Difference between revisions of "Binance"

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*[[Tranchess (CHESS)|Tranchess]]; Binance Labs was part of the [https://www.coindesk.com/markets/2021/07/05/defi-protocol-tranchess-raises-15m-in-seed-round-led-by-three-arrows-spartan/ $1.5m seed round] (5-7-2021).
*[[Tranchess (CHESS)|Tranchess]]; Binance Labs was part of the [https://www.coindesk.com/markets/2021/07/05/defi-protocol-tranchess-raises-15m-in-seed-round-led-by-three-arrows-spartan/ $1.5m seed round] (5-7-2021).
*[[Twitter]]; [https://twitter.com/CoinDesk/status/1522178995319721985 committed] $500M to finance [[Elon Musk]]'s takeover (5-5-2022). When the deal was finally done, this number was [https://newsletter.banklesshq.com/p/elon-cz?utm_source=post-email-title&publication_id=16015&post_id=81246557&isFreemail=true&utm_medium=email confirmed] (29-10-2022) ''"This means the company has roughly a ~1.1% stake in the social network."''
*[[Twitter]]; [https://twitter.com/CoinDesk/status/1522178995319721985 committed] $500M to finance [[Elon Musk]]'s takeover (5-5-2022). When the deal was finally done, this number was [https://newsletter.banklesshq.com/p/elon-cz?utm_source=post-email-title&publication_id=16015&post_id=81246557&isFreemail=true&utm_medium=email confirmed] (29-10-2022) ''"This means the company has roughly a ~1.1% stake in the social network."''
* According to [https://twitter.com/cyber_hokie/status/1302766451892400128 this] [[twitter]] thread (7-9-2020):
* [[Zircuit (ZRC)|Zircuit]]; Binance Labs was part of their Mainnet Round (22-7-2024).
*According to [https://twitter.com/cyber_hokie/status/1302766451892400128 this] [[twitter]] thread (7-9-2020):


''"Binance backs [[Band Protocol (BAND)|Band]], [[FTX]] (aka SBF [[Alameda]], the new [[SushiSwap (SUSHI)|sushi]] controller), and [[Serum]] (via [[3commas Cap]])."''
''"Binance backs [[Band Protocol (BAND)|Band]], [[FTX]] (aka SBF [[Alameda]], the new [[SushiSwap (SUSHI)|sushi]] controller), and [[Serum]] (via [[3commas Cap]])."''

Latest revision as of 02:41, 28 November 2024

Most known for its CEX and its BNB Chain (fka BSC)

Basics

  • Binance is currently a Cayman Islands based company. Binance has launched (4-2019) its Singapore fiat-to-crypto exchange, its third after exchanges in Uganda and Jersey
  • Since 2017
  • Mainnet release: 1-9-2020
  • Reportedly asks 100.000$ for listing a new coin.

History

"Binance was founded in 2017 by ex CTO of OKCoin, Changpeng Zhao (CZ), who raised US$15M to fund the company through an initial coin offering. The token sold was Binance Coin (BNB), which initially gave discounts on trading fees for users who held the token in their exchange wallet. BNB has been developed into an entire ecosystem since then - BNB coin has its own purpose built blockchain, is used to buy into Initial Exchange Offerings (IEO’s), and has many other applications within the Binance ecosystem."

Audits & Exploits

"As noted by a former Financial Accounting Standards Board (FASB) member and investment manager, the report released by the audit firm Mazars give not bring investors confidence about the exchange's finances, as it lacks information related to the quality of internal controls and how Binance's systems liquidate assets to cover margin loans.

Another red flag raised by the newspaper's sources regards the lack of information about Binance's corporate structure. According to the report, Binance’s chief strategy officer, Patrick Hillmann, was unable name Binance’s parent company, as Binance has been going through a corporate reorganization for almost two years.

Differences between the total Bitcoin liabilities were also highlighted. The exchange's proof of reserves shows that Binance was 97% collateralized, excluding assets lended to users through loans or margin accounts, indicating that the 1:1 ratio of reserves to customer assets was not achieved. Mazars' letter states about the difference: "With the inclusion of In-Scope Assets lent to customers through margin and loans which are overcollateralized by Out-Of-Scope Assets, we found that Binance was 101% collateralized.""

  • SafeCEX scored it in the Diamond tier with 89% (11-12-2022). Previously it held Gold tier with 75% (8-12-2022):

"⌛️ 5 days since Proof of Reserves

📎 Announcement

🔎 Assets included: BTC

✅ Merkle tree available and verifiable online

✅ Merkle tree open sourced

✅ Wallet addresses made public

✅ Wallet ownership confirmed by third-party auditor

❌ Wallet ownership not proven publicly by custom message"

"This is our third lowest scoring chain and it’s not hard to see why. BNBCHAIN is an example of a chain that is almost entirely centralized, poorly developed and insufficiently supported. Despite some good steps, this network remains insecure. This chain is essentially fully centralized. Contrary to what BEP131 might have you believe, a rotating hot-seat system of 2 of 21 validators being randomly selected does not equal a decentralized, secure or robust network. All it does is minutely distribute power further. It’s a step in the right direction, but a superficial and inconsequential one. For full network decentralization, the BnB chain should remove the cap on validators and then implement this random system.

Of these 21 validators, we couldn’t find any information relating to clear geographic locations. This means that the network could be potentially vulnerable to a power outage - more documentation is needed here! Despite technically allowing anyone to validate, the lowest active BnB validator has $millions in  BnB - making this network prohibitively expensive to validate. This hampers decentralization further (than the already limiting 21 validator slots).

