Smart Chain Platform for Beginners: A Comprehensive Guide

Understanding Smart Chain Platform: Core Concepts

The smart chain platform represents the second generation of blockchain technology. While Bitcoin, Litecoin, Dogecoin, and others remain the most recognized cryptocurrencies, they belong to the first generation of blockchains, designed primarily for a single purpose: creating digital money.

In contrast, this smart chain platform is a general-purpose blockchain platform ready to deploy smart contracts. These automated pieces of code can program virtually any logic, including traditional banking services such as exchange, lending, and borrowing. At the technical level, smart contract development on this platform is made possible through the Ethereum Virtual Machine (EVM).

Similar to how the gaming industry has engines that power games, such as Unreal Engine or Source, blockchain ecosystems also have their engines. Due to its decentralized nature, the EVM must function as a decentralized computer, executing smart contracts distributed across thousands of computers known as network nodes.

Thanks to this shared EVM heritage, the platform can easily support smart contracts written on other EVM-compatible blockchains. Essentially, this is analogous to porting a PC game to PlayStation or Xbox and vice versa. Through the platform's API (Application Programming Interface), developers connect to servers to encode smart contracts in numerous programming languages, including GO, Java, JavaScript, C++, C#, Python, and Swift.

The Dual-Chain Architecture: Main Chain and Smart Chain

The main platform launched its primary chain in April 2019 to enable near-instantaneous trading. The trade-off for this ultra-fast transaction speed was the inability to program smart contracts. Since smart contracts require significantly more computational power, the platform decided to first launch a specialized blockchain network for rapid trading.

As you may recall, Ethereum encountered many such bottlenecks, particularly when NFTs found themselves at the center of the crypto community's attention. For instance, when people rushed to collect and trade CryptoKitties (cartoon cats as NFTs), the entire Ethereum network came to a standstill in December 2017. With such inevitable throughput issues, the platform implemented its smart chain in September 2020 as a secondary network to the main chain.

By supporting the main chain with smart contracts, the smart chain is fully compatible, enabling the migration of cryptocurrency assets from one chain to another. While the smart chain supports the BEP-20 token standard, the main chain supports the BEP-2 token standard. Similar to Ethereum's ERC-20 token standard, BEP-20 focuses on easy token deployment across various DeFi protocols.

The simplest way to transfer funds between the smart chain and main chain is through a dedicated chain wallet. It allows access to funds across multiple networks including the main chain, smart chain, and Ethereum. Whether you want to trade NFTs or engage in yield farming and passive income generation, it seamlessly integrates with your browser as an extension.

How the Smart Chain Platform Operates

As a second-generation blockchain, the platform utilizes a Proof-of-Staked-Authority consensus algorithm. This means it combines Delegated Proof-of-Stake with Proof-of-Authority. As a result, the platform is significantly more energy-efficient than first-generation blockchains based on Proof-of-Work, such as Bitcoin or Ethereum.

Bitcoin often appears in news headlines due to the amount of electrical energy the PoW consensus requires to secure the network. PoS eliminates such energy overhead by using economic staking—validators—instead of computational power—miners—to confirm transactions and add new data blocks.

Delegated Proof-of-Stake Mechanism

So-called Delegated PoS takes another step forward by introducing voting and delegation mechanisms, ensuring that those with the largest staking shares do not dominate the entire network. Nearly all newer blockchains supporting smart contracts use some derivative of PoS, including Cardano, Algorand, Solana, Avalanche, and Cosmos. PoS has become popular not only because it eliminates miners as such but also relies on a system of incentives and rewards to secure the network.

Those who have the largest staking share (the most locked tokens) receive greater rewards, thereby securing the network. This creates a virtuous cycle where validators are economically incentivized to act honestly and maintain network integrity.

Proof-of-Authority Enhancement

However, since stakes of the same size may have different values, developers utilized Proof-of-Authority to provide additional security. PoA simply replaces monetary value with the validator's identity and reputation. This dual-layer security mechanism ensures that validators are not only economically invested but also reputationally accountable for their actions.

The platform maintains 21 validators responsible for processing transactions and securing the network. For comparison, Ethereum has over 200,000 validators, making this platform more centralized but also more efficient in transaction processing.

Finally, when the platform needs an upgrade or fix, it enters an epoch period consisting of 240 blocks (approximately 20 minutes). As another PoS feature aimed at limiting malicious behavior—double signing and node downtime—the platform also employs a "slashing" governance mechanism that removes a significant portion of a validator's stake for violations.

