Unchained - Is Binance Smart Chain Being Run 'Like the Project of a Stoned Teenager?' Two BSC Execs Answer - Ep.310

Starting point is 00:00:00 Hi, all. I just wanted to share with you a blurb that Raul Powell, co-founder and CEO of Real Vision, wrote about my book, The Cryptopians, which comes out February 22nd. He said, Laura Shin brilliantly lays out the untold story of the rise of Ethereum amidst the crazy times of the crypto boom of 2015 to 2017. A story of high drama played out in the big stakes world of cryptocurrencies and cutting-edge technologies with a cast of characters worthy of a thriller novel. The only difference is that this incredible tale is all true, and the hero of the story, Ethereum, has gone on to even greater things. This impeccably researched book is a must read for those wanting to understand the complexities and realities of creating one of the world's great technologies. If you have not yet pre-ordered a copy of the Cryptopians, then don't forget to.

Starting point is 00:00:53 Go to Bitley slash Cryptopians. That's B-I-T-R-Y-S-C-R-Y-P-T-O-P-I-N-S to pre-order your copy today. Again, the link to pre-order is Bitley slash Cryptopians. And now, on to the show. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago, and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. This is the January 18th, 2022 episode of Unchained. Buy, earn, and spend crypto on the crypto.com app. New users can enjoy zero credit card fees on crypto purchases in the first 30 days.

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Starting point is 00:02:21 and Instant for both merchants and users. Alchemy Pay, bridging fiat and crypto economies. Today's guests are Gwendolyn Regina, investment director of BSC Growth Fund and Sammy Karim, ecosystem coordinator at Binance Smart Chain. Welcome, Gwen and Sammy. Thank you, Laura. Hey, Laura, how's it going?

Starting point is 00:02:45 So I am curious about both of your backgrounds. Why don't you each tell the audience, what it was that you were doing before, working on Binance Smart Chain, and then how it was that you came to work there and what your current role is. And why don't we start with you, Gwen? Sure. So, hi, everyone. Really glad to be here.

Starting point is 00:03:06 So myself, I would summarize my background as having spent the last 16, 17 years in the worlds of technology, startup, and media. I've won several hats. I've founded and exited a tech media publisher. I was super lucky to have founded also an early stage investment fund, then global market expansion, always a range of things, but always in technology and again with media.

Starting point is 00:03:30 So just before BSC, I was actually at a big tech company. So Facebook now Matter, where I was building a new kind of a accelerator program for the Asia-Pacific region. And yeah, so I joined BSC a few months ago, and it's been an absolutely great right. And Sammy, what about you?

Starting point is 00:03:51 What's your background and how'd you come to BSC? Sure, great to be here. So my background was really in the enterprise software space. So I was working on large-scale digital transformation projects, mainly in the education space, but also worked in other industries, financial services, healthcare, oil and gas. After that, I went to consensus. I was a consensus for two and a bit years.

Starting point is 00:04:17 And then after that, joined the BSC core team supporting ecosystem growth. So in 2021, Binance SmartChain started the year with roughly 350,000 daily transactions and 50,000 daily active users. And there were about 200 decentralized apps. By the end of the year, you wrote in a blog post that Binance Smart Chain was then at 7 million transactions a day and 1.3 million daily active users with more than 1,100,000. apps on the network. So how did that growth happen? Yeah, that's a good question. So maybe I'll tell you a little bit about the backstory of how BSC came to be. So BSC was a community project. It was

Starting point is 00:05:02 one of the ideas that one of the developers and the finance chain team thought about would be an interesting experiment to do. So at the time, obviously all of the decentralized apps and DFI, everything was really happening on Ethereum Mainnet. But we also saw that the infrastructure at that time wasn't able to support very large user growth. And then obviously recurring issues with network congestion and resulting in high transaction fees. So we thought about providing an alternative infrastructure.

Starting point is 00:05:36 So initially our targets, we thought like reaching 30% of the transaction volume on Ethereum Mainnet would be success. But given the growth of BSC, kind of indicates the level of underserved demand that there really was. So for us, we were really focused on and thinking a lot about how do we develop and scale infrastructure that can support massive user growth. So how do we bring in tens of millions and hundreds of millions of new users into crypto? So we were really focused on that, and we wanted to do it in a way that would be

Starting point is 00:06:10 chain agnostic, language agnostic, client agnostic. But we did realize that the largest developer community and the most mature developer tooling and infrastructure was in the Ethereum and EVM ecosystem. So we decided to launch BSC as an EVM chain to allow developers to take advantage of all the developer tooling that exist. But we just used a different consensus mechanism. So it's using delegated proof of stake. So that allowed for much higher scalability and, of course, much lower transaction fees. So that's kind of the, backstory of how BSC really happened. There wasn't really a grand plan around, you know, reaching that level of users. It just, it just kind of happened organically based on the market

Starting point is 00:06:57 demand. And so for listeners who, you know, may have heard of Binance chain, can you just spell out the difference between Binance Chain and Binance Smart Chain? Sure. So, finance chain supports, or the finance chain team supports two independent. but parallel blockchains. So Binance chain was launched in 2019. It's a tenderment-based chain, which was designed to run Binance Dex. It's basically a single-purpose chain.