When it comes to the node software, we’re pleased that they’ve forked Geth and subsequently inherits many of its strengths. We’re also glad that development is all traceable in a public git repository. With just one documented node implementation, the BnB Chain is vulnerable to potential bugs. This vulnerability is proven countless times in their repository’s issues section: synchronization issues, validator sponsored front-running (and gasless transactions), PoSA abuse, network spam all come up in different points:

https://github.com/bnb-chain/bsc/issues/911,

https://github.com/bnb-chain/bsc/issues/338,

https://github.com/bnb-chain/bsc/issues/658,

(and so on and so forth).

We are pleased with the existence of a BEP infrastructure system to discuss chain upgrades (as opposed to arbitrary update systems), but we’d value longer discussion periods. A discussion period of 20 days on average is far shorter than other L1s.

For each line of deployed code, we found 1.77 lines of test code. This is relatively impressive, though we’d love to see code coverage statistics in their repository. We’d also like to see test reports and the scripts required to run them ensuring security minded users can replicate the tests. We’re also extremely unhappy with the lack of BnB chain specific audits. Given the massive innovation to consensus the BnB chain uses compared to Geth (as well as subsequent developmental differences between Geth and BnB), the lack of audit is frankly unacceptable. Everyone is well aware of the proven utility CertiK has provided to the BNB chain’s protocols, but it’s a surprising (and worrying) oversight that the node software itself has not been audited. Indeed, this is potentially a contributing factor for bugs as potentially as crippling as 20,000 free transactions to go unnoticed because there is no incentive to act in any other way."

  • CertiK claims to have done an audit for them, according to their website (12-6-2020). It is also selected as a partner (23-9-2020) for auditing Binance Smart Chain and projects building on that platform. 

Bugs/Exploits

  • A twitter user highlighted the following: "There is a high probability that BNB Smart Chain introduced a bug that caused persistent state damage. Erigon has not been able to sync the chain for a ~week now." And then the Chief Scientist of BNB fixed it the same day, meaning, didn't notice it for a week.
  • Infinite minting vulnerability discovered in BNB Chain and disclosed through responsible disclosure process by Felix Wilhelm, Jump Crypto.
  • From Decrypt: "Binance today completed its 21st quarterly burn of BNB tokens, effectively compensating for the losses incurred from its bridge hack (14-10-2022) Today’s burn took 2,065,152.42 BNB, worth over $549 million at current prices, off the market."
  • The founder of Cosmos explained that BNB Chain did use IBC code, but that the exploit itself would not have been possible within Cosmos and its IBC network (9-10-2022).
  • From Decrypt (7-10-2022):

"The BNB network was paused last night after detecting a spike in “irregular activity.” Binance’s BNB Chain is back up and running this morning after reports indicated a hacker made off with an estimated 2 million BNB tokens by exploiting a vulnerability in the network. At the time of the exploit, this sum came out to roughly $586 million, which would have made it the second-largest in crypto’s history. However, security firm SlowMist said the hacker only managed to get away with roughly $110 million. That’s because the majority of the stolen tokens, or $430 million worth, couldn’t be transferred off the BNB chain following the chain’s suspension last night, the firm said.

BNB Chain and CZ assured token holders that “all funds are safe,” as the stolen funds were not taken from wallets, but instead newly created by the attacker. “An exploit on a cross-chain bridge, BSC Token Hub, resulted in extra BNB. We have asked all validators to temporarily suspend BSC."

  • When asked if Binance will interfere with exploits on its BSC chain a representative answered (27-5-2021):

“It is not possible in the way that a lot of people think for there to be some kind of rollback.”

"It was only a matter of time until we started seeing rug pulls on other centralized EVM-based chains. We got a glimpse of that this week when Meerkat Finance was drained and then undrained on Binance Smart Chain (BSC)."

Governance

Admin Keys

"This chain is essentially fully centralized. Contrary to what BEP131 might have you believe, a rotating hot-seat system of 2 of 21 validators being randomly selected does not equal a decentralized, secure or robust network. All it does is minutely distribute power further. It’s a step in the right direction, but a superficial and inconsequential one. For full network decentralization, the BnB chain should remove the cap on validators and then implement this random system."

Treasury

Binance, BNB Beacon Chain, BNB Smart Chain and BNB Greenfield

  • BNB Greenfield launched on 17-10-2023.
  • From Blockbytes (9-2-2023):

"BNB Chain has released the whitepaper for its new decentralized data storage infrastructure project called BNB Greenfield. BNB Greenfield utilizes BNB as its native token and becomes the third blockchain in the BNB Chain ecosystem, alongside BNB Beacon Chain and BNB Smart Chain."

"The BNB Chain consists of a multichain framework — the BNB Smart Chain,  the BNB Beacon Chain, and sidechains and rollups.

The Beacon Chain is the dedicated layer used for governance (staking and voting), and the BNB Smart Chain is the dedicated layer for Ethereum Virtual Machine (EVM) consensus and execution. The BNB Beacon Chain is primarily a trade matching engine for the Binance decentralized exchange (DEX) built on a peer-to-peer distributed system that utilizes Tendermint Byzantine Fault Tolerance (BFT) consensus. The BNB Smart Chain is based on a Proof of Staked Authority (PoSA) consensus mechanism and is powered by a network of 21 active validators. The BNB Sidechain framework is a recent development effort designed to create BNB Smart Chain-compatible sidechains. Plans also include the launch of zk-rollups for high-performance scaling, allowing sidechains to customize solutions."