Gas Fees: Platform Comparison with Ethereum

Since blockchains are decentralized networks devoid of traditional oversight, this does not mean they can be used for free. Every time a validator processes a transaction, their compensation comes from gas fees, denominated in Gwei as a billionth denomination of ETH.

1 Gwei = 0.000000001 ETH

When comparing this platform with Ethereum, the former is significantly more affordable. Since its launch, fees on the network have substantially decreased, from an initial average of 25 Gwei to a more recent 6.4 Gwei. In contrast, Ethereum network fees have experienced wild fluctuations.

To determine the fee amount in US dollars, we must first multiply Gwei by 21,000—the minimum amount of gas required to process a transaction. This yields the following fee difference between the two blockchains:

• Average transaction fee on the smart chain platform: $0.35 USD
• Average transaction fee on Ethereum (regular transfer): $5.20 USD

Additionally, these are only base fees—those that do not include more complex transactions related to DeFi protocols. As a result of this clear difference in transaction fees, the platform has gained enormous popularity, with daily activity showing approximately 30% more active addresses compared to Ethereum.

Platform Tokenomics and Economic Model

What ETH is to Ethereum, the platform's native token is to this smart chain. Holders can use the asset to pay transaction and trading fees on the main exchange platform, including its decentralized exchange. The native cryptocurrency launched during an ICO in July 2017 as an ERC-20 token, less than two weeks before the platform's launch.

Initially, participants could acquire 2,700 tokens for one ETH or 20,000 tokens for one BTC. The token has demonstrated significant value appreciation over time, with its price performance exceeding both Bitcoin and Ethereum in certain periods.

The maximum supply is capped at 200 million tokens, with approximately 168.1 million in circulation. Regarding token inflation, the supply undergoes quarterly (every three months) burns—removing tokens from circulation—to ultimately reduce the total supply by half, to 100 million tokens.

Therefore, the native token reflects Bitcoin's deflationary nature, except that it is managed by a highly centralized, profit-oriented company. The platform controls or owns at least 50% of the token supply, with founding members receiving approximately 80 million tokens and early investors receiving an additional 10%.

Staking Rewards and Validator Requirements

If you've read the section of this guide about the Proof-of-Stake consensus mechanism, you likely know that staking is key to achieving passive income on this blockchain. If you choose to do so, you can become a validator to reap benefits. Unfortunately, the requirements are quite high:

• Minimum staking amount: 10,000 native tokens
• 64-bit virtual private server with minimum configuration: 16 GB RAM, 500 GB disk space, and fiber optic internet connection of 1 Gbps to run a full node (complete copy of the blockchain)

In return for securing the network and processing transactions, the APY (annual percentage yield) is approximately 13%. Needless to say, few can afford the privilege of securing the network. The average daily block reward represents significant value for validators who meet these requirements.

Finally, due to the aforementioned slashing mechanism, a validator can be sent to "jail" if their staked token holdings fall below the minimum threshold. This means the validator's ability to process transactions and receive rewards will be suspended for one day. Similarly, downtime and double signing can also result in slashing, with severe penalties for validators who attempt to verify two blocks of the same height.

Decentralized Exchange Ecosystem

Although the main platform is a centralized cryptocurrency exchange, the company deemed it appropriate to launch a decentralized exchange in April 2019. Decentralized exchanges (DEXs), like Uniswap or SushiSwap, have several key advantages:

• Full self-custody of cryptocurrency funds
• Exchange without intermediaries
• Reliability, as there is no single point of failure

For example, as a centralized exchange, certain major platforms are notoriously prone to downtime during peak trading volumes. Imagine needing to buy or sell cryptocurrency at the right moment, only to be thwarted by exchange outages. DEXs solve this problem by connecting to multiple servers across different regions.

The platform's decentralized exchange offers a wide selection of cryptocurrencies for trading. Given that the main chain uses the BEP-2 token standard, neither Bitcoin nor Ethereum are directly available. Instead, you must operate through bridged tokens—wrapped versions that maintain value parity with their original assets.

Similarly, when sending or receiving these tokens, you must always be careful to select the correct network address, otherwise there is a risk of losing all funds. Combined with the chain wallet, trading on the decentralized exchange is a secure and seamless alternative to centralized exchanges for those willing to convert incompatible tokens from other networks.