Starting point is 00:07:30 So it doesn't have the ability to run smart contracts. It's just purpose-built to run Binance Dex, just high-throughput, high-speed chains, producing blocks every half a second. And Binance Dex for the listeners who don't know it's an order book-based decks. So because it doesn't have the ability for developers to build other applications there, and that was actually we received a lot of feedback from the Binance chain community after the launch of Binance chain,

Starting point is 00:07:57 to be able to provide an infrastructure that developers could build applications on, like a general purpose chain. So those are, and Binance Smart Chain is an EVM chain, so supports developers to build a wide range of different types of applications on top. And so as you mentioned, BSC is built off a fork of Ethereum's geth client. And some of the other differences are that it has blocked times of about three seconds versus 13 seconds for Ethereum. And so I'm actually not sure what the maximum throughput is, but based off the record number of transactions you've processed in 24 hours, I thought maybe it was up to almost 200 transactions per second or something, as opposed to.

Starting point is 00:08:43 to about 15 for Ethereum. However, there are only 21 validators, as opposed to thousands for Ethereum. And those validators are chosen by 11 validators on finance chain, at least as far as I understand. So one of the main characterizations of BSC is that it has sacrificed decentralization for throughput. And when I asked Twitter for suggestions of what questions I should ask you to, one of them asked, oh, you know, if it's defy on BSC, is that even defy? You know, is it even decentralized?

Starting point is 00:09:19 So can you talk a little bit about why it is that BSC decided to make this tradeoff and how you think about, you know, whether or not things are actually decentralized on finance smart chain? Sure. So of course, this topic comes up a lot in the communities. So when we're talking about decentralization, I think it's also important that we talk about it in a way that's not binary on a spectrum, right? So of course, BSE is not a maximally decentralized network when you compare it to Ethereum Mainnet. So it does sacrifice some aspects of network decentralization to optimize for scalability. But we have had an plan around progressively decentralizing various aspects around the network. So validate your candidate diversity is one of them.

Starting point is 00:10:07 So in the initial period, when we first launched and were trying to bootstrap the network, the validator candidate diversity wasn't a high priority at the time. But as the network grew, the interest from validator operators and the community also increased very significantly. So today there's quite high level of validator candidate diversity, including, for example, Bison Trails, which is owned by Coinbase, running a public validator. on BSE and many others from the community running validators as well. But I think that's just the number of validators is just one aspect around the various important aspects of decentralization.

Starting point is 00:10:52 But I think also it's important that there's choice for developers and users. So for developers that require an infrastructure and their use case requires a maximally decentralized network that's available today with the Ethereum main. it. But in order to really grow the number of users that can participate in Defi, it became evident that there had to be alternatives. And that's the case today. So you have, for example, take Pancake Swap, which is the largest tax on BSC, the largest number of users among any Defi protocol today. So that was really only possible because of infrastructures like BSC. So I think it's important that there is more choice for developers and users.

Starting point is 00:11:41 So I've seen that BSC people have talked about, you know, that you believe when it comes to the crypto space generally that there will be a multi-chain future. Can you talk a little bit more about what that will look like and how BSC will fit in? Yeah, that's another topic we spend a lot of time thinking about as well. So we do believe that the Web 3 will be powered by an internet of blockchain and a network of networks. And we're just seeing that start to emerge today. So if you look at the number of EVM chains, it's growing rapidly. There's a number of different ecosystems also continuing to grow and bring in net new users into crypto.

Starting point is 00:12:22 I think for us, that's the most important thing. So we're super happy seeing more infrastructures coming alive and being able to be able to. to support massive user growth. We're also starting to see a lot more technologies around interoperability happening a number of different ecosystems. I think that will also support the development of really cross-chain applications that aren't really possible today or that are not very scalable or effective from a cost perspective.

Starting point is 00:12:55 So I think supporting that type of innovation for us also is super exciting and important. Maybe I can also chip in here, Laura, right, to kind of bringing that topic of multi-chain world from the investment point of view, if I may. So from an investment point of view for the BSC Fund investment program, when we look at projects and debts, you know, we also support a multi-chain world. People ask us like, hey, are you only investing a project to build on BSC? And we're like, no, right? We support a multi-chain world, please build on many chains as possible, right? As many as you want that you think it's relevant.

Starting point is 00:13:32 But yes, we do have a preference for, hey, please build on BAC. Of course, we can offer you all the support, you know, for you to be engaged with the BAC ecosystem, but really we support a multi-chain world. Just to add another point here as well. So the BSC chain ecosystem will also become increasingly multi-chains. So if we think about how do we reach a billion users, like what does a pathway to a billion users really look like?

Starting point is 00:13:56 The current chains and current architectures, I don't believe we'll really be able to support bringing in a billion users into crypto. So we will, and we are today already seeing that the current BSC chain is kind of reaching the capacity or limits of the number of users that it can really support. And for other types of applications, if we look at gaming, for example, which probably has a pretty clear pathway towards hundreds of millions and eventually a billion users, it requires different types of chain architectures. It could be private-sharded chains, or I don't think there's any kind of consensus yet on what are the type of architectures can really support that level of user scaling.

