Starting as far back as mid-2020, Ethereum has been grappling with three major issues: high fees, slow transactions, and limited scalability. Ever since, platforms that managed to address these issues gained huge popularity among developers, especially in the decentralized finance (DeFi) sector.
Among notable projects stands Binance Smart Chain (BSC), which managed to grow remarkably big in less than 10 months. Interestingly, the daily transaction volume on the Binance Smart Chain has been constantly outpacing that of Ethereum since the beginning of 2021.
However, as Ethereum gas fees are now dropping down to standard levels, it seems like Binance Smart Chain is losing its growth momentum.
BSC Unique Addresses Hit New Record, but Growth Slows Down
Since its launch in September 2020, Binance Smart Chain has been on an exceptional growth path. The network settled $1.5 trillion worth of transactions in the first quarter of 2021. In comparison, Ethereum managed to reach this milestone 8 years after its debut — Etherum also settled exactly $1.5 trillion in the first quarter of this year.
Just recently, the number of unique addresses on the Binance Smart Chain reached a new all-time high of more than 83 million. The major increase in BSC unique addresses occurred between February and March this year, as Ethereum gas fees were recording new ATHs.
While BSC hit a new milestone in terms of unique addresses, its daily transactions have stalled. The daily transactions on the network have dropped by more than 66% compared to its peak at $11.8 million around mid-May.
However, it is worth mentioning that despite this drop, the daily transactions on BSC still outperform that of Ethereum by quite a bit. At press time, Ethereum’s daily transactions are just more than $1.2 million, while the daily transactions on BSC are slightly more than $3.5 million.
Furthermore, the total value locked on the Binance Smart Chain has also undergone a 51% drop compared to its peak value of $53.374 billion set in mid-May. Influenced by this lack of momentum, BNB price has also been trading at $310 price levels for some time now. Though the upcoming BNB coin burn can be potentially bullish for the BNB price.
Ethereum Gas Fee Trends Downward
A recent report by blockchain analyzer Coinmetrics reveals that Ethereum’s gas fees have been dropping since mid-May. As of now, the fees have reached their lowest levels since March 2020. While a few months ago average gas price regularly stretched 150-200 GWEI, now the average price has decreased to the 15-30 GWEI range.
Several factors have contributed to this significant drop in the average gas fee. For one, Ethereum’s gas limit was increased to around 15M on April 22, which allows more operations to fit into each block, thus easing congestion.
In addition, scalability solutions like Polygon have started to take some burden off Ethereum since late April. Polygon, which is a layer two scaling solution that aims to improve interoperability between the Ethereum blockchain and compatible networks, is now settling more and more transactions.
Moreover, Ethereum’s long-awaited London hard fork is likely to launch on Aug 4. The update will be a major step towards the highly-anticipated Ethereum 2.0 upgrade. As previously reported by The Tokenist, with the Ethereum 2.0 upgrade taking place and functioning as expected, Ethereum could end up as the winner of the smart contract wars.
Binance Smart Chain: The Hotbed of DeFi Exploitations
A major factor in driving away hordes of developers and users from the Binance Smart Chain could have been the recent successive breaches of the network’s projects. Binance Smart Chain, which has a diminutive number of validators compared to Ethereum, was exploited more than 9 times in 2021 so far.
PancakeBunny recorded the largest hack, losing more than $200 million worth of crypto assets as the consequence of a flash loan attack. In total, 9 more outstanding BSC-based projects were exploited, accounting for a staggering $370 million in losses. Considering the entirety of DeFi hacks in 2020 totaled $154 million, BSC hacks were striking.
Nevertheless, the BSC community believes the hacks were well coordinated and asked developers to double-check for security breaches. While the majority know that DeFi is still in its experimental phase, it would still be hard to remove the bad memories linked with Binance Smart Chain—especially for victims of the recent attacks.
What do you think will be the fate of the Binance Smart Chain once the Ethereum 2.0 upgrade rolls out? Let us know in the comments below.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.