Guide to BNB Chain

• BNB Chain (formerly known as Binance Smart Chain) is a smart contract‐enabled sidechain for Binance Chain. It allows the ecosystem to use the EVM‐compatible functionality on BNB Chain, while making fast asset trades on Binance Chain, which is not slowed down by the need for its own smart contract capabilities.

• Coinbase Cloud offers secure read/write and participation infrastructure for BNB Chain, empowering those looking to build on the chain or help secure the network.

• As the developer and DeFi communities on BNB Chain continue to grow, Coinbase Cloud's Query & Transact read/write infrastructure offers a seamless way for developers to access data from the BSC blockchain to build crypto products and services.

• BNB, the native asset of BNB Chain, is not inflationary, meaning that operating a validator, or delegating to a public validator, and receiving a portion of transaction fees in rewards is the only way to organically increase one’s share of BNB.

• Coinbase Cloud has deep experience building for the protocols with technical components most similar to BNB Chain’s, including Geth forks, Ethereum, and other protocols sharing Tendermint consensus modules, along with ensuring performance on other high‐throughput networks like Solana, Algorand, or Flow.

An introduction to BNB Chain

BNB Chain (formerly known as Binance Smart Chain), launched by crypto exchange Binance, is an Ethereum Virtual Machine (EVM)‐compatible blockchain built to support smart contracts and staking in parallel to the previously launched main chain, Binance Chain.

BNB Chain is focused on making DeFi affordable by offering a higher gas block limit and faster block times than Ethereum. Its design is based on the Ethereum Geth client and a copy of the EVM, allowing projects from the Ethereum ecosystem to function natively within BNB Chain.

BNB Chain allows users to build dapps and stake onBNB Chain while still making fast asset trades on Binance Chain; Binance Chain remains fast because it does not need its own smart contract functionality. Binance Chain is a Tendermint‐based protocol built using portions of the Cosmos SDK.

BNB Chain is connected to Binance Chain by two relayers. The BSC Relayer passes communications from Binance Chain to BNB Chain (such as token transfers, refunds, or staking transactions). The Oracle Relayer monitors events on BNB Chain and broadcasts the transactions to Binance Chain. This two‐way connection enables cross‐chain transfers and connects the two networks’ ledgers into one interoperable system.

Binance Coin (BNB) originally launched with a Ethereum‐based ERC‐20 token which was replaced with the native, Binance Chain‐based coin BNB in 2019. It has a broad range of uses including transaction fee payments, payments processing, token launches on the Binance Launchpad, and paying a portion of the salaries for 90% of Binance employees.

The BNB Chain mainnet launched in September of 2020. As of July 2021, BNB Chain processes as many as 9 million transactions daily, with a current all-time daily high of 11.83M transactions in May 2021. The developer community on BNB Chain is growing, in part backed by BSC’s $100M Accelerator Fund launched with the goal of accelerating the development of blockchain technology and DeFi within the BNB Chain ecosystem.

As a neutral platform, Coinbase Cloud now offers secure read/write and participation infrastructure for BNB Chain, empowering those looking to build on the chain or help secure the network. According to Binance, the BNB Chain ecosystem has a large and growing community of DeFi and NFT builders due in part to its low transaction fees and high transaction speeds, along with developer activity surrounding infrastructure, tooling, cross‐chain bridges, API development, security projects, and a range of builder funding initiatives related to the Accelerator Fund.

"BNB Chain is becoming an important hub for developers looking to build applications, as demonstrated by the number of DeFi and NFT projects launched on the platform," said Aaron Henshaw, who leads engineering at Coinbase Cloud. "We’re proud to offer secure read/write infrastructure to support this flourishing developer community, and help drive innovation in the broader crypto ecosystem." — Aaron Henshaw, Coinbase Cloud

How to participate on BNB Chain

BNB Chain uses a novel consensus engine, Parlia (based on the Clique proof of authority consensus protocol, in combination with other proof of stake consensus methods), which is implemented as proof of staked authority (PoSA).

BNB Chain comes to consensus on the state of the chain internally using proof of authority (PoA). That authority is granted by the PoS consensus activity that takes place on Binance Chain using Binance Chain’s Tendermint‐based PoS module. These activities include staking transactions, delegation, validator elections, and reward distribution. Binance Chain’s staking module calculates the active set of BNB Chain validators, and updates the active set on BNB Chain at midnight UTC each day. The active set of BNB Chain validators then performs consensus via PoA, and also sends reward payout information to Binance Chain where reward distribution takes place.

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BNB Chain’s active set includes the top 21 validators by total value staked (self‐bonded and delegated). Blocks are produced in a round‐robin format and validators take turns attesting each other’s blocks, referred to as ‘sealing’ blocks, as well.

Anyone can become a validator on BNB Chain by submitting a 10 BNB transaction to create a validator and self‐bonding 10,000 BNB to their validator node. However, as of August 2021, the minimum stake to be in the active set is approximately 519,000 BNB.

Delegation is enabled on BNB Chain. Any BNB holder may delegate a minimum of 1 BNB to the validator of their choice. Delegators may redelegate at any time with no penalty, or undelegate, after paying a transaction fee. Rewards from delegation automatically compound to a delegator’s stake and must be unbonded to be withdrawn.

Including validators, users can operate four node types on BNB Chain:

• Validator nodes are responsible for performing consensus, including producing blocks and verifying blocks produced by other validators

• Full nodes store the full history of BNB Chain, along with receiving and validating new blocks and verifying accounts’ latest states

• Archival nodes store the same information as full nodes, plus the historical state of every account at every block height

• Sentry nodes stand between validator nodes and the public network to ensure privacy along with protection from DDoS attacks

BNB Chain's EVM compatibility, along with being built as a fork of the Geth client, makes it easy for developers familiar with the EVM to easily deploy dapps on BSC in order to access the network’s scalability, low transaction fees, and DeFi community. However, transactions are also recorded faster in BNB Chain, which has a block time of three seconds (as compared to 13 seconds for Ethereum). Though this speed and the higher block gas limit make BSC attractive for its growing developer community, these factors also require node operators to use powerful infrastructure.

Rewards and economics on BNB Chain

BNB, the native token of the Binance ecosystem, is used for three purposes on BNB Chain:

• Paying gas fees for transactions and smart contracts

• Performing cross‐chain operations with Binance Chain

• Staking on BSC validators and unit of account for rewards

The current/maximum supply of BNB is lower than the initial supply due to regularly conducted "burns" of BNB by Binance, the latest of which took place in July 2021, permanently destroying over 1.29M BNB. Binance has committed to burning BNB equivalent to approximately one‐fifth of its profits each quarter, though the burn schedule has not been programmatically defined on‐chain.

There is no inflation on BNB Chain; validators are rewarded via transaction fees, shared pro‐rata with delegators. The validator that generates a block receives 15/16 of the block’s gas fee, with the remaining 1/16 of gas going to the system reward contract (to fund cross‐chain functions).

At the time of creation, a validator must define its:

• Commission rate: the commission rate on block rewards charged to delegators

• Maximum commission rate: the maximum commission rate the validator can charge

• Maximum daily rate increase: a set percentage by which the commission rate can be changed per day

For example, a validator launched with a commission rate of 10%, a maximum commission rate of 20%, and a maximum daily rate increase of 1% could never raise its commission rate above 20%, and changing the commission rate from 10% to 20% could only take place over a minimum of 10 days (1% per day). Within these self‐defined parameters, the commission rate may be changed by the validator operator at any time.

Reward amounts are calculated daily on BNB Chain and then distributed two days later on Binance Chain to the validator and its delegators. The validator retains its commission rate, then pays a pro‐rata share of the remaining rewards directly to delegators, after which the validator’s share of rewards are transferred directly to the validator’s identified reward address.

Risks of participation on BNB Chain

Slashing is enabled on BNB Chain, along with jailing, a set period of time that a validator cannot participate in consensus and earn rewards. An unjail transaction must be submitted in order to return to the active set.

