote on Monday, February 22nd.
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#BNB started as a token on #ETH, but maybe #ETH will end up as a token on #BSC. Restricting comments due to the provocative joke. 😂 https://t.co/jmIr3Xbi6p — CZ 🔶 Binance (@cz_binance) February 22, 2021
”Have an Infinite Mindset.”
However, he encouraged Ethereum and BSC community members to get along with one another. “For those holding ETH, no need to attack #BSC. We together make the industry bigger. ETH price did not drop. It increases together with #BNB. Have an infinite mindset.”
A number of other platforms that were already hosted on the BSC platform have seen positive movement as a result of the growth of the BSC. For example, Venus, which Cointelegraph describes as “an algorithmic money market and synthetic stablecoin protocol designed specifically for BSC,” has grown significantly along with the BSC. The Venus token (XVS) has grown more than 2900% since its October launch, sitting at $75.37 at press time.
Moreover, PancakeSwap (CAKE), another BSC-based DeFi project, has seen massive growth since its inception on the Binance Smart Chain last autumn. CAKE was trading at roughly $1.40 when it launched in late September; today, that figure is up to $15.23. Furthermore, PancakeSwap is listed as the third-largest automated market maker in the DeFi space, following behind Uniswap and Sushiswap.
”DeFi Protocols Are Increasingly Chain-Agnostic.”
Why is BSC proving to be such a strong contender for an Ethereum replacement of sorts? A number of analysts say that it all comes down to cost and speed. As Ethereum has seen fees increase and transaction speed slow down with the growth of traffic on the network, DeFi developers have begun to look elsewhere.
A software update known as Eth2.0 is already underway to address the scalability issues on the Ethereum network. However, with a launch date that is months (or even years) in the future, some analysts believe that Eth2.0 may be too little, too late.
A spokesperson for Binance told Cointelegraph that: “feedback we have heard is the DeFi protocols are increasingly chain-agnostic. The rapid growth of BSC shows the users prefer lower transaction fees. BSC also provides a variety of assets, many of which are not available on DeFi protocols on Ethereum.”
Does Binance smart chain threaten Ethereum?
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Binance Coin (BNB, Tech/Adoption Grade “C-”) is having a day, trading up over 60%, as the Friday Index Roundup confirms the start to altcoin season.
Bitcoin (BTC, Tech/Adoption Grade “A-”) continues to trade at or near all-time highs and continues its run to $60,000, as of Friday.
Ethereum (ETH, Tech/Adoption Grade “A-”) is close to finally breaking $2,000.
Binance Coin continues its astronomical run, cresting over $300 today. This comes as Binance Smart Chain-based decentralized finance applications have seen a ton of interest, mainly due to lower fees than Ethereum-based competitors.
Many observers in the crypto universe have been talking about a potential “flippening” event, where BNB might overtake ETH as the No. 2 crypto asset, something that could happen if more and more people switched to Binance-based DeFi apps. We’re still well away from something like that, though it is interesting to see some true competition for Ethereum Dapps (decentralized applications).
While BNB may not overtake ETH, the asset is still red-hot, smashing through all resistance levels on this parabolic run. BNB is currently up more than 580% this month, a truly amazing run.
Here’s BNB in US dollar terms via Binance
Binance Coin might try to overtake Ethereum, but what remains the world’s No. 2 crypto is not backing down.
ETH seems to be moving more slowly than the rest of the market during this bull cycle. It’s knocking on the door of $2,000, but it’s had some trouble breaking above that level. The takeaway here is that ETH’s apparent “slow growth” is bullish: It continues to climb higher despite flows into other notable coins and DeFi tokens.
Here’s ETH in US dollar terms via Coinbase
Folks, perhaps we’ve “buried the lede” here, but Bitcoin crossed $1 trillion in total market capitalization for the first time.
This is a major milestone. In terms of total asset valuation, Bitcoin trails just five total companies in the world.
The King of Crypto is rapidly approaching silver’s $1.5 trillion market cap, but it still makes up just 9% of gold’s $11.3 trillion. Like Ethereum, Bitcoin’s upward trajectory, despite flows into altcoins, is extremely bullish.
Here’s Bitcoin in US dollar terms via Coinbase
Now let’s turn to my colleague Sam Blumenfeld for an overview of the Weiss Crypto Indexes …
Index Roundup
Over the past week, we’ve seen the top cryptocurrencies set new highs. But smaller altcoins have outpaced them. Bitcoin surpassed $54,000 during trading this morning, and Ethereum looks set to cross the symbolic $2,000 price level.
Meanwhile, a flood into altcoins through Bitcoin and Ethereum pairs have led to a recent boom for smaller and less-established cryptocurrencies because of their potential.
The Weiss 50 Crypto Index (W50) gained 8.05% this week, as the broader market looks to continue exploring new highs.
The Weiss 50 Ex-BTC Index (W50X) increased 10.15%. Bitcoin slightly underperformed this week, but this is to be expected during periods where altcoins rally.
Breaking down performance this week by market capitalization, we see that large-cap cryptocurrencies lagged behind smaller and mid-sized altcoins. This is predictable during “alt season” because the smaller coins are typically bought using Bitcoin or Ethereum. The Weiss Large-Cap Crypto Index (WLC) rose 6.13%.
Mid-cap cryptocurrencies rallied, as the Weiss Mid-Cap Crypto Index (WMC) climbed 24.52%.
The small-caps performed the best this week, as the Weiss Small-Cap Crypto Index (WSC) soared 41.24%.