Starting point is 00:14:34 But we want to experiment with different types of chain architectures and provide the infrastructure that will allow developers to build those applications that will bring in hundreds of millions of users and eventually a billion users. And so, Gwen, when you were saying that you, you know, also invest in projects on other chains, are you saying that they would be ones that built on multiple chains? including BSC? Yeah, so we have invested in some projects that are live, mainnet on other chains, and have a plan to build on BSC.

Starting point is 00:15:11 So that is good enough for us for now, right? Because for us, you know, we are, again, fairly chain anostic, but really that, again, we support a multi-chain world. But the plan to BSC, we prefer that to be in a picture, because again, we want to, you know, feed this team into the larger ecosystem because we can do so much more to help them be more engaged, you know, partnerships and stuff like that, of which Sammy is leading those efforts as well. And so in this multi-chain world, how does BSC see itself like in terms of, do you imagine

Starting point is 00:15:43 that the chain will take on a particular niche? Like for instance, it will be kind of more focused on either DFI or NFTs or gaming or something like that? Or does BSC see itself as the dominant smart contract platform? We can start off and then Sammy. can join in, right? So, you know, I think ultimately we're all in this space because we like the paradigm shifting, you know, potential of the technology. So for myself, you know, when I look at it, I just really like innovation across the space, right? So when I look at depths and I look at what's going on, it's really about, hey, let's grow the pie together again, right? So again, the rising tight lifts or boats. And so when it goes back to kind of what we're looking at in terms of like

Starting point is 00:16:27 chain usage, you know, I think. the jury is still out. So on our side, we are focused on certain investment categories. You know, we are focused on how can we again onboard the next billion users, right? The first billion users to crypto in general, right? And then, of course, we grow from there. So when we look at those with that in mind, we are focused on finding more DeFi projects, advanced defy, you know, NFT gaming. We announced Matterfi, for example, as a coherent thesis that we are looking at, we are investing in. That includes NFT, SocialFi, Dow enable us as one kind of project gaming, for example.

Starting point is 00:17:06 So we see several themes across the domain, and we believe that these will bring in much more the mass market. So really bridging Web 2 and Web 3 as well so that we can get to the next billion users. So for us, you know, in terms of focus on a particular chain, I mean, we are from the technical aspect doing way more to support the different potential usages. But as for now, I think the jury is still out. Sammy, what if anything to add on that? Yeah, I largely agree with that. So I think the current BSC chain, I think, will largely be occupied by DFI protocols and the majority of DFI activity will stay on the current BSC chain.

Starting point is 00:17:45 And then other infrastructures and other chains that we launch and support will be used for other types of use cases primarily. So gaming to congregates on gaming projects, congregates on certain chain infrastructures, other types of applications on other infrastructure. So the gaming chains, for example, will be more suitable for gaming applications. They might have significantly lower transaction fees. So today, the transaction fees and the current BSC chain is around 30 cents. So probably not that suitable for the majority of gaming applications, but the future chain infrastructure is likely to be fractions of a sense, so much more suitable for those types of use

Starting point is 00:18:30 cases. But ultimately, it will be up to developers and users to decide. And I think I'll add on to that as well, right? So to bring in that the whole idea also of, you know, Sammy mentioned transaction costs and speed, right? So we talk about security and stuff like that as well. Like, I'm not sure whether the different use cases, again, require the same level of choice in terms of variables of trade-off. Again, so I also align with Sammy. So I think just to make the point that I think for us, you know, we look at the future and there's still a lot to be written, I think. You know, there are certain directions to know if we are going and the world and the ecosystem across the chains is going. And yeah, it's exciting to see how that will evolve.

Starting point is 00:19:15 And at the moment, what kinds of developers would you say are choosing? to build on BSC as opposed to other smart contract platforms and kind of on the flip side of that among the full universe of crypto users, who would you say is the typical BSC user? I think it's pretty varied. So starting on the first question, I think today we're seeing the bulk of development activity and projects. Still a lot of stuff happening in the DFI space. We're seeing very significant growth happening in the gaming space. We're seeing some projects in the social Phi category and then others like in the longer tail that are looking at use cases around institutional digital assets and other types of use cases.

Starting point is 00:20:00 User profile is difficult to categorize. I think it's super broad right now because we've seen user growth really globally across almost every country and also the types of users as well are also quite broad. But I think the current BSC chain has the ability to support a much. wider range of user profiles, including users which much smaller net on-chain net asset values. And so I actually, you know, earlier when I asked you kind of what the focus would be, I actually thought you guys were going to say gaming, because I did notice that gaming makes up over 50% of transactions on BSC. And I also saw that the Growth Fund announced a program in early

Starting point is 00:20:45 December with Annamoka brands to invest $200 million into gaming projects on BSC. So why, you know, have you kind of put that focus there, especially since you were saying that you felt the current chain can't really support that kind of activity? I think it's been really driven by what's happening in the market generally. So I think if you look at this year, the Axi Infinity story has really captured the imagination of a lot of people. And that's also driven a lot of the activity from the developer community. as well. It hasn't been like something that's intentional, intentional or that we've been trying to

Starting point is 00:21:21 drive. It's just happened organically. So I think we've seen a lot of inbound demand from game developers and a range of different types of game studios, more traditional game development firms that are looking at developing blockchain games. And they're coming to BSC because they do see the largest number of users there, among other factors. To add on as well, like gaming, is in the real web tool world, it's such a big use case. And it's something that's really captured the masses, really, for lack of a better word, right? And so when we see that, again, the taking off of the Xs, XE and then the XE's of the wannabes, right? And other games, you know, really having a way more users, we really see this trend as like, hey, this is a really great use case.