"Binance

One of the largest centralized exchanges—no need to go much deeper here. However, it's worth noting that Binance is also an umbrella brand for the overall Binance ecosystem—a true behemoth in the crypto world, containing a venture fund, project launchpads, an incubator lab, a charity fund...you get the idea.

Binance Chain [became BNB Beacon Chain]

This is the first blockchain network under the Binance brand. It uses Tendermint and thus it can be seen as part of the Cosmos ecosystem. It was launched in 2019 and it was deliberately designed to not support smart contracts. With that, the main use case was trading via Binance DEX—a ‘decentralized’ exchange used to bootstrap liquidity of multiple non-ETH projects, including Thorchain. Thorchain also currently uses it (BEPswap resides on Binance Chain). I couldn't find the details about validation. The FAQ says:

“Binance Chain uses BFT and PoS (upcoming) based consensus mechanism to produce blocks among a series of qualified Validators...The process for setting up validators among different entities on Binance Chain is currently being defined.”

It's safe to assume that the validator set of the Binance Chain is centralized.

Binance Smart Chain [became BNB chain]

Binance leadership was not satisfied with lagging adoption of Binance Chain. While alternative ecosystems were busy building the basic rails, the wave of innovation with DeFi was concentrated on Ethereum. Acknowledging this, Binance forked Ethereum EVM and bootstrapped a second blockchain—Binance Smart Chain, with support of smart contracts.

It's essentially an Ethereum copycat with increased throughput and a centralized validator set of 21 validators handpicked by the leadership (kinda like EOS). They call it PoSA = Proof of Staked Authority.

Having two blockchains under one brand is pretty confusing and I am not sure why they didn't name it differently. However both blockchains now reside on the main Binance domain and form what Binance calls a “dual-chain architecture”."

Token

Binance
Total supplySupply: 197,192,382 BNB

 ICO

  • In July 2017, Binance (BNB) launched, just after raising $15 million in an initial coin offering for its own token, BNB which was first based on Ethereum; users of the token receive a 50% discount on transaction fees.
  • From Token Tuesday (8-10-2019):

"Binance released its whitepaper in June 2017, outlining an ambitious goal to build a world-class digital asset exchange. The project successfully raised $15M in July of 2017 with BNB set at a base conversion rate of $0.10 per token (1 ETH = 2700 BNB)."

Token allocation

  • Allocation: 50% ICO, 40% Founding Team, 10% Angel investers

Inflation

  • According to a Messari report (Q3-2023) it has 6.2% inflation at that time.

Utility

"Trading discounts

First and foremost, BNB can be used to cover maker and taker fees when trading on a Binance exchange."

Lottery Tickets

Binance’s Lottery System determines IEO eligibility based on the amount of BNB held in any given wallet throughout a predefined window of time. It’s important to note that the larger your BNB holdings, the more lottery tickets you will receive. This does not guarantee access but rather increases the chances that you will be able to participate in the sale (in rare cases more than one time). Similarly, the amount of BNB required to receive a lottery ticket along with the number of lottery tickets earned is changed on a case-by-case basis."

Community voting

Binance recently picked up community voting again with a new spin. Rather than having voting be tied to one vote per account, the new system ties token ownership to voting weight. Similar to the layout for the Lottery tickets, the more BNB you hold, the more votes you receive. Furthermore, there are only two coins competing against one another, rather than a slew of projects with little to no attention.
Generally speaking, the thought here is that this system makes it much easier to distinguish if whales (otherwise known as traders with large BNB holdings) would be interested in trading a specific proposed token. Similarly, strong supporters of a given project would be likely to go out of their way to accumulate more BNB seeing as the voting is no longer equal across the board. While the ethics behind this schema may be debated, this method of community voting will likely inquire a strong demand for BNB than previous methods. 

DEX Transactions

This past year marked the launch of Binance Chain, a native chain in which BNB is used to process all transactions on the network. This was largely due to the development of a native decentralized exchange (DEX) which saw many stagnant ERC or NEP tokens migrating to the BEP standard in the hopes of capturing more trading volume. Binance continues to influence the use of the DEX by signaling that projects with *significant* volume on the DEX has a strong chance of being listed on the main site. It only seems logical as those with the most volume on the DEX are also generating the most income to Binance in the form of BNB transaction fees."

Burnings

  • By March 31, 2023, over 44 million BNB (~22% of its 200 million total supply) had been burned since the burn program began in 2017. BNB has averaged a deflationary rate of 1.1% over the last year.
  • From Decrypt (17-10-2022):

"The quarterly burns were formerly based on Binance’s profits from BNB trades at its exchange, but have since changed to a formulaic “auto-burn” model. The formula calculates how much BNB to burn based on the number of BNB chain blocks during that quarter, and the price of BNB. In general, the higher the price of the coin at a given time, the more BNB will be burned each quarter."

"Each quarter, the board of the Binance exchange buys BNB tokens from the market for 20 % of the proceeds of the transaction fees and then 'burns' them (Proof of Burn), that is, it permanently removes from the market."

"As originally outlined in the whitepaper, the company is scheduled to burn BNB every quarter based on the amount of total trading volume over the past 90 days. On average, Binance has burned 0.78% (1,557,906 BNB) of the total supply per quarter. If this held true for the remainder of the burning events moving forward, Binance will hit its 100M BNB burning allocation between July and October of 2033. Seeing as the BNB being burned is coming from the team internal reserve, these events do not have a direct correlation on price as if they were purchased off the open market. With this being said, burn events can still be seen as a long-term value driver behind Binance Coin as scarcity plays an increased role as time goes on."