Moving forward, we’ll likely see a continuation of alt-season. It’s positive news that market-leaders Bitcoin and Ethereum continue to set new all-time highs despite outflows into altcoins.
While corrections are common in the crypto market, its overall health and fundamentals look stronger than ever.
Notable News, Notes and Tweets
Pomp and the rest of Crypto Twitter continue their campaign to recruit Reddit’s r/WallStreetBets crowd.
Crypto analyst Luke Martin acknowledges BNB’s major breakout and other positive market catalysts.
MicroStrategy chief executive Michael Saylor raises over $1 billion to buy more Bitcoin.
While institutions increase adoption, retail traders embrace crypto’s future.
What’s next
It seems like we pass another critical milestone for the cryptocurrency industry almost daily now, such is the nature of a parabolic bull market.
The significance of Bitcoin becoming a trillion-dollar asset can’t be overstated — it’s simply more validation for the King of Crypto and the industry at large. Ethereum is also setting new highs despite the fact that it hasn’t experienced a parabolic breakout like some other crypto assets.
The rise of the Binance smart chain brings some healthy competition for Ethereum and its DeFi application ecosystem. Competition like this usually sparks development wars and pushes the entire industry forward with a newfound sense of urgency.
The index roundup for this week confirmed our assertion that we’re in the midst of an altcoin season. “Alt season” always brings with it some exciting price runs in smaller-cap cryptos and can serve to bring attention to some undiscovered and undervalued projects.
The fact that this alt season is coinciding with new all-time highs for many blue-chip cryptocurrencies highlights the excitement in this space. As always, stay tuned for more news and insights.
Binance Blamed for Purposely Choking Ethereum’s Network – Exchanges Bitcoin News
Binance Blamed for Purposely Choking Ethereum’s Network
The recent ramp higher in cryptocurrency prices has assuredly attracted its fair share of cheerleaders and detractors alike, but the reality of this climb has been a concurrent increase in network fees from rising transaction volumes.
Binance is Blamed for Purposely Choking Ethereum’s Network to Drive More Users to Its Own Platform
The resulting volumes have clogged networks like Ethereum, which have seen gas costs climb almost 20x over the last 12 months. For the growing DeFi market, these sky-high costs have elicited significant criticism from the community and mobilized the ecosystem to hunt for more affordable options. Enter Binance, which may dethrone Ethereum as the new DeFi hotspot due to its interoperability and lower transaction costs.
Binance Smart Chain (BSC), which works on a Proof of Authority (POA) model, is centralized (Binance picks the authorities that run each node) relative to Ethereum’s entirely decentralized approach. This has prompted some users to criticize the approach, believing that Binance is abusing its clout and market power to intentionally clog the Ethereum network. However, this sharp critique misses the bigger picture.
A quick look at wallet and gas data highlights that Binance is the largest single gas spender. For instance, the image above tweeted by Nansen AI highlights from February 12th to the 18th, Binance spent the equivalent of nearly 5,000 ETH in gas alone. Although many users are quick to criticize publicized data of Asian exchanges which are known for inflating trading volume, this data can be corroborated by Etherscan data.
The data demonstrate that both in terms of gas spent and transaction volume over the last seven days, wallets attributed to Binance accounted for six out of 10 of the most active wallets in the entire Ethereum ecosystem. While it could be inferred that Binance’s volume is propelling Ether costs upward and doing so intentionally to attract more volume to its smart chain, this argument misses out on the blockchain interoperability that Binance has promoted. Moreover, Binance hasn’t shut off the taps to Ethereum, making the argument of it clogging the network somewhat moot.
Binance Pancakeswap Has Overtaken Uniswap
The costs of switching from Ethereum to Binance are very low, especially for smart contracts and Dapps. By improving the interoperability and reducing switching costs along with rebating developers who bring valuable projects online, Binance has built itself up as a formidable destination for all manner of activities.
Given the volumes of DeFi, any reduction in network fees and costs is likely to attract greater adoption. By filling this void quicker than competitors or more established chains, Binance is now home to PancakeSwap, which has overtaken Uniswap (based on Ethereum) in terms of volume.
Because the barriers of switching from Uniswap to PancakeSwap (which is effectively a copy of Uniswap on BSC), are fairly low, it’s no wonder why DeFi users have made the jump. Moreover, it has caused a sharp incline in Binance Coin’s (BNB) valuation, making transactions also more expensive on its own native chain.
Yet, unlike Ethereum, by building a more cost-effective ecosystem that rewards smart contract developers, Binance is actually incentivizing development and smart contract use, and not necessarily using its market power to clog other competing networks.
FTX Quick to Criticize
Still, that hasn’t been enough to silence critics like FTX, which blame Binance for the default chains where it sends transactions. In a recent tweet critique, cryptocurrency derivatives exchange FTX was quick to pile onto Binance’s withdrawal process which effectively defaults to promoting its own chains and creates a conflict due to the fees it reaps in return.
As a result, it has cost FTX dearly due to coins being sent to the wrong chains. Accordingly, the service has decided to pass along the extra costs to users in the form of a 5% deposit surcharge for tokens sent to the wrong chain. However, in large this argument speaks more towards user mistakes than Binance’s default settings.
While the Binance universe is undoubtedly growing, and exchange volumes speak credible truth to this reality, the self-promotion of its own tools will continue to spark the same sort of denunciations that marked the decentralized versus centralized exchange debate. Ultimately though, utility speaks the loudest.
What do you think – is Binance purposely choking the Ethereum network to gain more users? Let us know in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, Binance, Twitter user NanshenAI, Etherscan