Starting point is 00:22:11 how can we capitalize on it to again offer users more choice, more options for games, for chains, for example, as well, and just much more a better user experience, right? So gaming is one focus because of that, because it all leads back to our goal of onboarding a next billion users. But that doesn't mean that we don't focus on other things, because when we talk about crypto, it's about financialization of many industries, right? So we are looking across the space, you know, we talked to, and Sammy mentioned a few categories we look at, right? So we've talked about the innovation and the kind of developers building on it.

Starting point is 00:22:45 We'll see just many different kinds of teams. We've seen people building AI as well. For example, we invested recently in a project that enables NFTs to be AI, INFTs, intelligent NFTs, right? That's super interesting, Aletheia. So we see really a range of developers building on BSC. And so, you know, as we mentioned earlier at the moment, probably with the throughput, that's available on BSC gaming probably may not be able to take off to the same extent it could in the future. So at this moment, what is BSC's scaling solution or plans for scaling? Yeah, so we are looking at what the future looks like from infrastructure perspective. We know that we want to experiment with different types of chain architectures. I think in the short term,

Starting point is 00:23:38 the community can expect to see private-sharded chains that will be primarily occupied by gaming projects, and then later other types of L2 solutions, other types of chain architectures could be chains

Starting point is 00:23:54 that are not EVM as well. So basically we want to serve the developer demand, whatever that might be. So we'll run a number of different types of experiments and focus on how we can really support the scaling from infrastructure your perspective. I also wanted to ask, so Gwen, you know, you've been talking a little bit about

Starting point is 00:24:14 how you've been deploying the $1 billion growth fund. Can you just talk a little bit more? So we talked about gaming, like what other kind of are your top priorities and how are you looking at different projects that you're, you know, eyeing for investment? Yeah. So I would take a step back first and kind of give a rough overview of the $1 billion growth fund. So we have four pillars, that we segmented the one billion into. So this is to target different people involved in the ecosystem. So the first 100 million goes to talent development. This basically means we want to really educate more people about the ecosystem,

Starting point is 00:24:54 about crypto and blockchain. So this means working with higher level like institutions, you know, to educate, again, into R&D projects as an example. we have 300 billion focused on incubating and working with the top depths and builders. So that's primarily through our most valuable builder program. So it's an accelerator. And recently we just announced MVB season four where this time it's going to be investment focused as well. So that's how we're deploying the funds where we want to bring in a top depth.

Starting point is 00:25:27 And this time also newer debts, right, who are much more innovative. And we want to, hey, you know, put more funding behind you. you, investment money behind you, but also incubate you. And another part of the pie is 100 million for liquidity incentives. So this is really to kind of incentivize our debts to help them. You know, we want to see long-term vision in terms of how they will grow, how they can, we can help them provide sustainable liquidity. We kick them off, but we really want to see them, you know, have a concrete plan to make sure that their debt is sustainable and is growing as well. And the last bucket is 500 million we've dedicated to investments.

Starting point is 00:26:07 This is where I kind of talked about earlier as well in terms of Matify and stuff like that, where we do direct investments. So over the last year or so since the BSC started deploying distributing capital, we've made 40 over investments into, again, various projects, everything from infrastructure, Web 3 infrastructure to Web and Dev tooling to the different depths, like, again, D-Fi, game-fi, and more innovative as one. So we're looking, again, more social fire as well. And so here we've been talking all about Binance Smart Chain,

Starting point is 00:26:43 which of course has the name Binance in it. Can you talk a little bit about how Binance was involved, you know, from the beginning and then what its current relationship is to BSC? Yeah, so BSC was, you know, Sammy briefly kind of mentioned it earlier, right? So BSC was kind of an initiative, essentially, from the Binance chain team. And it got huge, huge support from Binance. But now, you know, really it's run, you know, where autonomously, you know, we are looking at a BSC on our own.

Starting point is 00:27:13 Like this is the BSE core team. And for the $1 billion growth fund, where did that money come from? Sponsored by Binance. Yeah, I can just add in here. So because BSE, of course, like transactions. fees and the validator nodes taking is all denominated in B&B. So obviously, Binance are huge supporters for us and CZ as well as a massive supporter and advocate for BSC.

Starting point is 00:27:42 But I think we've reached the stage where we're also progressively decentralizing that part as well, where we become more community driven and run more independently and may have other organizations and groups supporting BSC in the same way that that Binance does in the future. So you talked about BNB, and that used to be burned every quarter based on the profit of finance. However, the, I guess, algorithm, you could say, or the calculation by which the B&B would be burned recently changed.

Starting point is 00:28:18 Can you tell us how that's now determined? Yeah, sure. So we implemented recently a real-time burn mechanism. So it's similar to the mechanism on ETH mainnet in which ETH is burned. So using the same mechanism on BSC. So it's basically based on the transaction volume that's happening on BSC mainnet, which is burning B&B in real time. All right.

