BNB price surges as Binance Smart Chain grows in popularity with DeFi

Binance Coin (BNB) experienced an absolute rift in February. It traded at $ 48.93 on February 1 and rose to $ 304 at the time of publication, up 521% since the start of the month and 707% since the start of the year.

This price rally has made the BNB the third largest cryptocurrency with a market capitalization of $ 46.5 billion. The NBB hit its all-time high of $ 342.88 on February 19. That price rally and jump in market cap is due to the growing popularity of Binance Smart Chain in the decentralized financial markets and other macroeconomic factors driving the growth of flagship assets like Bitcoin (BTC). and Ether (ETH) hit new all-time highs this week.

While the price of Ether rose to its all-time high on February 19, Binance announced on Twitter that they have “temporarily suspended” withdrawals from Ether and all Ethereum-based tokens due to an “overload problem”. This resulted in users being unable to exchange these tokens for about an hour and then leave the community to speculate on what actually happened. That hiatus caused the BNB to rise another $ 60 during that time, while Ether fluctuated in the same range.

Binance Smart Chain is the main driver?

Aside from macroeconomic factors like the price of BTC and ETH hitting all-time highs this week and driving up the price of BNB, Binance Smart Chain has also gained significant prominence in the crypto community. BSC was launched in September 2020 and acts as a parallel blockchain to the Binance chain. At the same time, it enables the functionality of smart contracts and the staking mechanism of the BNB, which the Binance chain supports as a native token.

Cointelegraph further discussed this with a Binance spokesperson, who commented on the unique benefits BSC has for users, saying:

“BSC offers a powerful and cost-effective blockchain network that is compatible with the Ethereum Virtual Machine. Developers can be less concerned about transaction fees and more focused on innovation while using all of the existing developer tools that they are familiar with in the Ethereum ecosystem. “

The entire Binance ecosystem is operated by BSC. As a global cryptocurrency exchange with extremely high user traffic, it is extremely important that scalability and low transaction fees go hand in hand with the BSC ecosystem. BSC is now used extensively by various DeFi protocols, with Ethereum for the blockchain being the multi-service platform Value DeFi and the yield aggregator Harvest Finance, which cited cross-chain yield farming as the main reason for the relocation.

The influence of BSC has expanded to include various DeFi protocols. At Venus, an algorithmic money market and synthetic stablecoin protocol designed specifically for BSC, the price of its Venus Token (XVS) rose over 750% from a low of $ 10.04 on Dec. 2 after its launch on Binance Smart Chain February to an all-time high of $ 95.90 on February 20th.

Another well-known DeFi protocol to BSC is PancakeSwap, which became the first billion dollar project on the blockchain. Due to the growth of its food token, CAKE, its market capitalization quickly doubled to $ 2 billion. Data from Cointelegraph Markets shows that the price of the CAKE rose 973% from a low of $ 1.89 on February 3 to its all-time high of $ 20.33 on February 19.

Speaking to Cointelegraph, Ilia Maksimenka, CEO of PlasmaPay – a DeFi investment platform – pointed out that PancakeSwap could be one of the main reasons for the BNB’s price rally:

“PancakeSwap traded over $ 400 million daily and briefly became the second largest DEX in the world. It is [BSC’s] The unique proposals of a lottery service and a non-fungible token-art platform have encouraged PancakeSwap use cases. “

BSC wins with high Ethereum fees

Another reason BSC is so popular is its lower transaction fees compared to Ethereum, which is pulling retail investors off the DeFi markets due to its high demand and tailoring it more to whales. While Eth2 is proposing to use its scalability solutions to address the transaction fees issue, the network is currently heavily congested due to the increasing popularity of DeFi protocols, resulting in high gas fees for all transactions on the Ethereum network.

William Quigley, cryptocurrency fund manager at Magnetic Capital – a crypto-focused investment firm – told Cointelegraph that the increase in BNB was due to the congestion on the Ethereum blockchain, adding, “Ethereum has an Uber-like increase pricing mechanism. When the demand in the chain is high, the price of quickly completing a transaction increases. “

On February 18, BSC recorded 2.5 million transactions on its network, compared to 1.3 million transactions on Ethereum. The Binance spokesperson told Cointelegraph why this might be the case:

“The daily transaction volume at BSC has increased by 300% since the beginning of the year and strengthens an ecosystem of over 100 DeFi projects. Additionally, the platform managed to keep GAS costs down to just $ 0.04. Compared to $ 5.53 on Ethereum, BSC is 135 times cheaper! “

While Eth2’s phased launches promise speed in the proposed roadmap, history suggests those launches often miss the deadline with no clear indication of when the actual updates will be made. With Ethereum taking some time to implement its scaling solutions, which should ultimately lower gas charges on the network, blockchains like BSC will benefit most from the delays up until this point.

Ethereum’s network speed compared to BSC could also be one of the reasons DeFi protocols migrate to BSC as it is comparatively faster. BSC allows 300 transactions per second, while Ethereum can only process 15 transactions per second despite its higher transaction fees.

Blockchain disruption

Lower transaction fees and network speed may not be the only reasons some DeFi protocols migrate to BSC. The fact that BSC is 100% compatible with DeFi’s flagship blockchain Ethereum, which allows protocols to deploy their application to BSC without additional changes, is a design victory for Binance. The Binance spokesman went on to talk about some of the other reasons:

“We heard that the DeFi protocols are increasingly chain independent. BSC’s rapid growth shows that users prefer lower transaction fees. BSC also offers a wide variety of assets, many of which are not available in Ethereum’s DeFi protocols. “

Although various other blockchains like Cardano and Polkadot are trying to break Ethereum’s hegemony in the DeFi and NFT markets, neither of the two has been as successful as the Binance Smart Chain. Disruptive blockchain innovations will drive the industry forward by challenging the status quo and driving blockchain developers to focus on building universal, well-connected blockchains.

Connected: DEXs become unusable? How to Navigate to Record Gas Charges Before Eth2

Billy Adams, head of ecosystem development at XinFin – an open source hybrid blockchain platform – told Cointelegraph that blockchains like BSC are beneficial to the entire ecosystem:

“The market is showing appetite for new DeFi solutions that can offer investor protection, sufficient liquidity for MSMEs and interoperability between other blockchains and legacy systems.”

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