Binance’s BNB Chain is losing its edge as the world’s most-used Ethereum-compatible blockchain.
Daily transactions on BNB Chain still dwarf those on Ethereum, the world’s preeminent smart contract platform, but the gap has steadily narrowed over the past several months.
At the end of 2021, BNB processed more than 6M transactions per day to Ethereum’s 1M. While daily transactions on Ethereum have held steady, BNB is now processing just under 3M transactions per day.
Making its debut in the fall of 2020, BNB Chain — then known as Binance Smart Chain — was created to provide an alternative to Ethereum, where transaction fees, or gas, priced out many would-be users.
The plan worked. At its peak last November, BNB briefly processed more than 15M transactions per day, which cost users more than $7M in daily fees, according to crypto data provider Nansen. That month, Ethereum was handling a little more than 1M transactions per day, with daily fees fluctuating between $50M and $80M.
Binance, the China-based centralized exchange that built BNB, and PancakeSwap, the chain’s dominant decentralized exchange, accounted for almost half of the transactions between April and July of this year, according to a report released by Nansen over the weekend.
Real Retail Usage
Most importantly, perhaps, the transactions seem to represent real use by retail investors, according to Nansen.
“Although some of this could be attributed to bot activity, BNB Chain remained a popular chain with retail who have been priced out of Ethereum,” researcher Yi Jun Lee wrote.
Specifically, Nansen was able to attribute about 7% of on-chain activity between April and June of this year to MEV bots transacting automatically on the chain, although the 7% figure was limited to users the company was able to identify.
Nor were BNB’s transaction figures boosted by cross-chain arbitrage in which traders profit off price differences between like assets on different blockchains. Popular cross-chain bridges — software that allows users to move assets between otherwise incompatible blockchains — accounted for less than 1% of transactions in the second quarter, according to Nansen.
Whales Prefer Ethereum
Nevertheless, Ethereum towers over BNB in terms of the value of assets being moved.
For example, on June 30, the last day of the second quarter, 300,000 people sent $2.5 billion in stablecoins on BNB, whereas 60,000 people sent $17.2 billion in stablecoins on Ethereum.
“Taking this as a reference point in isolation would indicate that the higher-value transactions tend to occur more on ETH mainnet vs. on BNB Chain,” Lee said in an email via a spokesperson.
In prioritizing low cost, BNB had to make sacrifices.
“For BNB to afford the scalability that it has, trade-offs had to be made in terms of centralization – at the end of Q2 2022, there were only 21 active node validators securing the network,” Lee said. “Bigger blocks also mean that the technical requirements for running a node is more demanding than, say, ETH.”
The network’s native BNB token is up nearly 6% in the past month.