Starting point is 00:28:49 So in a moment, we're going to talk a little bit more about some of the features and potential issues or problems with BSC. But first a quick word from the sponsors who make this show possible. Alchemy Pay is the pioneer of the world's first truly hybrid crypto and fiat payment network that makes real world crypto payments easy, secure, and instant for both merchants and users. It is currently being used by merchant partners in more than 70 countries for online and offline, consumer to business and business to business transactions. Through partnerships with Shopify, N-IUM, and Finance,

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Starting point is 00:31:20 With the Crypto.com visa card, you can spend your crypto anywhere. Enjoy up to 8% cash back instantly, plus 100% rebates for your Netflix, Spotify, and Amazon Prime subscriptions, and zero annual fees. Download the crypto.com app and get $25 with the code Laura. Link in the description. Back to my conversation with Gwen and Sammy. So as we have mentioned earlier, Binance SmartShapes, chain was forked from Ethereum.

Starting point is 00:31:53 However, also some of the main DAPs on BSC were forks of applications on Ethereum, such as pancake swap being a fork of Uniswai, Venus being copied from compound and MakerDAO, etc. I mean, there's another one that's popular called AutoFarm, which is a copy of urine. And so what do you have to say to people who criticize BSC and the applications on it for just being copies of Ethereum and its popular smart contracts. I would say that when we look at it, when we look at the space, you know, Ethereum was the first, you know, computer programmable blockchain, right? It's the first smart contract chain, a platform. And it's done immensely well, right? So it's amazing the amount of innovation that's

Starting point is 00:32:40 happened there. But at the same time, when we look at the growth of the entire ecosystem and the growth of what's happening on BSC, there's also been a lot of innovation. We know, we've got like Dairy Protocol, for example, doing everlasting options, you know, with I mentioned earlier, for example, Alethea, you know, doing intelligent NFTs. So we've got a lot of developers building, you know, new stuff and kind of thinking, like, from the ground up what they can do with Web 3, essentially. So I would say that, you know, for us, what we're looking at again, it's always like, it's not just BSC, we're looking at innovation in the space, and we want innovation to thrive across all the chains. Yeah, I'll just add on that. So BSC is a public permissionless chain. So anybody can deploy contracts on there.

Starting point is 00:33:24 Of course, we're trying to provide some guidance to the developer community. But a lot of those projects that you mentioned are community projects. So they're just, I think at the time when if we go back to Defi summer 2020, when really compound launching comp kicked off like the whole yield farming and massive growth of TVL in DeFi, there wasn't really alternatives. Like everything was happening on Ethernet. And like a lot of users were being priced out, like $50, $100 transaction fees at time. So when the BSC infrastructure was launched, developers and users started to see that there's an alternative here.

Starting point is 00:34:04 And then that started to grow very rapidly as well. So I think the Defy ecosystem on BSC for sure was leveraging a lot of the innovation that was happening on Ethereum. but today there is a lot of innovation happening on BSC as well in the infrastructure space, in the DFI space and others as well. In early 2021, many transactions on BSC were failing and people were tweeting screenshots of contracts that, for instance, had 680,000 failed transactions within 17 hours. And even recently last week, when I asked people on Twitter for questions that I should ask you. Somebody named the Defy Avenger replied, is BSC broken? I bridged for two projects recently

Starting point is 00:34:51 and got more failed transactions than all my other defy experiences combined on ETH, Polly, and Avalanche. Transactions that did go through on BSC were very slow, not going back there again. So why are there so many failed transactions on BSC? Yeah, I think that's a fair question. So I think over the last one year or throughout 2021, when we went through different growth patterns, we had some periods where there was an all-time high network transactions was around, I think, 13 million, but we did have a lot of challenges in supporting the scaling of the infrastructure. So I think inherently, EVM architecture was not really designed for that transaction volume. And a lot of the infrastructure as well, like data indexing and a lot of other.

Starting point is 00:35:42 It's not only about the block consensus, but all the other infrastructure and tooling to support that transaction volume was never really designed for that purpose. So there was a lot like a very steep learning curve for the whole developer community for a lot of the infrastructure providers. But I think the current situation is that the tooling and infrastructure has reached a level where we can support the current transaction volume, even if it goes to 13 million transaction, daily transactions, or even beyond. But it was kind of a difficult and painful learning process.

Starting point is 00:36:17 But I think today, all the other EVM chains can also leverage a lot of the improvements that have happened across that infrastructure and tooling stack to be able to support that level of user growth. So definitely it's been a kind of steep learning curve, but has allowed us to kind of reach a point where we're able to support this. scaling of infrastructure to where it is and much beyond. There have also been a lot of hacks on various BSC protocols in March, Mirkat. On BSC was drained of $31 million, possibly by the team itself.

Starting point is 00:36:54 In April, uranium finance lost $15 million in May. An attacker stole $45 million from pancake bunny, and the bunny token then basically collapsed. In May, there was possible price manipulation on Venus, which caused $200 million worth of liquidations. There was the squid game token named after the popular TV series, and that appears to have been one big giant rugpole. CoinDisk eventually reported that some BSC users had just left the platform completely due to concerns about the safety of their funds. And I did also see that after May BSC, or rather that in May BSC had accounted for 20% of all,

Starting point is 00:37:35 defy total value locked, but now it's only 6%. So is BSE doing anything to address these issues or can it? Very good question. So I think definitely there has been lots of exploits, but it's not unique to BSC. I think it became a very attractive target for the black hats and the malicious actors in this space due to the large number of new users. There are large TVL in a lot of the DeFi protocol. but there hasn't been, there isn't really any way to kind of prevent that.