  • Binance quietly updated their white paper with significant revisions surrounding Binance Coin burnings; according (18-4-2019) to The Block, who spoke with Binance CEO Changpeng Zhao, the white paper's language was clarified for legal and descriptive reasons; commentators say the language change most likely reflects securities concerns, but would have little effect on any regulators assessments.
  • In 2019, the team burned a total of 5,321,482 BNB (US$207,338,000) burned. This is up from $120,000,000 worth of BNB burned at the end of 2018. 
  • A twitter thread on 21-1-2020 further went into the numbers and concluded: 

"My theory is that Binance is just burning more BNB because they already have it in treasury anyway (why not?) and if they burn more, it gives them more headlines and the appearance that Q4 was really successful. Which, if you look at all the data, just can't be possible"

"An example of an off-chain capital asset (albeit one without the legal protections of traditional equities). A portion of profits generated by the Binance exchange is used to burn tokens. These cash flows aren’t autonomously driven by protocol code—humans are involved. Revenues aren’t on-chain and transparent, you have to trust the numbers from a crypto bank. Off-chain cash flow tokens like BNB are a form of psudeo-equity. They’re like securities, but without legal protections."

"The Malta-based exchange said its 13th token burn, which destroyed 2,253,888 tokens or 1.13% of the token's supply, is its highest-ever burn in terms of dollar value and the fourth-highest in terms of the amount of BNB burned."

"Binance has completed its quarterly token burn. The exchange removed roughly 3.7 million Binance Coin (BNB) from circulation worth roughly $165.8 million, according to an announcement published today. This is the largest token burn so far."

"Binance completes 15th Quarterly #BNB Burn. A record $595.3M USD has been burned!"

"Binance Completes 16th Quarterly BNB Burn. $393.6M USD has been burned!"

  • From their blog (18-10-2021):

"Today we completed our quarterly BNB burn, permanently removing 1,335,888 BNB, or the equivalent of approximately $639,462,868 USD from circulation."

  • From Decrypt: "Binance today completed its 21st quarterly burn of BNB tokens, effectively compensating for the losses incurred from its bridge hack (14-10-2022) Today’s burn took 2,065,152.42 BNB, worth over $549 million at current prices, off the market."

Token Details

Stablecoin

Binance stablecoin (BUSD)

  • Had its own stablecoin integrated in its exchanges. The token is a partnership between Binance and Paxos. BUSD is issued by Paxos Trust Company, an NYDFS-regulated entity. It got shut down by the SEC (14-2-2023):

"Paxos said that it "categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws. The halt comes into effect on February 21, but the firm said that "BUSD will remain fully supported by Paxos and redeemable to onboarded customers through at least February 2024.""

Update: Paxos said (11-7-2024) that an investigation conducted by the U.S. Securities and Exchange Commission (SEC) has concluded, with no enforcement action on the horizon.

  • It turned out that at multiple times in its history the peg was not backed at all (11-1-2023), Binance confirmed this but said new measurements had been taken already.

Venus (VAI)

"Binance has unveiled a new “decentralized” stablecoin system called Venus. The system is built on the Binance Smart Chain and will mint the decentralized stablecoin called VAI, backed by a basket of various BEP-20 tokens (BEP-20 is Binance's token standard). The Venus protocol can be seen as a mixture of MakerDAO and Compound, said Binance CEO Changpeng “CZ” Zhao.

"VAI is minted by the same collateral that is supplied to the protocol. Users can borrow up to 50% of the remaining collateral value they have on the protocol from their vTokens to mint VAI," said Binance. "The collateral provided to Venus will be represented by vTokens (such as vBTC) which will enable users to redeem the underlying collateral as well as to borrow against it."

Using the Venus protocol, users will also be able to stake their Binance coin (BNB), Binance stablecoin (BUSD), and Swipe (SXP) tokens into separate pools to farm Venus (XVS) tokens, beginning Tuesday. Binance will then list XVS into the Innovation Zone on October 6 and open trading for XVS/BTC, XVS/BNB, XVS/BUSD, and XVS/USDT pairs. The protocol is developed by Swipe Wallet, which Binance acquired earlier this year for an undisclosed amount. Binance first revealed a project called Venus last August. At the time, Binance said Venus would be a "regional version of Libra.""

  • From this article (29-9-2020):

"According to a tweet by Joselito Lizarondo, founder of Swipe Wallet and Venus Protocol, the BSC-based platform is a fork from Compound (COMP) and Maker (MKR).

Venus does not include any VC pre-mined tokens or team allocation funds in a bid to fully decentralize the project. The VAI token is a multi-collateralized stablecoin offering cross-chain collateral with other crypto assets based in the BEP-20 format.

The platform allows over-collateralized lending with 75% or lower of the assets supplied on the Venus Protocol and interest-earning on collateral supplied. Users can also stake their vTokens (e.g., vETH) to mint VAI stablecoin, which is pegged to the dollar at a ratio of 1:1." 

Coin Distribution

"Approximately 281,987 holders possess BNB, and the top 10 wallets control 47.61% of the supply. The top 50 BNB wallets account for 64.91% of the supply, while the top 100 wallets represent 70.95%. Only two wallets out of the top 10 BNB addresses are labeled as exchange wallets. For additional reference, a quick glance at the BNB chain stats reveals 2,650,397 BNB holders; however, the top 10 wallets on that chain possess 97.25% of the supply."

  • From Bitcoin.com (28-1-2022):

"Coincarp.com metrics indicate that the top ten BNB addresses possess 88.23% of the supply. Onchain stats further show there are 321,134 BNB holders today. The top three BNB addresses are operated by Binance’s exchange platform, as the richest BNB holder is an exchange wallet with 52.02% of the BNB supply. The second-richest BNB wallet operated by Binance holds 27.14%, while 3.55% of the supply is also held by the third-largest address owned by the trading platform. BNB metrics indicate that more than 82% of the BNB supply is held by Binance operated wallets."

Tech

Transaction Details

How it works

  • The Binance exchange uses Infura, which became painfully clear when it went down for a couple of hours (11-11-2020).
  • Binance Smart Chain runs alongside the Binance Chain blockchain. The key difference is that it has smart contracts (like Ethereum) that allow users to run applications on the blockchain.
  • Is still permissioned. "Not everyone can run a validator node and the initial validators are selected by Binance though plans are for validator participation to open up to more people."
  • All 11 pre-selected validators are now online to produce blocks with consensus from the genesis block. The Binance Chain explorer and wallet will be open to public access around April 23. Binance said that no trading pairs will be listed until the first batch BNB conversion has occurred. Changpeng Zhao (CZ) tweeted that he made the first transaction on mainnet.

Binance Smart Chain (BNB Chain)

  1. "t’s a sovereign blockchain, which will provide security and safety to all users and developers.
  2. It’s EVM-compatible and will support all of the existing Ethereum tooling along with faster and cheaper transactions.
  3. Its native dual chain interoperability will allow cross-chain communication and scaling of high-performance dApps that require fast and smooth user experience.
  4. Its on-chain governance with Proof of Staked Authority consensus, built on 21 validators who validate the transactions, will provide decentralization and enable significant community involvement."

"BSC is a fork of Geth—one of Ethereum’s clients—with one main difference: it uses Tendermint BFT consensus (i.e. Cosmos tech) with 21 trusted validating nodes instead of the Ethereum 1.0’s proof-of-work. 21 entities come to consensus on the state of Binance Smart Chain, and these 21 entities are all extrapolations from Binance and its leadership."

Fees

Upgrades

"The quarterly burns were formerly based on Binance’s profits from BNB trades at its exchange, but have since changed to a formulaic “auto-burn” model. The formula calculates how much BNB to burn based on the number of BNB chain blocks during that quarter, and the price of BNB. In general, the higher the price of the coin at a given time, the more BNB will be burned each quarter."

  • After BNB Chain's bridge got exploited, Binance came with the following changes (7-10-2022):

"What happens next?  There will be on-chain governance votes to determine the following four actions for the common good of BNB:

  1. What to do with the hacked funds, freeze or not to freeze?
  2. Whether to use BNB Auto-Burn to cover the remaining hacked funds, or not?
  3. A Whitehat program for future bugs found, $1M for each significant bug found.
  4. A Bounty for catching hackers, up to 10% of the recovered funds.

The BSC validator voting function for general opinions will be switched on in the next few days via an upgrade of BNB Beacon Chain. A new on-chain governance mechanism will be introduced on the BNB Chain to fight and defend future possible attacks.

The number of community validators will continue to expand in the move towards further decentralization. We believe it’s essential for the future of Web3."

"In Q2, developers focused on enhancing the BNB Beacon Chain with the Descartes upgrade and furthering the liveness and robustness of the BNB Smart Chain with the Euler hard fork."

Staking

"This chain is essentially fully centralized. Contrary to what BEP131 might have you believe, a rotating hot-seat system of 2 of 21 validators being randomly selected does not equal a decentralized, secure or robust network. All it does is minutely distribute power further. It’s a step in the right direction, but a superficial and inconsequential one. For full network decentralization, the BnB chain should remove the cap on validators and then implement this random system."

"Besides the 21 active validators, the BNB Smart Chain introduced more inactive validators (called "Candidates") into the validator set over the quarter. This Euler hard fork was implemented to improve the network's reliability and redundancy. Redundancy, in this case, means that 2 candidate validators and 19 active validators will be selected every hour to join the consensus."

Validator stats

"The number of active validators on BNB Smart Chain (BSC) grew 10% QoQ, from 29 to 31. At the same time last year, there were only 21 validators on BSC."

  • From a commissioned Messari report (2-2023):

"In Q3, BEP-131 introduced candidate validators onto BNB Smart Chain to improve the robustness of the network, and over 50 validators (active and in-active candidates) were plugged into the network by the end of Q4. The active validator set also grew from 21 to 23 over Q3. In Q4, the community voted and passed a proposal to add three more active validator seats, expanding the active validator set to 26. Eight validators, including those run by independent third parties such as HashQuark and Certik, contribute to just under ~33% of the network's total stake."

"BSC has 21 active validators, making it more centralized than most platforms. This validator set is determined daily by Binance Chain, a network managed by just 11 validators. BSC's active validator set resets daily based on each validator's voting power (staked BNB + any delegations). All BNB staking and delegation takes place on Binance Chain through a staking module. Binance Chain validators manage this module, thus all BSC validator accounts. BSC now supports several third-party validators, although at least 5-6 others have close ties to Binance. The distribution of validator accounts is far less clear for Binance Chain. They each take turns producing blocks in a seemingly predefined order. There doesn't appear to be any stake-weighted mechanism to determine which one produces the next block."

