As the Binance Smart Chain (BSC) ecosystem continues to grow so too does the price of BNB. The asset is up to $565 from $37 at the beginning of the year. However, the growth in the BSC ecosystem on the BNB price is igniting concerns of over-centralization on the network. According to a new report from CoinTelegraph, two researchers from crypto analytics firm, Messari raised the issue on Twitter on Monday.
Where do these concerns stem from? The BSC network operates on a Proof-of-Stake (Pos) model that uses 21 validators, chosen daily, to confirm transactions on the network. Just 11 of these validators are responsible for the network’s governance. By contrast, there are more than 77,000 validators who have staked on the Ethereum 2.0 network.
In order to become a validator, a user has to “stake” (or lock in) at least 10,000 BNB (worth $5.65 million at today’s prices). In exchange for locking in this amount of BNB, validators are rewarded with BNB tokens each time they are chosen to confirm transactions.
Is the Binance Smart Chain Centralized?
In theory, anyone who holds this much BNB can become a validator. However, several researchers at Messari believe that the validators on the BSC network could be a little too connected to Binance itself.
Wilson Withiam, a senior research analyst at Messari, wrote on Twitter that: “it’s hard not to presume that each Binance Chain validator is in some way connected or tied to Binance.”
“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,” he said.
Some might overlook the influence Binance Chain has over Binance Smart Chain's validator set.
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. pic.twitter.com/UeWDj0o1DY
— Wilson Withiam (@WilsonWithiam) April 12, 2021
Ryan Watkins, another senior research analyst at Messari, also commented that: “every cycle people get hoodwinked by the latest centralized solution to all blockchains problems.”
Why Ethereum Needs Layer 2 Solutions More Than EverGo to article >>
“Price action will cause people to believe anything. I don’t care how high BNB or CAKE go, it won’t change that they’re still copycats,” he said, referring to Ethereum as the original smart chain network. “It’s one thing to view these assets as a way to make money, it’s another to view them as innovations that push this industry forward.”
“The reason why BSC is faster and more scalable is not because of some magical technological innovation. No, it’s instead the magic of centralization. BSC is an Ethereum fork with a centralized validator set. That’s it. Nothing more.”
You can make money on the way up… BSC will likely have a place in this industry for the foreseeable future.
But if you really think BSC has achieve smart contract supremacy, and will become the world’s settlement layer, you are on crack.
— Ryan Watkins (@RyanWatkins_) April 12, 2021
“Copying Is a Feature, Not a Bug.”
However, not everyone agrees with this assessment. Twitter user ‘earoshthime’ wrote that: “when it comes to invention & innovation, copying is a feature, not a bug (sic).”
“Copying is a sign that something there is worth exploring, but it only takes one character difference to be better,” earoshthime said.
Another Twitter user pointed out that while BSC’s operational model may raise concerns over centralization, Ethereum’s slow march toward its own PoS algorithm is leaving its millions of users hanging in the balance with high transaction fees and low scalability.
“Etherium needs to hurry and solve their scaling problem that’s causing ridiculously high fees. These fees are taking too much out of peoples pockets. At some point people care more about their money than Defi (sic),” he wrote.
Finance Magnates reached out to Binance for commentary and will update this article when Binance responds.