Starting point is 00:38:09 It's really about user education. So it's about educating users around how to evaluate risk, educating the developer community around how to think about security and security best practices. On the technology side, we are starting to see some innovative solutions on how to kind of prevent. So like early detection systems, there's some really interesting innovations happening in Mempool technologies

Starting point is 00:38:35 that allow transaction simulations to detect large asset balance changes and do these kind of technology types of solutions. But ultimately, I think the most important one is around education for both users and developers. And on that point for the education bit, Laura, so this is where as well, under our efforts, we're sponsoring hackathons, under the talent program, development program,

Starting point is 00:39:01 we want to educate both a retail user as well the incoming developers and talent into the space more, as to how security, again, is so important, right? As you said, funds and many people have been exploited. So we really want to make sure that the next depths that being built as well have great usability. Because usability is one way in which you help the users, you know, be more secure, right? So the users can, you know, we can educate the users,

Starting point is 00:39:30 but if the debts can also do their part, right, by making their systems just less likely to make mistakes. I think that will be cool. So I think we're looking at, you know, different efforts, again, across the space as to how can we increase the level of education and security. Sammy, when you were talking about the technological solution, so let's say that there is some kind of attack happening at that moment, say with a flash loan, are you saying that somehow the technology could,

Starting point is 00:40:02 stop that in mid transaction or like how would that work? Because also there probably would be some legitimate uses that might get caught in that. So yeah, I just would like to hear a little bit more about that.

Starting point is 00:40:18 Yeah, so a number of these solutions are still in different stages of R&D but there was two exploits recently that happened outside of the BSC ecosystem, but basically the way that those works is it's basically like an early detection system. So there's bots that are monitoring tornado and any addresses that are funded through tornado.

Starting point is 00:40:40 Any contracts being deployed by those addresses, they'll analyze the events there and then provide like early detection or warnings to the project teams of those particular Defy protocols. So that's one of the types of technologies that are being developed and there's others as well. But I think those types of technologies will help to grow the whole DeFi ecosystem. system in a more anti-fragile way. So I think a lot of the exploits that happened over the last year were also indicative of the kind of nascent stage of where Defi is at the moment and kind of a lot of the challenges that need to be addressed. We also leverage a lot of partners, Laura. So, you know, we work closely with Sertic, Pek Shield. We have a Buk bounty program, for example. We also work

Starting point is 00:41:26 closely a rock dog, you know. So security is important. So not just in the technical side of things, but also through partnerships. So there was a recent GitHub post that called out that the chain isn't being run very well. And it was saying basically the developers working on the protocol are not doing a good job.

Starting point is 00:41:45 It began, this is a blockchain with supposedly billions of value, yet it is governed and developed like the project of a stoned teenager. And then they wrote several bullet points. There is no code review. Patches are simply committed.

Starting point is 00:41:59 In most cases, even without a problem, proper description of what they do or what problem they try to solve. There doesn't appear to be any reasonable testing process in place. Every update appears to make things worse. There is zero responding to bug reports. Hundreds of people report non-syncing nodes or nodes falling out of sync. Response from the developers, zero. There is no beta testing. Stuff is thrown over the fence. And it goes on. There's more, but I won't, you know, read the whole thing. But they concluded. the root cause of the problem is that you mindlessly increased the block size and reduced the

Starting point is 00:42:37 block time without doing the actual work required. What do you have to say to these criticisms? I think some of those criticisms are valid. So I think for sure it's acknowledged the developer community, the BSE developer community faced lots of challenges on running their own nodes and a lot of infrastructure-related challenges. I think it's also really due to the current architecture, right? So Geth was not really, like we really pushed the limits of how much Geth could be used. And so there's a number of issues around that, but we are seeing today as well a number of awesome community-driven initiatives. For example, the work that's happening with the Erigon client team on developing a BSE-compatible and ERIGON client that will be able to support

Starting point is 00:43:27 operation, much easier operation of full and archive nodes by developers. But I think for sure as well, like we're constantly trying to improve and we're being supported by awesome developers in the community to drive a number of these initiatives. And actually I would say also, like, we welcome these candid posts, right? This is how we improve, you know, how our team gets feedback as well. we think feedback is a gift, right? And I think this also helps the entire ecosystem. So candid feedback is welcomed.

Starting point is 00:44:03 Yeah, I would also encourage. So in that same post for listeners that can find it, one of the BSE core developer teams also wrote a quite detailed post, which provides some really good insights around some of the stories and backstories around launching and then scaling BSC. So I would highly encourage listeners to also check it out. And so it sounds like you feel like it's more of a technological issue with kind of like pushing the boundaries of Geph. Because, you know, the way that this post was written, it really seemed like they were saying it's more of an organizational process type issue.

