As the crypto sell-off continues, the Ethereum community has been more resilient than the Binance Smart Chain ecosystem, even though BSC enthusiasts tout the blockchain as a cheaper, faster alternative to Ethereum.
While TVL on Ethereum had dropped 13% to $104.4B from $120B, Binance TVL had dropped 44% to $20B from $36B, according to data platform DeFi Llama.
BSC, which has emerged as a low-fee smart contract blockchain, was created by crypto exchange Binance as a parallel blockchain to its pre-existing Binance Chain. Unlike Binance Chain, BSC was built with smart contract functionality compatible with Ethereum, allowing developers to build native decentralized apps (dapps) or port dapps from Ethereum. For instance, some major Ethereum protocols, like DeFi/decentralized exchange (DEX) aggregator 1inch, have already connected to BSC.
But whereas gas prices on Ethereum average well over 100 Gwei (which translates to around $68.80 for a typical Ethereum transaction) for token swaps with highs of up to 373 Gwei ($257 for a typical Ethereum transaction) in February ̶ BSC’s average gas prices are almost always under 20 Gwei ($14 for a typical BSC transaction). These significantly cheaper transaction costs result in a much lower barrier to entry for BSC compared to Ethereum, especially considering how quickly gas fees add up with every transaction in DeFi.
“If you want to farm actively, you kind of need a million on Ethereum to make it viable,” said Sam Farmer, a pseudonymous self-proclaimed degen who trades on both Ethereum and BSC. “But on Binance Smart Chain, you can do it with $50 and have no problems.”
The Big Draws
On the surface, the BSC ecosystem is very similar to Ethereum, but the number of validators that authenticate transactions is a lot smaller, which makes BSC not as decentralized as Ethereum.
But that hasn’t seemed to slow down BSC usage.
“I love decentralization. I want it to become mainstream. I really do, but I also have to acknowledge reality,” said Whodang, a trader who is currently invested in BSC after getting tired of insane Ethereum gas fees. “People are here to make money. The truth is the money is behind centralization.”
The most popular dapp on BSC is its main DEX and automated market maker (AMM), PancakeSwap. PancakeSwap allows users to exchange tokens, and over the past 24 hours, PancakeSwap had 657,000 users at time of writing, according to data on DeBank.
Ethereum’s highest trafficked protocol is also its biggest DEX/AMM, Uniswap. But across both Uniswap V2 and Uniswap V3, the 24-hour user base was only 89,000.
Moreover, the second highest trafficked Ethereum dapp was the DEX aggregator MetaMask Swaps, which had 7,600 users over the last 24-hour period at time of writing. And only six other Ethereum dapps, including the lending protocol Maker and the NFT marketplace Opensea, had over 1,000 users daily.
This means that not only did PancakeSwap have 638% more users than Ethereum’s Uniswap, but PancakeSwap alone had nearly six times as many users as all the users of every Ethereum dapp combined.
That said, there have been some claims that BSC user numbers are inflated by bots. As evidence, one Twitter thread even pointed to a single BSC contract with 680k failed transactions spammed over a 17-hour period.
To be sure, though, Ethereum user numbers are also likely inflated due to the ability for one person to have multiple wallets ––as is the case with any other blockchain.
With lower transaction fees, BSC appears to be bringing in more retail investors playing with lower dollar amounts.
While PancakeSwap’s total value locked (TVL) at $14.1B is higher than that of Uniswap V2 and V3 at $12.2B, it’s not much higher and is spread across many more users. In a similar vein, BSC’s top lending protocol, Venus, had $9.4B TVL with 6000 users over 24 hours. Whereas Ethereum’s top lending protocols, Maker and Compound, had TVLs of $13.3B and $12.1B respectively, despite having less than 6000 users combined.
And the amount of dapps running on BSC is also considerably smaller than Ethereum. Of the 45 BSC protocols listed on DeBank, 20 of them are DEXs, with 16 of those also being AMMs. There are also 8 lending protocols and 7 yield-aggregators. Only 4 BSC protocols ̶ PancakeSwap, Venus, and two other DEX/AMMs ̶ have over $1B TVL.
In comparison, Ethereum has 291 dapps running on top of it, 14 (including both versions of Uniswap and Aave) of which have over $1B TVL. So right now, Ethereum is by far the more valuable ecosystem overall.
Copycats and Meme Tokens
BSC’s lower barrier to entry not only means that people with less money can participate more easily, but it also provides a far cheaper environment for developers to build dapps.
And because of that, some questionable applications, like copycat NFTs and memecoins, have made a home of BSC.
BSC is planning to launch its own official NFT marketplace in June. But in the meantime, some NFT projects running on BSC have just stolen from successful projects on Ethereum. For instance, in February, Larva Labs tweeted about “Binance Punks” stealing art from CryptoPunks and selling it on BSC. And another BSC project ̶ which has since been shut down ̶“Musical Beats” stole from Ethereum-based audio NFT platform EulerBeats.
As it relates to memecoins, eight of BSC’s top ten tokens by volume over the past 24-hours are memecoins priced below a penny. There’s Alaska Inu (LAS) with a 24-hour volume of $17.8M, AQUAGOAT with a 24-hour volume of $14.6M, and Australian Safe Shepard (ASS) with a 24-hour volume of $8M. Many of these meme tokens, like ASS, are commonly shilled on Twitter and Reddit forums like r/CryptoMoonShots. And looking at the massive BSC project compilation list on BSC News reveals tokens like the Non-Player Token featuring the NPC meme, and Yield Panty, a deflationary token to “entice people.”
While some of BSC’s memecoins might have solid tokenomics underpinning their protocols, many are created on the fly just for fun and have little to no real functionality besides trolling and speculation.
In conclusion, BSC is offering a low-cost blockchain for a growing number of smaller scale DeFi users and developers, but because of that, there are more opportunities for bad actors, speculation and fickle investors.