DeFi Ecosystem on the Smart Chain Platform

Smart contracts are the foundation of decentralized finance. In turn, access to these contracts on blockchains is provided by decentralized applications (dApps). Therefore, colloquially, smart contracts and dApps are interchangeable terms.

Furthermore, just as tokens power smart contracts running on the blockchain, blockchain governance and incentive systems operate on native tokens. As we noted earlier, the native token for this smart chain uses the BEP-2 pattern, while all dApps utilize the BEP-20 standard.

The platform hosts over 1.2 million token contracts. The best of these in terms of market capitalization are typically those that serve as bridges between other blockchains, enabling cross-chain interoperability and expanding the ecosystem's reach.

PancakeSwap: Leading Decentralized Exchange

As a decentralized exchange, PancakeSwap successfully replicates Ethereum's Uniswap model. It uses an automated market maker (AMM) to facilitate token swaps without centralized oversight. After launching in September 2020, its governance token, CAKE, rapidly gained value.

This was a predictable outcome for traders who decided to use this smart chain platform instead of Ethereum due to high network fees. PancakeSwap has become one of the most popular DeFi protocols, offering liquidity provision opportunities, yield farming, and various innovative features that attract both retail and institutional users.

The platform's success demonstrates the demand for low-cost, high-speed DeFi solutions. Users can provide liquidity to trading pairs, stake tokens to earn rewards, and participate in governance decisions through the CAKE token. The protocol has processed billions of dollars in trading volume and continues to innovate with new features and partnerships.

BakerySwap: NFT-Enhanced AMM

BakerySwap is also an AMM, like Uniswap and PancakeSwap, but with one key difference. As a liquidity provider, BakerySwap adds its own NFTs to the yield farming experience, creating a unique gamified approach to decentralized finance.

When you earn BAKE tokens, you can use them as randomly generated meal combo NFTs. Then, this unique collectible NFT can be staked to earn even more BAKE tokens. This innovative combination of DeFi and NFTs has attracted a dedicated community of users who appreciate both the financial incentives and the collectible aspect.

BakerySwap reached a significant milestone by processing hundreds of thousands of NFT transactions, demonstrating the platform's capability to handle both traditional DeFi operations and emerging use cases like NFT trading and staking.

Venus: Algorithmic Stablecoin Protocol

You may have noticed that decentralized finance depends on stablecoins. Since we don't live in a world where most people use cryptocurrencies for everyday expenses, stablecoins are the bridge between DeFi and traditional finance. The problem is that often only one company manages a stablecoin—including the most popular ones.

This is where the Venus protocol enters, with its cutting-edge algorithmic stablecoin, VAI. It is backed by a basket of other stablecoins and cryptocurrency assets, providing diversified collateralization and reducing single-point risk. Moreover, Venus allows for asset tokenization and creates a money market for lending and borrowing.

This effectively makes Venus a unique combination of lending protocols like Compound or Aave with stablecoin generation mechanisms like MakerDAO, but exclusively for this smart chain platform. Users can supply assets as collateral, mint VAI stablecoins, and participate in lending markets to earn interest on their cryptocurrency holdings.

Best Cryptocurrency Wallets for the Platform

Beyond the mentioned chain wallet, here are several of the most convenient ways to access the rich dApp ecosystem popularized by minimal network fees:

MetaMask: Industry-Leading Browser Wallet

MetaMask is the highest-rated non-custodial wallet that integrates with web browsers and then connects to any dApp. Focusing on widespread adoption, MetaMask also offers support for integration with the most popular hardware wallets, Trezor and Ledger. This combination of convenience and security makes it an ideal choice for both beginners and experienced users.

The wallet's user-friendly interface allows for easy network switching, token management, and dApp interaction. Users can add custom networks, import tokens, and manage multiple accounts from a single interface. MetaMask's extensive documentation and large community support make it an excellent starting point for those new to blockchain technology.

Trust Wallet: Mobile-First Solution

Acquired by a major platform, Trust Wallet introduced staking as early as April 2019, in addition to support for various blockchains. As an integrated dApp browser, it is available for both iOS and Android. It supports over 40 blockchains and 160,000 tokens, making it one of the most comprehensive mobile wallet solutions available.

Trust Wallet's mobile-first approach ensures that users can manage their cryptocurrency portfolios on the go, with features like built-in exchange functionality, staking capabilities, and NFT support. The wallet's intuitive design makes it accessible to newcomers while providing advanced features for experienced users.