Starting point is 00:44:41 It's not really that. It's more around the infrastructure challenges. And I do understand the frustrations for a lot of the developer community would have faced over the last year. But there's a lot of initiatives happening on how do we? we really support the scaling of infrastructure with this level of user growth and transaction volume and the current usage and where we really want to go as well. So I think for sure there's been tons of issues on the infrastructure side, but I think there's a lot of initiatives and how do we really address these in the short and medium long term. And I think in the long term as well, you know, Laura, we again, we mentioned that we're trying

Starting point is 00:45:21 to get a $1 billion, right? our all-time high for BSC was 2.27 million. So with a long way to go. So with a lot more things to do, right, even on the technical side, we are aware of that. And we are, the team is looking into that. Another user wrote on GitHub, their name was Null Qbit. And they talked about a BSC transaction in which it appeared that a validator prioritized a transaction that had a gas price of zero and that the validator then received a transfer

Starting point is 00:45:51 of BNB, which null qubit speculated was, quote, possibly as payment for the special treatment. And in the post, they noted that there were many similar transactions with the same behavior and that the transactions weren't publicly visible from the transaction pool, which raised the possibility that these were transactions that were submitted directly to the validators. And then they wrote, clearly there was an agreement between the originator of the transactions and the validators. and the goal is to perform front running without risk. And then Null QBit noted that since the gas price was zero, there was no burn.

Starting point is 00:46:29 And then they said, it's possible that this is another thing these validators are starting to explore to bypass the burn feature and maximize their profits. What is your response to this post? So this is happening on a number of other ecosystems. So there is like a growing market today for transaction order. that started really on Ethereum as well, but it's happening on a lot of the other EVM chains. So there is growing market demand from professional traders and others. And these types of use case, I think this type of activity will grow. Like there's growing market demand around it.

Starting point is 00:47:05 There's not really much we can do to stop it. Like it's really being driven by growing market demand. Okay. So at this moment, we probably, I'm sure, we're all aware there's very much a heated competition at the layer one level. And initially, you know, I would say that BSC was among the chains called an Ethereum killer. I don't even know if people are still really using that term anymore. But one of the younger ecosystems than BSC, which is Terra, recently overtook BSC as the defy protocol with the second highest total value locked.

Starting point is 00:47:45 And so currently there's $17 billion held in Terra. across 17 protocols versus $15 billion for BSC across 277 protocols. Why do you think that this has happened? I think it's largely driven by what's also happening in the market, given the appreciation of Luna. So if you look at the DFI ecosystem on Terra, it's quite concentrated on a few daps. But I think it's great, generally,

Starting point is 00:48:17 the growth of Defi across other ecosystems going to support bringing many new users into crypto generally. So I think more chains, more infrastructure, more new users are all really awesome for this space generally. Like I wouldn't really, don't really like to get into like the comparison type of thing. And I think like TVL and Defi is like one metric. You should look at like a number of different types of metrics to including users, unique active addresses, unique active address growth, community-sized growth and a number of others to get a really more representative view of what the user growth for any type of infrastructure really looks like. And so some critics perceive that BSC has taken off because of the high fees on Ethereum

Starting point is 00:49:03 and obviously also because of the throughput issues there. But if Ethereum scales and also brings down transaction fees, then what place would you see in the market for BSC? It's great for all of us. I think like, you know, Ethereum going to 2.0, you know, really just would make the entire ecosystem, you know, much more friendly. And I think there's space for all. Because again, we're only at like 200, 300, 300 million crypto users in the world, right? There's just so many more billion to go.

Starting point is 00:49:33 So for myself, like super excited to see the progress. Because for ourselves, so we have, and Sammy shot earlier about some of our technical plans, we have so much more to achieve and with so much to do as well. So it's exciting, actually. And Sammy, did you want to add anything on that? Yeah, I think the emerging layer two ecosystem as well is also going to help to support bringing many new users into crypto, providing more choice for developers as well. I think eventually we'll love to be able to leverage the expertise and experience that we've gained in supporting the growth of the BSC infrastructure to also the power, the growth and scaling of other ecosystems and other chains. Okay, but yeah, I mean, I just wonder if in that world, obviously, Ethereum will be perceived as being more decentralized and then BSC will not have those advantages of the higher throughput and cheaper fees. But, you know, I mean, even now, I would say that if BSC is kind of like competing on those factors, that then Solana, even at the current moment,

Starting point is 00:50:44 kind of maybe is a more appealing choice for developers because it also offers higher throughput, it also offers lower fees, but it is still more decentralized than BSC. So what would you say, you know, is the appeal to developers who are still looking for that kind of environment? So I think if we look at the landscape and the situation today, just based on the number,

Starting point is 00:51:14 of users on BSC, which is larger than all of the other EVM chains combined, is what's really attracting the developers to come and build projects on the current BSE infrastructure. So I think as other chains and user growth continues to accelerate as well, developers will ultimately have more choice, but also users will, I think, eventually congregate and do the majority of their activities on chains based on different preferences. So it could be access points. It could be a number of other factors. It could be where their favorite NFT marketplaces.

Starting point is 00:51:49 So ultimately, I think the important thing for users is also the freedom of choice, but also freedom for the assets to be able to move from, like if NFTs are issued natively on X chain, be able to move those NFTs to chain Y where their favorite NFT marketplaces is and ultimately having more freedom and choice for the users. So as I mentioned on Twitter, I solicited questions for both of you. And one of them, Star Trade 7, asked, since finance just has 21 validators, what happens if the authorities decide to shut down Binance smart chain? I think that would be pretty difficult because the validator candidate diversity today is like there's a number of validators that are being run by groups that we don't know the identities of those operators.

