Great thanks to Dominator008 for his support to this Insight!
Binance Smart Chain (BSC) launched last September, opening a new era of exchange-blockchains and attracting attention of numerous projects. In a couple of months, BSC ecosystem saw an overall growth — AMMs, lending & borrowing, stable coins, NFTs and other ecosystem projects began building on BSC. Then in December 2020, Huobi announced the launch of their own Huobi ECO Chain (Heco) followed by the announcement of OKExChain which launched with live trading, mining and EVM Module for smart contract development functions.
Exchange chains are currently a hot topic in the industry and the trend will continue to be for a long time. BSC is currently one of the leading exchange chains and since its launch, has quickly attracted many users, projects, and seen significant growth of its on-chain data. Its transaction volume reached $1.2 billion in just one month since launch. The goal of BSC is to offer quicker and more convenient asset transfers across multiple Layer 1 blockchains and/or dApps. We also look forward to the implementation of Ethereum Layer 2 scaling technology to “compete” with BSC in the near future. Alternatively, we see a possibility where the two can work together to create a better user experience.
This year, BSC aims to build cross-chain financial infrastructure, unlock the Internet value, provide more solutions for various blockchain composibility, and enable different DApps to interact and transfer assets via BSC bridge service. At present, BSC is spending more effort on subsections such as algorithms, aggregation solutions, cross-chain and multi-chain, gamification, community, and social tokens, synthetic assets, institutional DeFi, infrastructure, and tools, etc., which provide a massive design space and infrastructure support for more and more projects who choose to migrate to BSC.
With an increasing number of projects migrating to BSC, we believe BSC is to Ethereum what Kusama is to Polkadot. New projects can be tested in a real environment already while leveraging Binance’s 100M user base and at a lower cost. Presently, the development of the layer 2 network (sidechains excluded) is not as fast nor developed as exchange chains and we see this as an opportunity for BSC to attract projects who will choose to migrate to avoid the high gas fees of Ethereum Mainnet.
The exchange chains have taken over a lot of traffic from Ethereum and have become the essential public chains that cannot be underestimated in the ecosystem. A prime example of power of BSC has been Pancake Swap. In our opinion, BSC itself will become more decentralized, and encourage communities to run nodes and BNB holders to pledge to nodes for revenue. In the long run, BSC will become an important part of the future multi-chain ecosystem.
As a reply to the rapid development of the Ethereum DeFi ecosystem, exchange chains have their own pros and cons. IOSG reckons that exchange-leading chains like BSC will continue to trend in the short term. The reasons are as follows:
Although exchange chains possess obvious advantages, they are far from perfect. The problems mainly include: