You may have heard about BNB Chain, created by the world’s largest cryptocurrency exchange. The chain, which is the result of a merger of Binance Chain and BNB Smart Chain, has won kudos for its ability to swiftly process transactions while charging low fees. The company, however, currently faces a number of legal and regulatory issues. Read on to learn more about this important player in the world of blockchains.
Social Media
Although decentralized apps are often used for social media and gaming purposes, some of the most attractive uses are made in finance. Investors who loan money on a dApp, for example, generally get higher interest rates than if they loan money to a bank since there aren’t any intermediaries. Borrowers also can negotiate rates with lenders, which isn’t always the case for people shopping for a loan. Finally, a smart contract can allow the transaction to take place immediately since no lawyers or other third parties are involved.
Getting started on the BNB Chain is an easy, three-step process:
- Download a crypto wallet to connect to BNB Chain and manage funds;
- Get BNB, the BNB Chain currency; and
- Find a dApp that you want to use, a game you want to play, or another application that looks interesting.
Pros and cons of BNB Chain
Like any other blockchain ecosystem, there are advantages and disadvantages to BNB Chain. And while we generally like to present the pros first, the BNB Chain had some big cons in mid-2023. First and foremost, its parent company Binance Holdings has been charged by the Securities and Exchange Commission with failing to register its tokens and failing to register its platform before its 2017 initial coin offering (ICO).
The SEC investigation isn’t unique to Binance. Ripple Labs (XRP +0.20%), for example, has been fighting with the SEC over whether its token should be considered a security. But the SEC also has charged Binance with a number of securities violations, citing co-founder Zhao’s control of Sigma Chain AG and Merit Peak Ltd., trading firms that act as market makers on the Binance platform. The SEC claims the two firms received unfair speed and access advantages, and it alleges Binance commingled billions of investor assets, sending them to the two firms owned by Zhao.
The Commodities and Futures Trading Commission also has weighed in, alleging that Binance traded on its own platform using 300 “house accounts” without disclosing the information to its customers. Zhao described the CFTC filing as “unexpected and disappointing,” noting that the company had been cooperating with the regulator for more than two years.
Finally, there’s the question of security. Although Binance notes that no investor lost money, an October 2022 exploit prompted the company to pause its BNB Smart Chain after hackers made off with more than $100 million. The company promised to alter its governance to prevent further exploits.
To be sure, BNB Chain has some advantages. It supports EVM-compatible smart contracts and other protocols so users from other blockchains can easily migrate their dApps. The blockchain also has cross-chain bridging that allows Tether and Ethereum developers to use it. It supports most popular programming languages and has extensive documentation. The BNB Chain also uses the proof-of-stake method to validate blocks. The method leads to faster transactions, lower gas fees, and a much smaller carbon footprint.