Starting point is 00:52:41 So I think it will be pretty difficult. I'm not sure really how the execution or enforcement could really happen. Okay. Yeah, so I guess we would have to see. So last spring, CipherTrace, which Disclosure is a past sponsor of my shows, signed on to apply its transaction tracking and wallet attribution software to BSC. What exactly does that mean? Would Defi on BSC be more similar to using a SCE?

Starting point is 00:53:11 a centralized service, which has a typical kind of know-your-your-customer process? No, I think that's more related to being able to analyze certain addresses, analyze certain transactions, especially ones that are blacklisted or known to be connected to certain types of malicious applications. It's more related to that side. It's like driven more by compliance requirements for certain exchanges to be able to integrate with that type of infrastructure. Another question that I received on Twitter was Funk E0TX asked, what happened to Binance Bridge?

Starting point is 00:53:51 Will it be replaced or put on ice for good? And when you answer, can you explain what Binance Bridge is and then answer the question? Sure. So Binance Bridge is one of the many types of bridges supported by BSC currently. So Binance Bridge allows users to bridge assets from a number of supported chains to BSE. And it was leveraging some finance infrastructure. Basically, we saw that the majority of usage was happening on other bridges, decentralized bridges.

Starting point is 00:54:29 And it was one of the key focus areas in the initial period of trying to bootstrap the network, wanted to support a lot of choice in how users can bridge their assets to and from BSC. So we decommissioned Binance Bridge mainly because there was the majority of bridging of assets was happening on other bridges that are currently still operation. And we're seeing more bridges come into production and being able to support bridging assets between a number of different ecosystems. So Binance Bridges decommissioned. it's no longer in existence.

Starting point is 00:55:07 It won't come back either. One bridge we supported as well, for example, from the BSC fund is any swap. Right. So we support a lot of other projects out there, infrastructure. So after BSC's huge year of growth in 2021, what are the plans for the chain in 2022? Yeah. So we have a couple of initiatives that we're planning. We want to launch a number of new infrastructures that will support users,

Starting point is 00:55:33 user scaling for different domains. So the first ones the communities can expect to see are for gaming specific chains, so chains that are much lower transaction fees, potentially the same block speed, but will be much more suitable for gaming applications. So later we'll also look at launching other types of another chain architectures. So we want to try and run a number of experiments. And then the ones that we do see developer and user traction for, support the scaling of the infrastructure for those.

Starting point is 00:56:06 But I think we want to try and really support an experiment with different types of chain architectures with the view of being able to support applications to reach hundreds of millions and eventually a billion users. On the investment side of things, we constantly are still looking for super interesting projects, steps, again, across kind of the funnel, right? So everything from infrastructure to kind of next level up. of tooling in general, you know, be blockchain tooling or just web tooling and really thinking about how to bridge web tool, web three. So we've made some new investments as well under the

Starting point is 00:56:43 Matterify thesis and category. We haven't announced them, but you see much more, many more announcements soon at that space, and we're looking for way more. So I think one big theme in which we really are backing on for this year for 2022 is really DALS. Right. We've seen DOS take off in several different ways. We think there's just so much more to be done with DALS, right? this is a new way of collaboration. And yet it's not super easy, actually, to really start a doubt, you know. So we want to, again, invest in more Dow Enablers, you know. And just again, in the space, you know, we always think about where will the mass use cases be, right?

Starting point is 00:57:21 And so we do that through direct investments, to something like our core investment partnership with Annamoka brands. We're talking a few more big potential partners as well, industry leaders to maybe do similar, investment programs, you know, and could be a much more strategic partnership where we talk about investments, incubation, you know, collaborating of different ecosystems, for example. So there's a lot more plan for 2022 and it's super exciting. Yeah, I agree with you. I think Dallas are going to be big this year. I'm pretty excited about that. All right. Look forward to our new investments, Laura. We'll keep you posted. Please do. All right. Well, where can people learn more about each of you and your work.

Starting point is 00:58:03 So I'm on Twitter. People can follow me at my Twitter handle is Crypto Maxi, but the T is a 7th. So I'm also on LinkedIn, but I'm mostly on, mostly on Twitter, but also listeners can follow

Starting point is 00:58:18 the latest developments and news and engage with the Binance chain communities on our Twitter and our Discord. So head over to Binance.org, and you'll find all of the relevant links there. On my site, you can find me on Gwendolyn Regina on Twitter. I'm also on LinkedIn.

Starting point is 00:58:36 Across social media, my handle is generally Gwendolyn Regina. Perfect. All right. Well, thank you both so much for coming on Unchained. Thanks, Laura. Thanks so much for joining us today. To learn more about Gwen, Sammy, and Binance Smart Chain, check out the show notes for this episode.

Starting point is 00:58:54 Unchained is produced by me, Laura Shin, Adelph from Anthony Yun, Daniel Ness, Mark Murdoch, Shishok, and CLK transcription. Thanks for listening. Thank you.

Unchained - Is Binance Smart Chain Being Run 'Like the Project of a Stoned Teenager?' Two BSC Execs Answer - Ep.310

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