We often lead extensive discussions about the future of money and decentralized finance (DeFi). What do we have to do to provide everyone with access to more opportunities? How can we create a fair and decentralized financial system that treats all users as individuals without bias or censorship?
In early 2020, the Binance team approached the developers from the existing Binance Chain community intending to fund and support the development of an infrastructure to address these questions. A team of developers formed shortly after and published the BSC White Paper. A few months later, in September 2020, they launched the mainnet of the new Binance Smart Chain and invited community validators to help BSC on our mission to build the infrastructure and ecosystem for the evolving world of finance.
Binance Smart Chain was designed with the vision of a decentralized and censorship-resistant blockchain that provides the financial infrastructure that has new functionalities and lower operating costs than existing options. Individuals participating in the BSC ecosystem benefit from borderless access to financial products and services with lower costs and better opportunities. BSC’s goal is to develop an infrastructure for a DeFi ecosystem accessible to everyone anywhere worldwide with access to a computer or phone and internet connection.
There’s no easy way to build a fully decentralized network from scratch without an existing community of projects, developers, validators, delegators, and users. Binance.com (CEX) helped finance and support the initial infrastructure and bootstrap growth with expertise and knowledge sharing.
As the network grows, the ecosystem becomes more independent and decentralized, resistant to malicious attacks and attempts to control the network. To achieve our goal, BSC is on the way to grow into a stable and decentralized infrastructure.
In code we trust
The Binance Smart Chain code is fully open-source and verifiable. Independent researchers and projects interested in building on BSC can review the code on Github. The main benefit of using open-source code is that it doesn’t rely on a centralized entity to protect it, but the whole community can contribute, review the code, use it, and assess security.
To achieve decentralization and technical superiority, the BSC Whitepaper introduced a new Proof of Staked Authority (PoSA) consensus, which the team eventually implemented. PoSA combines the best of Proof-of-Authority (PoA), used by MATIC Bor, TOMOChain, GoChain, or xDAI, and Delegated Proof of Stake (DPoS) used by EoS or Cosmos. The PoSA consensus relies on 21 community validators supporting short block time and lower fees.
The new PoSA consensus combines DPoS and PoA so that:
1. Blocks are produced by a limited set of validators (supported by delegators)
2. Validators take turns to create blocks in a PoA manner, similar to Ethereum's Clique consensus protocol
3. Validators require daily re-election based on staking governance to participate in the Validator Set
This new consensus mechanism enables validators, token holders, developers, and users to benefit from a rewarding blockchain that offers high performance and space for further innovations. Both delegators and validators support the network, help it grow, and further decentralize it while earning network rewards.
BSC validators are individuals and groups operating hardware nodes, powering the BSC network by processing transactions and signing blocks. They can be institutional, individual, or community-organized.
There are two groups of validators: the validator candidates and the elected validators. Validator candidates are all validators that meet the minimum hardware requirements, run a local BSC full node, and self-stake a minimum of 10,000 BNB. Anyone who meets the criteria can become a validator candidate. Elected validators are the top 21 validator candidates with the highest total delegated BNB (self-stake + delegators’ stake) volume. The elected validators change every 24 hours.
Please note, different from other typical PoS/dPoS blockchains, the validators receive the reward in BNB, which is a purely deflationary token; its total supply decreases over time. See the BNB burn schedule for more info.
The BSC also supports the role of delegators. Delegators are users who stake their BNB via Binance Chain Wallet to support their preferred validator and help the validator achieve the required minimum stake to participate in the validator elections.
In return for their participation, validators receive rewards in transaction fees from the processed network activity. The delegators receive interest on their BNB (share of validator earnings based on the individual stake) paid in BNB.
There are a few reasons why you should become a validator or delegator on BSC. The most obvious is the high return potential for elected validators that comes from transaction fees and commissions from delegators. As a delegator, you will benefit from high APR and earn regular rewards on your stake if your validator gets elected. The average daily reward for a BSC validator in February 2021 was 134 BNB. The average APR for a BSC delegator was 60%.
Block rewards by date; Source: https://explorer.bitquery.io/bsc/miners
However, compared to other financial products that only offer returns, there’s a deeper meaning behind participating in the BSC network. As a validator or delegator, you directly support the whole BSC ecosystem’s stability, capacity, and performance. The vigorous and rapid development of DeFi projects on BSC provides you with an opportunity to participate in a quickly evolving new market, gathering new experiences and investment opportunities.
As a validator or delegator, you become a cornerstone of the infrastructure powering the BSC DeFi ecosystem. Your support will help empower developing nations and the unbanked, providing them with unlimited borderless access to crypto finance.
