On the surface, BNB Smart Chain (BSC) and Ethereum don’t look that different. It makes sense, since BSC is a hard fork of the Go Ethereum (Geth) protocol. The two blockchains share many similarities, in fact, users’ public wallet addresses are the same on both blockchains.
Thanks to BSC compatibility with the Ethereum Virtual Machine, there are even cross-chain projects operating across both networks. While their similarities make them compatible, their differences can make a significant impact on the experience of users and developers.
BNB Smart Chain (formerly known as Binance Smart Chain) first came onto the blockchain scene in 2020, and ever since have been pitted against Ethereum in a battle of the blockchains.
Ethereum is one of the largest and most popular blockchains, second only to the premier chain, Bitcoin. According to State of the Dapps, Ethereum hosts almost 3000 dApps while BNB Smart Chain hosts just 211.
On the surface it appears like a blockchain version of David and Goliath.
Ethereum rose to fame by being the first to champion the use of smart contracts, an innovation that propelled blockchain’s use beyond mere cryptocurrency. Even though a number of blockchains have sprouted up around it, BSC being just one of them, Ethereum still dominates the dApp and smart contract market.
That said, Ethereum is far from perfect and BSC is a direct attempt at addressing its imperfections— its volatile gas fees being the main issue for Ethereum users.
Although BSC’ numbers may pale in comparison to Ethereum’s, it’s important to remember just how new BSC is. As a concept, Ethereum was introduced in 2013 and the blockchain launched in 2015. Considering how young BSC is, it is proving itself as a worthy contender against a more developed and mature ecosystem.
BNB Smart Chain is a relatively new blockchain designed for developing high-performance decentralized applications.
It first started life as “Binance Smart Chain” but in the beginning of 2022 it had a label overhaul to distance itself from the Binance exchange. The newly named BNB Smart Chain was created to run in parallel with the Binance Chain (now BNB Beacon Chain) and is powered by the token BNB.
Even the token has been given a makeover— the BNB coin was formerly known as Binance Coin but has been renamed “Build and Build” but keeps the same acronym.
Now we have all the name changes out of the way...
BNB Beacon Chain (formerly Binance Chain) was launched in 2019 to facilitate fast, decentralized trading but it has limited flexibility and scalability. BSC was a way to add smart contract functionality to the Binance ecosystem without causing the inevitable congestion and impact on network throughput.
BSC is an independent blockchain (rather than a layer 2 or off-chain scalability solution), which means that if BNB Beacon Chain were to go offline for any reason, BSC would continue to run.
The cross-chain compatibility between BSC and BNB Beacon Chain provides users with a larger and more complete ecosystem. Users can easily transfer their assets from one to the other, easily trade BSC assets on multiple exchanges, and use them in a wide range of DApps.
BSC also made a couple of smart moves early on, firstly with design— BSC is compatible with the Ethereum Virtual Machine (EVM), meaning it supports Ethereum tools and DApps.
This makes it easier for developers to import their projects from Ethereum (should they need to bypass Ethereum’s congested network), and allow users to easily configure applications like crypto wallets to work with BSC.
The second smart move was to introduce the Binance Smart Chain BUIDL Reward Program to encourage builders to create dApps on the BSC platform. The incentive program offers up to $5m in BNB to be paid back to developers in proportion to the gas used for their contracts.
The Ethereum blockchain was conceived by programmer Vitalik Buterin. In the Ethereum Whitepaper published in 2014, Buterin envisaged a blockchain that would give developers complete freedom to build any application they wished upon it. And so, in 2015, the smart contract was born with Ethereum as its vehicle and ether (ETH) as its fuel.
Ethereum opened up a whole new world of blockchain use case possibilities, from finance to gaming, identity management, decentralized autonomous organizations (DAOs), and supply chain management. But the most popular use case has been non-fungible tokens otherwise known as NFTs.
Read more: What are NFTs and How do They Work?
Currently, Ethereum is the most popular choice for minting NFTs but for how long? Ethereum’s NFT market share fell from 95% to 80% in early 2021. The network’s notoriously high gas fees have been coined as the culprit for the shift in sales.
Yet, developers are still very much attracted to the Ethereum network. According to the Electric Capital Developer Report (2021), more than 20% of new Web 3 developers joined Ethereum.
The scripting possibility that Solidity (the programming language for developing Ethereum smart contracts) provides is one of the main reasons dApp developers choose Ethereum over other blockchains.
