Decentralized Finance (DeFi) on the Binance Smart Chain (BSC) has grown tremendously in the last few weeks. At the same time, some BSC DeFi tokens went through the roof and one project was even able to overthrow UniSwap (UNI). How “smart” is the Binance Smart Chain?
The DeFi sector on Ethereum (ETH) still seems to be recovering from its extreme price rally in early February and is currently in a consolidation phase . Most of the ETH DeFi projects have fallen slightly this week and this is also reflected in the “ETF Token” DeFi Pulse Index (DPI) .
At the same time, the capital managed by ETH DeFi protocols has leveled off at just over 40 billion US dollars.
This means that the DeFi sector on Ethereum, which is normally spoiled by growth, has not grown since the beginning of February. But that doesn’t have to be a cause for concern. After such an extreme price rally as in recent months, it is good for the prices of many DeFi tokens if the market can recover and the tokens can slowly level off at a fair price level before the next rally begins.
Nevertheless, the horrendously high Ethereum transaction fees in particular have ensured that many investors have looked around for alternatives to Ethereum. In their search, many investors chose the DeFi sector on the Binance Smart Chain.
Not only did the Binance Coin BNB grow strongly this week , but the DeFi ecosystem at the BSC has also gone through the roof.
In the meantime, DeFi at the BSC is already a quarter the size of the DeFi sector of Ethereum. Compared to the Ethereum Blockchain, transactions on the BSC can be carried out much faster and cheaper. This makes the BSC particularly interesting for small investors who want to use DeFi applications but do not have the necessary capital to do so effectively on Ethereum.
So it came about that in the last few days many of the top BSC projects have become enormously popular. For example, the decentralized exchange (DEX) BakerySwap (BAKE) has turned over more than $ 120 million in the last seven days and both user activity and trading volume on DEX has exploded.
In the last 14 days alone, according to CoinGecko , the price of Bake has increased by over 1,778 percent and despite the extreme growth, the development of the project is no exception on the Binance Smart Chain.
The decentralized exchange PancakeSwap (CAKE) is one of the largest projects in the Binance Smart Chain . According to CoinGecko, the daily trading volume of PancakeSwap has even overtaken the two DeFi exchanges UniSwap and SushiSwap.
In the last 24 hours alone, PancakeSwap’s trading volume was over $ 1.7 billion. UniSwap has only turned over just under 1.2 billion US dollars in the same period. The trading volume of PancakeSwap is impressive, but investors should still be careful as DEX is still very young and has only recently entered the market.
The bullish momentum in the crypto market suggests that blockchains, which have a growing DeFi sector, will also be among the winners in the coming weeks. An end to the high transaction costs on Ethereum is not in sight in the foreseeable future. As long as that is the case, alternatives such as the BSC and its DeFi projects will still have some growth potential.
However, one should not forget a big difference between the BSC and Ethereum. Currently, almost all of the power over the BSC is in the hands of the Binance crypto exchange. The BSC is therefore much more centralized compared to Ethereum and therefore also very dependent on the success of Binance. If there are any problems with Binance, this could also have a negative impact on the BSC ecosystem. In addition, one can assume that projects like Cardano (ADA) and Polkadot (DOT) will expand massively into the DeFi sector in the coming months, which will lead to even more competition.
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