SafePal: Hardware Security Solution

For additional security, SafePal is not only a mobile wallet but also offers a hardware wallet called SafePal S1. Priced at approximately $50, it is an excellent way to use physical storage to make your cryptocurrency funds resistant to hackers. SafePal supports 20 blockchains and 10,000 tokens, providing comprehensive coverage for diverse cryptocurrency portfolios.

The hardware wallet uses secure element chips and offers features like air-gapped signing, ensuring that private keys never touch the internet. This level of security is particularly important for users holding significant amounts of cryptocurrency or those concerned about sophisticated hacking attempts.

Math Wallet: Universal Blockchain Solution

Similar to MetaMask, Math Wallet is an extension for the most popular browsers—Chrome, Brave, and Edge. However, Math Wallet was created with the mission to serve as a universal blockchain wallet, supporting multiple dApps across numerous blockchain networks.

If you've heard of a public blockchain, Math Wallet likely supports it. In addition to this impressive feature, it has a staking aggregator in the form of MathVault and MathChain as a layer-2 scalability solution based on Substrate. This comprehensive approach makes Math Wallet an excellent choice for users who interact with multiple blockchain ecosystems and want a single wallet solution for all their needs.

Investment Considerations and Platform Outlook

Among public blockchains, this smart chain platform ranks at the top as one of the most centralized networks. Therefore, its longevity depends largely on how regulators treat the parent company and how the company itself conducts its business affairs. Regulatory scrutiny of centralized cryptocurrency platforms has increased in recent years, and the platform's future may be influenced by evolving regulatory frameworks.

On the other hand, the platform is a very attractive smart contract platform. This is ensured by lightning-fast transaction speeds and low transaction fees, which have become its primary competitive advantages. Based on these two driving forces alone, the platform has become one of the most popular smart blockchains in the cryptocurrency ecosystem.

The platform's success has also spurred innovation in the broader blockchain space, with other projects attempting to replicate its combination of speed, low costs, and EVM compatibility. However, the platform maintains significant advantages in terms of ecosystem maturity, liquidity depth, and user adoption.

For investors and users, the platform offers compelling opportunities in DeFi, NFTs, and other blockchain applications. The low barrier to entry, combined with a rich ecosystem of dApps and protocols, makes it an attractive option for both newcomers and experienced cryptocurrency enthusiasts. However, users should carefully consider the trade-offs between centralization and decentralization, as well as the regulatory risks associated with platforms controlled by centralized entities.

FAQ

What is Smart Chain platform? What is the difference between it and Ethereum?

Smart Chain is a blockchain platform offering Ethereum-like functionality with faster transactions and lower fees. It provides superior performance and cost efficiency compared to Ethereum, enabling seamless DeFi and DApp experiences.

How should I start using Smart Chain as a beginner?

Get a Trust Wallet, purchase BNB tokens, and connect to Smart Chain network. Then explore dApps like PancakeSwap for trading. Smart Chain offers low fees and fast transaction speeds for beginners.

What fees do I need to pay for transactions on the Smart Chain platform?

On Smart Chain, transaction fees are typically between 0.1 to 0.2 USD, varying based on network congestion. Fees are paid in the platform's native token and are significantly lower compared to other blockchain networks.

How to safely store and manage assets on Smart Chain?

Use cold wallets for maximum security, backup mnemonic phrases offline in secure locations, avoid copying/pasting mnemonics to prevent theft, enable strong passwords, and never import private keys on internet-connected devices.

Smart Chain平台支持哪些主要的DeFi应用和生态？

Smart Chain supports major DeFi applications including PancakeSwap, Venus, and Alpaca Finance. These platforms offer decentralized trading, lending, and leveraged yield farming, driving the ecosystem's growth and innovation with low transaction fees and high efficiency.

How should I choose and connect a wallet to the Smart Chain network?

Select Binance Smart Chain in your wallet's network settings. Add the network details if needed, then confirm the connection. Popular wallets like MetaMask and Trust Wallet support Smart Chain integration seamlessly.

How are the transaction speed and security of Smart Chain platform?

Smart Chain platform delivers fast transaction speeds with block times of just 3 seconds, ensuring quick settlements. Security is robust through Proof of Staked Authority consensus mechanism, protecting user assets and data integrity effectively.

What risks and common pitfalls should beginners be aware of when using Smart Chain?

Beginners should avoid blind chasing gains and panic selling, trusting inside information, investing all funds in a single project, and using unsafe platforms. Maintain caution and diversify your investment strategy.