Ethereum also provides a rich library of supporting tools including tutorials and developer tools such as debuggers, unit test frameworks, and test coverage tools.
Now that we have been acquainted with the background of each blockchain, let’s look at how they differ.
Despite being a newer blockchain, BSC managed to topple Ethereum off the top of the list when it comes to unique active addresses. The report from cryptocurrency analytics platform, Nansen, considered the number of active addresses across selected blockchains during January 2022.
The report found that BNB Smart Chain (BSC) had a volume of 10.4 million unique active addresses while Ethereum recorded almost half that, at a total of 5.44 million.
Everyday transactions can also give an interesting insight into the differences between the two blockchains. For example:
BSC: Highest number of 16,262,505 transactions on Thursday, November 25, 2021.
Ethereum: Highest number of 1,716,600 transactions on Sunday, May 9, 2021.
With more active users and more daily transactions, it appears that BSC is the more popular choice. The significant difference in transactional throughput and active users can be attributed to the fact that BSC is quicker and more cost-efficient when it comes to transferring funds and creating smart contracts.
A consensus mechanism is the method that the networks’ nodes reach consensus about the data submitted to the block. There are various ways of forming consensus, including Proof-of-Work (PoW), Proof of Stake (PoS), Proof of Authority (PoA).
Ethereum is currently undergoing a shift from Proof of Work towards Proof of Stake, but for the moment, it is still mostly operating on the PoW algorithm.
In Proof of Work the nodes compete to solve the block hash in order to be the node to add a block of data to the blockchain (and be rewarded with the transaction/gas fees therein). The node (the prover) must prove to the other nodes (the verifiers) that they have expended a certain amount of computational effort (work) in solving the hash of a block.
The problem with PoW is that it requires a huge amount of computational power resulting in extremely high-energy usage.
In fact, according to the Digiconomist, Ethereum uses 113 terawatt-hours per year. That’s the same amount of power as consumed by the Netherlands. A single transaction on Ethereum is the energy usage equivalent to watching 20,723 hours of YouTube videos.
Proof of Work is also a lengthy process making it one of the slowest methods of achieving consensus on the blockchain. The average transaction time on Ethereum is 13-15 seconds, compared to just 3 seconds of BSC.
It’s for these reasons that Ethereum is migrating to a Proof of Stake mechanism.
PoS involves validators staking a certain number of coins in order to claim their right to add a block to the chain. Instead of competing as miners do in a PoW mechanism, validators are then chosen at random.
It provides the financial incentive for participating nodes but doesn’t require the same computational effort or energy consumption. It also doesn’t require the same heavy-duty equipment, which lowers the barrier to entry.
This switch will not only bring down Ethereum’s gas fees and waiting times but the PoS method also supports sharding which will allow for greater scalability.
BSC is a hybrid consensus mechanism called Proof of Staked Authority (PoSA).
Like PoS, BSC validators “stake” their BNB but the number of active validators, participants eligible to validate transactions, is limited. Although the limit has increased from 21 to 41 with the recent changes to the BNB ecosystem it is still considerably more “centralized” than Ethereum which has more than 70,000 validators.
The validators are chosen from a set built on the BNB Beacon Chain. The top 41 validators are determined by the number of BNB tokens they have staked, and then propagated once a day from BC to BSC via cross-chain communication.
The PoSA consensus model enables short block times and lower costs, but it does mean it compromises network decentralization.
Any transaction on the blockchain requires payment. Both BSC and Ethereum use a gas fee model and are calculated in gwei.
0.000000001 ether = 1 gwei
0.000000001 BNB = 1 gwei
The gas fees are a way to incentivize and compensate miners and validators for the computational power spent in validating the blockchain's transaction records.
BSC and Ethereum users set a gas price to entice miners/validators to prioritize their transactions. The higher gas prices will get processed faster, while transactions with lower gas can end up with longer wait times or staying unconfirmed.
Historically, Ethereum gas fees have been much higher than those experienced on BSC.
From a snapshot from Etherscan and BscScan we can see that the average gas prices differ drastically. On Biance Smart Chain, the highest average recorded on the 16th August 2021 was 7.7278 gwei which equates to roughly $5.
The highest average gas price on Ethereum during the same time period was recorded on the 10th January 2022, at 218.547966407, the equivalent of about $144.