Liquidity Mining

  • Has what they call a Launch Pool, which resembles liquidity mining. For more info look below under 'Other Projects'.

Scaling

"BNB ZkRolllup is a SNARK-based system that can prove the validity of transactions on a rollup blockchain that inherits security from the underlying BNB Smart Chain. BNB ZkRolllup will be launched in various phases. Phase 1 will focus on leveraging BNB Smart Chain for security while bringing fast transaction speed, faster finality, and lower gas costs for end users. Additionally, the team hopes to make BNB assets interoperable between the BNB Smart Chain base chain and ZkRolllup. The development of BNB ZkRolllup on BNB Chain will be one a significant challenge over the months ahead, but it is crucial to the evolution and competitiveness of the network."

Different Implementations

Interoperability

"More specifically, BNB Chain Bridge integrates with Celer's state channel-based cross-chain network, deBridge's interoperability framework and Stargate's cross-chain liquidity solution."

Other Details

Oracle Method

Compliance

  • $4.3B settlement with DoJ, FinCEN, OFAC & CFTC; CZ resigns as CEO (21-11-2023).
  • Binance is being investigated by the CFTC (13-2-2021). Update (28-3-2023):

The Commodities Futures Trading Commission is suing Binance, CEO/cofounder Changpeng Zhao (AKA CZ,) and ex-chief compliance officer Samuel Lim for allegedly breaking U.S. laws and offering unregistered futures & options trading.

  1. Binance secretly let U.S. customers use its platform.
  2. CZ’s been counter-trading his own customers. Binance traded for profit on its own platform via ~300 “house accounts” that were all owned by CZ and two other trading firms. He said that’s not true though in his post. The CFTC says otherwise: that the house accounts were exempt from Binance’s insider trading policy.
  3. Binance faked a compliance audit.
  4. Binance alerted its VIP members if the cops asked about their account.
  5. Binance knew criminals used its platform, but didn’t care.
  6. CZ made Binance’s corporate structure opaque to maintain control of everything. There are ~120 entities in Binance’s corporate structure. CZ has controlled all of them at one point, either directly or indirectly.

"The BSC system is not as closed as it once was. There are multiple bridges out of BSC now, and they’re not all controlled by Binance, meaning CZ can’t blacklist all the addresses and keep the stolen funds on BSC."

  • When asked if Binance will interfere with exploits on its BSC chain a representative answered (27-5-2021):

“It is not possible in the way that a lot of people think for there to be some kind of rollback."

Their Other Projects

Axie Infinity

Binance Liquid Swap

"Is in effect an automated market maker (AMM) exchange where smart contract-based liquidity pools set spot prices and facilitate swaps. This is the same model used by Uniswap. The three initial trading pairs will be USDT/BUSD, BUSD/DAI, and USDT/DAI."

CryptoSafe Alliance

"Binance is launching the CryptoSafe Alliance platform in partnership with Oasis Labs, a data privacy company, to prevent and analyze cryptocurrency fraud. The CryptoSafe Alliance will begin by offering post-mortem analyses of any hack or breach of contributing members, allowing members to have a better understanding of how to avoid similar attacks in the future. According to a statement announcing the alliance, addresses will be blacklisted when they are found to be complicit in criminal activity such as money laundering, fraud, extortion or theft. 

“By using a combination of privacy-preserving technologies and a decentralized blockchain, the Oasis Network is able to ensure that the CryptoSafe Platform is trustless,” said Vishwanath Raman, Privacy Architect at Oasis Labs. “Each exchange that is part of the alliance can upload threat intelligence without it ever being shared with other partners.""

DappBay

"BNB Chain has announced the launch of ecosystem dApp hub DappBay. The Binance-founded platform will have anti-scam tools built into it for users to assess project risk."

DeFi.org

"Orbs and Binance announced Monday the launch of a new accelerator for the DeFi ecosystem. Named DeFi.org, the accelerator focuses on supporting the research and development of open-source software and community development in the DeFi space. The accelerator will evaluate projects based on their innovativeness and composability within the space, as well as principles of fair distribution, community ownership, sustainable economics and a sound approach to risk management.

In line with the sponsorship, startups will have additional consideration if they are willing to apply for participation in Binance’s “Bridging DeFi and CeFi” program or the Orbs Grant Program. The wider accelerator program is, nonetheless, blockchain agnostic and allows anonymous developers to participate as well.

DEX

  • Has released a Bitcoin-pegged token,  BEP2 , on its DEX Binance Chain to increase liquidity and volume; Binance noted that the use of Bitcoin decreased decentralization on the DEX but increases auditing capabilities versus other ledger styles. The post states that BTCB are 100% backed by bitcoin, with the reserves easily visible as they are recorded on the public blockchain. Binance noted that using bitcoin as a backing asset for the new token allows for more convenient audits

Launch Pool

"Binance has released Launchpool, a way for users to make income by staking tokens for so-called yield farming. The first project to be hosted on Launchpool is Bella Protocol (BEL), which recently raised $4M in a seed funding round led by Arrington XRP Capital.

Users will be able to stake their tokens in three separate pools to farm – earn profits by providing staked liquidity – BEL tokens over a 30 day period starting Wednesday.

A week later, on Sept. 16, Binance will list BEL for trading and open trading pairs on its exchange for BEL/BTC, BEL/BNB, BEL/BUSD and BEL/USDT (tether)."