Validators are an essential part of the BSC ecosystem, and the network could not function without them. They support the network, and in return, they’re highly rewarded for the processed network activity.
One of the best performing validators is BNB48 Club, a local community validator with 31 delegators that staked together over 129,000 BNB. The majority of their self-stake came from their Initial DEX Offering (IDO) on the DODO platform, and their delegators raised the rest. Over the previous 25 days, the BNB48 Club received an average daily reward of 163 BNB, totaling over 4,000 BNB in less than a month.
Every elected BSC validator has three roles:
A diverse pool of community-operated validators is an immense benefit to the whole BSC community. A larger validator candidate pool provides increased decentralization and computing power distribution, resulting in better security and stability. A higher number of validator candidates can positively impact user experience, helping BSC grow and further develop the DeFi landscape.
Binance Smart Chain Avg. Voting Power per Block; Source: BscScan.com
To become a validator candidate, you need to:
*The 10,000 BNB requirement allows the validator to get listed on the validator candidate list and attract more BNB delegation through their communities.
The high validator rewards drive competition, and the existing top 21 validators all have over 100,000 BNB staked as of March 1, 2021. The average voting power of elected validators is above 158,000 BNB, and the total voting power (total stake volume) is 3,458,961 BNB.
BNB holders and Binance Smart Chain users can become delegators on the BSC network and support their preferred validator, earn rewards and trust them to vote in governance on behalf of you. Delegators stake their BNB, increase the validator’s capacity, and further boost decentralization and network growth. As a delegator, you’ll pay a commission to the validator for providing you with the opportunity to stake your BNB.
You can choose the best validator for you from a list of eligible validator candidates based on their slashing history and other criteria and support them with your BNB stake. In return, you’ll receive a staking reward.
How to delegate BNB to a BSC validator candidate:
Using BNB48 Club as an example validator, a delegated stake of 100 BNB in February 2021 would achieve a 60% APR. BNB48’s most profitable day was February 21, when they achieved their highest APR of 130%, which turns into 300% APY for the validator runner and 143% APY for its delegators.
As a user, you delegate your BNB stake to a validator, but you can also redelegate and undelegate your BNB. You can perform one redelegate and one undelegate every 7 days.
Relegation gives you the ability to transfer (redelegate) a part of your stake delegated with Validator A to Validator B. This allows you to support multiple validators and earn rewards from each elected validator by sending a redelegate transaction with the amount of BNB you wish to transfer.
With undelegate, you can remove (undelegate) your stake from a validator. This allows you to withdraw a portion of your stake or your full stake from a validator by sending an undelegate transaction to unbond BNB.
BSC is a very competitive blockchain with multiple advantages over other blockchains commonly used for DeFi infrastructure. To remain competitive in the future, it must be compatible and upgradeable to future consensus protocols. Here, BSC relies on the Binance Chain (BC) for staking management.
Binance Chain supports a dedicated BSC staking module that accepts BSC staking from BNB holders and calculates the highest staked node-set. Every midnight (UTC), BC issues a verifiable ‘ValidatorSetUpdate’ cross-chain message to notify BSC to update its validator set with 21 new validators elected from the top 21 validator candidates based on their total staked volume (voting power).
The validators then govern the specific network features such as:
Top 25 Validators by Blocks 7d chart; Source: BscScan.com
It’s crucial for success to achieve an environment that empowers and leverages all parties – validators, delegators, users, developers, and everyone else who decides to join the finance revolution.
Successful and popular BSC projects like PancakeSwap, 1inch, Venus, or GooseFinance, attract new users and increase transaction volume, thus directly increasing the rewards for validators and attracting more members to stake their BNB. More and better validators result in better performance of the network, further boosting the existing projects and attracting new users; indeed, an ecosystem of its own.
In September 2020, BSC launched with the hope of attracting potential projects. Today, the BSC ecosystem consists of over 180 projects developing in different areas such as Wallets, Infrastructure, Credit & Lending, or Games (https://bscproject.org).
This ever-evolving environment pushes the existing validators to improve and quickly attracts new validators. Validators are increasing their BNB stakes, investing large amounts of start-up capital and other resources while leveraging the community strength.
Everyone can participate in building the future of DeFi. If you’re a BNB holder, you can get rewards from validators. If you’re a large volume holder or a group, you can become validators to earn revenue and support the network. If you’re a developer, you can start building and support the growth.
Will you join us on the journey to decentralization?
Explore the BSC community