Three types of poor behavior on the network incur penalties:

• Self‐bond below minimum: validators are jailed for one day if their self‐bond falls below 10,000 BNB

• Downtime in a 24‐hour period:

  1. a validator that misses over 50 blocks that it had the turn to propose in round‐robin consensus (~52.5 minutes of downtime) will not receive any rewards for that period, which will instead be distributed amongst the performant validators

  2. a validator that misses over 150 blocks that it had the turn to propose in round‐robin consensus (~157.5 minutes of downtime) will be slashed 50 BNB and jailed for two days

• Double signing: a validator that proposes two different blocks at the same block height will be slashed 10,000 BNB and jailed for an effectively permanent period of time

Only self‐bonded BNB on a validator can be slashed; delegators are never at risk of losing their delegated BNB.

Governance on BNB Chain

BNB Chain has system parameters to dictate network behavior, including slashing amounts, cross‐chain transfer fees, uptime, and more. These parameters are defined by the BNB Chain validator set using a proposal‐vote process on Binance Chain. Voting power is defined by overall BNB Chain stake — because of this, running a validator is the only way to have a vote in BNB Chain governance.

Anyone can submit a proposal on Binance Chain to update BNB Chain parameters. The proposal must be submitted with a 1,000 BNB deposit and may specify a voting period during which time BSC validators can vote on the proposals (the voting period defaults to one week if not specified).

If the proposal’s quorum is met (at least 50% voting participation), there are sufficient yes votes (at least 50% of possible votes are in favor), and no more than on‐third of votes are cast ‘No With Veto,’ the proposal will pass and the proposer will receive their deposit back. In some cases, if the proposal fails the deposit may be distributed to the validator set.

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Why run a BNB Chain node?

• As BNB, the native asset ofBNB Chain, does not have any inflation, becoming a validator operator (or delegating to a public validator) and receiving a portion of transaction fees in rewards is the only way to organically increase one’s share of the BNB Chain network.

• The developer and DeFi communities on BNB Chain are growing. BNB Chain full nodes can be used to build on BNB Chain without needing to participate as a validator. Full nodes can be used to analyze transaction data, write new transactions to the chain, or verify account information.

• Leveraging managed read/write infrastructure takes the heavy lift out of deploying and maintaining infrastructure, enabling users to build on — or analyze data from — BNB Chain without needing to develop engineering resources.

• As with all proof of stake networks, validators help keep the network secure and functioning. Anyone who uses the Binance ecosystem has a distinct interest in providing that security themselves.

• Operating a validator is the only way to have a vote in BNB Chain governance in order to have a say in decisions such as parameter updates — like increases to transaction fees. Users who both pay transaction fees and earn them as validator operators have a significant interest in participating in the network's decision making process.

Why choose Coinbase Cloud?

• BNB Chain nodes can be difficult to run given the high‐throughput nature of the chain and the large state size stored on nodes. Coinbase Cloud provides the expertise, tools, and industry‐trusted platform to ensure your nodes scale and remain performant, with extensive experience building for other high throughput networks like Solana, Algorand, or Flow.

• Coinbase Cloud has deep experience building for the protocols with technical components most similar to BNB Chain’s, including Geth forks, ETH, and protocols sharing Tendermint consensus modules.

• Coinbase Cloud's Query & Transact read/write infrastructure for BNB Chain makes it easy to access data from the blockchain to build crypto products and services. You can free up your in‐house engineering resources, spend more time developing your core products, and spend less time managing infrastructure.

• As one of the most trusted names in the blockchain infrastructure industry, we have best‐in‐class security augmented by information, application, and incident management policies.

• We designed an intuitive user experience that is surprisingly simple given the complexity of the underlying technology. Our platform’s automatic node management workflow frees our customers from the worry of constantly checking or managing their active participation.

• We’re node, participatory infrastructure, and protocol experts. We test all software, infrastructure, and protocol upgrades on our own infrastructure first ensuring any breaking issues are caught well before propagating changes to our customers’ infrastructure.

• Our dedicated protocol specialists keep Coinbase Cloud's customers up‐to‐date about changes to the validator ecosystem. They provide advice, insights, and guidance that arms our customers with critical information to better manage their participation.

• We are the world’s premier multi‐cloud, multi‐region infrastructure provider specializing in permissionless participatory networks.

• As a non‐custodial infrastructure provider, we can work with you to participate in BNB Chain regardless of your custody solution.