Mining Pool / Staking activities

"Is planning (1-4-2020) to launch its own mining pool. “The company has already hired some professionals for this purpose, some of them former Bitmain employees. The launch is planned for the Q2 2020,” Coinlife wrote."

Native BNB Oracle System

"Imagine launching a centralized price oracle solution in 2022. Docs and marketing try to make it *seem decentralized* but data is sourced and signed by Binance themselves. Introducing a single point of failure to dApps and putting user funds at risk."

WBETH

  • Binance's version of LSTs.

Acquisitions

"Binance entered the derivative game by buying the JEX exchange in September. The futures market leads in volume after only seven months of operation and now sits in contention with perennial favorites like BitMEX for most open interest, a measurement of the aggregate open long and short positions on a market.

A joint effort with peer-to-peer exchange Paxful suggests fiat-stablecoin aspirations. A strategic investment in upstart FTX represented another bet on crypto derivatives."

IEO's

"For those unfamiliar with the Initial Exchange Offerings (IEOs), Binance was at the forefront of a revived utility token fundraising mechanism that gained traction throughout 2019. In short, rather than a team conducting an Initial Coin Offering (ICO) and then listing on a reputable exchange, IEOs takes the entire process in-house. Historically, Binance IEOs have offered more advantageous deal structures than ICOs in the form of lower hard caps and purchasing limits to further democratize the capital pool.

Roadmap

  • Can be found here (7-2022):

"Most notably, the BNB community plans to expand the BNB Chain with L2-like solutions. Plans include the launch of zk-rollups for high-performance scaling and sidechains for more customizable blockchain solutions.

Further, intentional steps are being taken toward greater decentralization. The team has open-sourced the validator set of the Beacon Chain and continues to evaluate different approaches to both the election period and the elected validators of the BNB Smart Chain."

Revenue

  • Revenue has slowly trended downwards since Q3 2022 from 67M to ~$31M in Q3 2023.
  • From a commissioned Messari report (26-7-2023):

"BNB Chain revenue (in BNB) decreased 6.1% QoQ as average transaction fees declined 25.5% after BSC validators voted to reduce gas fees from 5 to 3 Gwei."

  • From a commissioned Messari report (2-2023):

"With the decrease in average transaction fees, BNB Chain's daily revenue trended downward. The peer group experienced various trends as user activity varied across each."

Usage

  • From Cryptoslate (8-2022):

"BNB has a relatively tiny portion of [GameFi] volume (10.6%) and of gaming transactions (under 5%) despite having the most projects—lending credence to the argument that the chain is full of vaporware games nobody wants to play."

"During Q2, NFT markets, GameFi, and to some extent the Terra collapse, collectively brought more unique users to the BNB Chain ecosystem. The resulting user adoption and its deflationary fee-burning mechanism contributed to BNB Chain’s resilience and outperformance compared to its peer group during Q2. Despite ongoing investment programs, BNB Chain’s Q2 TVL fell roughly 55% in USD terms quarter-over-quarter (QoQ). The BNB Chain ecosystem is heavily concentrated and dependent on PancakeSwap. Roughly 50% of BNB Chain's DeFi TVL is in a single application.

This downturn, however, was isolated to DeFi as BNB Chain’s nascent NFT and GameFi markets grew significantly QoQ. With massive increases in NFT secondary sales volume (634%) and unique NFT buyers (716%), BNB Chain NFT activity quickly grew to levels seen on popular chains like Solana and Flow. The total number of unique contracts deployed also bucked the downward trend, growing 31.7% over the quarter."

"Active wallet addresses on Binance Smart Chain continue to grow at increasing rate compared to Ethereum, accelerating to rate 3x higher than Ethereum since the start of May (with average growth rates of 4.8% vs 1.5%, respectively). Compared to Ethereum’s daily average growth rate for transaction (at ~0.3%), BSC’s daily average growth rate for transactions is 9x greater (at ~2.9%)."

"While the Ethereum blockchain processed a record 1.56 million transactions on Wednesday, BSC registered a total transaction volume of 9.13 million, according to data provided by EherScan. BSC-based PancakeSwap, which generates liquidity from traders who stake tokens, known as “farmers,” alone processed more transactions than Ethereum. PancakeSwap contributed more than 2 million of BSC’s transactions on the day, or some 20% of the total."

"Ethereum has 30x the number of unique addresses at almost 140M accounts, compared with BSC’s 5.2M, according to Etherscan and BSCScan. Ethereum processed $112B in transactions last month, compared with BSC’s $15B, according to DappRadar. Total Value Locked in DeFi is at $54B on Ethereum, or more than five times TVL in BSC, according to data compiled by The Block.

On the surface, it looks as though BSC’s daily transaction count has started dwarfing Ethereum’s rate by two to one. On Friday, BSC’s total transactions breached 3M according to BSCScan. By comparison, Ethereum daily transaction count has never been above 1.5M.

Twitter user ChainLinkGod.eth has pushed back on Binance CEO Changpeng Zhao’s celebration of BSC’s success, pointing to a smart contract which has generated over 100K transactions in the last two days and over 750K total as an example of how the company may be manipulating the metric. “The hundreds of thousands of failed transactions on BSC I posted about are from an PancakeSwap arbitrage bot with a very low success rate,” ChainLinkGod told The Defiant. “It appears to be inflating the transaction volume metric which is often used to promote the amount of user activity on BSC versus Ethereum.”

