Nowhere is the value of a multi-chain cryptocurrency ecosystem seen more clearly than in DeFi . The processes required for DeFi, such as lending, staking and yield farming, are complex. As there are already many chains, all offering different services, it is unrealistic to expect a chain to be the best in everything. A healthy DeFi ecosystem will be multichain with different blockchains meeting different financial needs.
Currently, the Total Locked Value (TVL) on Ethereum is more than $ 50 billion. This makes it by far the largest chain in the DeFi ecosystem. Ethereum has more than double the blocked amount compared to Binance Smart Chain which is currently the second largest chain with just under $ 25 billion. However, the TVL is only one way to measure the size of the chain. Nearly 3.5 million transactions take place on BSC every day. This is nearly three times the total number on Ethereum which only has around 1.2 million transactions per day.
This perfectly demonstrates the ability of different chains to perform different tasks more efficiently. Ethereum, as a proof-of-work network and a truly decentralized network, holds most of the largest protocols that facilitate lending operations.
AAVE is one such example, and is arguably the largest protocol in all of DeFi when measured in terms of TVL. However, the proof-of-work verification model creates complications for Ethereum. Transaction speeds are slow and the fees are much higher than on BSC. Because of this, BSC can offer a much more efficient product in terms of trading and also potentially has an edge over Ethereum when it comes to staking capital in liquidity pools.
Binance Smart Chain, an Ethereum competitor
BSC was launched less than a year ago and is already a real rival to Ethereum. BSC’s Proof-Of-Staked Authority means network participants stake BNB to validate transactions. Participants will then be rewarded with a portion of the transaction fees that have been included in the validated blocks. While some might say that this validation method means BSC is not truly decentralized, one thing is clear, this method makes it possible for BSC to charge much lower fees than Ethereum’s.
Transactions on Ethereum can routinely cost more than $ 100. Conversely, a BSC transaction rarely exceeds as little as $ 0.25. These low fees have undoubtedly contributed to BSC’s rise more than any other feature. Simply put, Ethereum is completely unsuitable for high-intensity trading for the average retail investor.
For developers, BSC can offer much faster transactions. This is a feature that will particularly appeal to DeFi developers looking to create protocols that require a lot of transactions to work.
BSC: The DeFi chain
Perhaps this is why BSC protocols are much more DeFi oriented than Ethereum. Only 10% of dApps on Ethereum have a DeFi feature. However, BSC, despite being a much smaller ecosystem, sees around 75% of its dApps to be part of the DeFi ecosystem.
Comparing and contrasting one DEX of each chain is the best way to illustrate the differences. SushiSwap is a very popular DEX on the Ethereum chain while CoinSwap Space is a new DEX operating on BSC. Both of these chains provide a myriad of different DeFi options that allow users to yield farming and stake their crypto tokens. The goal of both of these DEXs is to challenge the leading DEX on their own blockchain ( UniSwap on Ethereum and PancakeSwap on BSC).
Perhaps the biggest difference between these two DEXs and probably the difference that is most significant to users is the fees. To use SushiSwap, a user has to pay commissions on the Ethereum network which, as noted, regularly leads to commissions over $ 100. CoinSwap , on the other hand, has low fees even compared to other DEX BSCs, being able to offer transactions for less than $ 0.20.
The low transaction fees on BSC mean that CoinSwap can offer many different features that make DeFi simple. Using the bulk collection feature, users can send all returns across all their liquidity pools and staking tokens directly to their wallet. No matter how many different pools a user has invested in CoinSwap, all returns can be collected in a few simple clicks. Due to the inefficiencies of Ethereum’s Proof-of-Work model, bundling so many different transactions is much more difficult.
Another key feature of BSC, especially for the future, is that it was built to facilitate interoperability. CoinSwap is only a couple of months old, but the team already plans to incorporate several blockchains as part of their DEX. This is possible because BSC is built with a double chain architecture. This will be a huge benefit to any protocol built on BSC if DeFi truly develops in a multi-chain ecosystem. BSC interoperability means DeFi can be supported wherever it develops.
Taking DeFi to the next level
There is a lot of space in DeFi for BSC, Ethereum, and many other chains . BSC has advantages over Ethereum in some areas, but that doesn’t mean Ethereum isn’t superior in other respects. However, the low fees and fast transactions on BSC have facilitated a DeFi ecosystem that serves the average investor in a way that could not exist on Ethereum. The fact that it took less than a year to grow shows how much demand there was for this version of DeFi. This perspective that BSC offers can only propel the rest of the cryptocurrency sphere forward.