"Binance Smart Chain (BSC) is starting to match Ethereum (ETH) on some key network numbers—but it’s all dependent on one single application, according to DappRadar’s report published today. “In January BSC reached new heights in terms of transaction volumes and unique active wallets. If the trend continues in February, BSC might become the number one blockchain in terms of transaction volume,” the researchers summarized. In January, the total transaction volume on BSC amounted to $15 billion. This is up considerably compared to previous months. Venus (XVS) is responsible for over 90% of the total transaction volume."

"PancakeSwap holds over $218 million on its smart contracts and is the biggest liquidity provider on the BSC. It added that a total of over 180 projects—all building on the BSC—had applied for grants under the accelerator fund."

Projects that use or built on it

"To date, there are 1400+ projects on the BNB Chain, notably Wombat Exchange, Radio Caca, SecondLive, MOBOX, X World Games and Animal Farm. Meanwhile, PancakeSwap remained the most used dApp on the network in Q3 2022."

Pro's and Con's

Pro's

  • Binance Smart Chain has low fees, liquidity and is composable due to its EVM fork.

Con's

  • An area of concern around the BNB Chain ecosystem is its concentration and dependence on PancakeSwap (31-7-2022).
  • Coin concentration is highly centralized among the top ten addresses, going over 80% (28-1-2022).
  • From Bankless (18-3-2021):

"BSC can scale with Ethereum, but without the world class researchers and developers that work on Ethereum they are destined to wait for Ethereum to innovate and fork the innovation."

"Binance’s recent change from a mandated BNB burn using 25% of the company’s profits have been substituted with a far more ambiguous “we will destroy BNB based on the trading volume”. The lack of transparency surrounding the burn events makes it very difficult for traders to know how much BNB will be burned, or how much Binance had made in profit on any given quarter.

The last potential concern surrounding Binance is identifying the advantages that Binance Chain offers over other rising smart contract platforms, like Ethereum."

  • Has KYC for BinanceUS, whereas before sign-ups only required an email. "With BinanceUS now mandating KYC for sign-ups in parallel with the lack of altcoins and other features, US investors have little incentive to move away from other major US exchanges, such as Coinbase."
  • Participated in the Tron takeover of the Steem blockchain. From DAR Weekly (6-3-2020):

"Sun with the assistance of major exchanges Binance, Huobi, and Poloniex (recently acquired by Tron) used their stake of STEEM (native currency of the network) to prevent the soft fork as well as release the founders fund of STEEM, which accounts for approximately 20% of the circulating supply. Moreover, the funds were utilized to take over the majority voting rights and replace the previous Block Produces with loyal ones. The funds deployed by exchanges were determined to be those owned by individual users, who face a 13-week lockup period. As a result, a huge community backlash ensured, with the departures of multiple Steem developers as well as the Head of Communications.

Objectively speaking, since the announcement on February 14th, the STEEM token has declined 27%. As for the Steemit community, it has not only turned against Justin Sun, but also the very exchanges that aided in the takeover, despite Binance and Huobi citing misleading information."

Team, Funding, Partners, etc.

Team

  • Changpeng " CZ" Zhao; ex-CEO. Resigned after a deal with the DoJ (22-11-2023).
  • Wei Zhou; ex CFO, left suddenly after three years (10-6-2021).
  • Binance hired (19-8-2021) Greg Monahan, a former IRS official, to head its global money laundering team; it will also apply for registration with the central bank of the Netherlands after being issued a warning for operating illegally.
  • Head of Binance Labs Bill Qian Is leaving the firm (3-6-2022). The announcement comes a few days after Binance Labs said it raised a $500 million fund.
  • During the market crash of 2022 it announced that the company is hiring 2000 employees (5-7-2022). Meanwhile 16 executives left the company over the last few years (10-2023).

Funding

"This strategic investment is part of Binance’s $100 million accelerator fund for developers to build blockchain projects on Binance Smart Chain and Mask Network will work closely to build the Multi-Chain Universe."

"Binance backs Band, FTX (aka SBF Alameda, the new sushi controller), and Serum (via 3commas Cap)."

"Announced a $100 million accelerator fund (9-2020) for its Binance Smart Chain ecosystem, the first six blockchain projects who got funding are AnySwap, Arkane Network, BakerySwap, Bitquery, PancakeSwap, and Proxima. The six funded projects range from automated market makers and data platforms to gaming solution providers. Of those, PancakeSwap holds over $218 million on its smart contracts and is the biggest liquidity provider on the BSC. It added that a total of over 180 projects—all building on the BSC—had applied for grants under the accelerator fund."

  • Launched a $1 billion fund for growing the Binance Smart Chain (BSC) ecosystem (12-10-2021).
  • Announced a new half-billion dollar fund. The $500 million will be invested in Web3 projects. The fund has big backers: Internet investment capital firm DST Global and global venture capital firm Breyer Capital are both involved.

Partners

"Binance and India-based bitcoin exchange WazirX – which Binance acquired in November – announced Tuesday their new "Blockchain for India" fund would incubate and invest in local startups that contribute to the creation of a sophisticated cryptocurrency and blockchain ecosystem for the subcontinent. Worth a total of $50 million, the fund will make investments anywhere between $100,000 and $5 million."

"BMW plans to integrate blockchain technology into its daily operations and create a blockchain loyalty program for its customers in Thailand. The popular carmaker has onboarded blockchain infrastructure firm Coinweb as its decentralized architecture provider and BNB Chain for settling transactions."

Binance Chain Alliance

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