They say you need you need a certain amount of madness to be a visionary entrepreneur.

When Zhao Changpeng first learnt about Bitcoin at a poker table in 2013, he knew in his blood, that this was the future. So after reading Satoshi’s white paper, he sold his apartment and went all in on the cryptocurrency.

Better known as “CZ” in the community, he now runs Binance, one of the most successful crypto conglomerates on the Interweb.

What first started out as an alt-coin exchange has now blown into a potential full scale competition with Ethereum, via his version of the smart contract – Binance Smart Chain (BSC).

Think of BSC as a cheaper-better-faster alternative to the numero dos in the crypto space.

Due to the insane amount of traffic on the ETH network, transaction fees have sky rocketed. Unless you’re a multi-billion dollar hedge fund that can scale at will, fixed transaction costs cannot be ignored. But there’s another way to avoid high transaction costs – leave Ethereum.

And that’s why more and more people are switching over to BSC. Especially so in the DeFi space.

Total Value Locked (TVL) on BSC have been increasingly exponentially since the start of this year (source: defistation)

While purists can argue until the cows come home that BSC is significantly more centralized than ETH, that doesn’t bother me too much. Look I geddit, in the purest sense of the word, DeFi = Decentralized Finance. But we are at the frontier of this space, where people are still trying to figure stuff out, and standards are changing all the time, even as we speak.

What can be accepted and established will only be known at a later stage, but right now we need to focus on more important things – like low cost yield farming on the BSC.

Move Over Uniswap, Here Comes the Pancake!

The new kid on the block – Pancake swap, has risen to the top 3 decentralized exchange (DEX) by market share volume within the span of a few months. It seeks to displace the number 1 ETH contender – Uniswap (which has been around since 2018).

An average transaction costs <$1 on the BSC network, compared to >$50 on ETH.

With a first mover advantage, Pancake swap is currently the largest Automated Market Maker (AMM) on the BSC. Having starting only late last year, we already see all kinds of colorful offerings they have on their platform, that help contribute towards token burn (ie. inflation control measures):

  • Lottery sweep stakes
  • Pancake Prediction (currently in beta stage) – binary trading predictions on BNB token prices
  • NFTs and collectibles
  • Initial Farm Offerings

All these feed back into the Pancake ecosystem, which then translates to high APRs! And in turn attracts more liquidity (which is what all profitable investors want).

Without deflationary measures, high APRs typically lead to token inflation

Partner staking platforms such as Pancake Bunny also forge symbiotic relationships and help build off each other’s infrastructure. Unlike the vampire attack that SushiSwap launched on Uniswap in Sep 2020, this provides momentum and helps the entire community grow.

If there’s one thing I like when looking at a business, it’s the ability to grow the pie instead of playing short term zero-sum games (DUH).

With lower transactions costs, high APRs and a growing ecosystem, it is not difficult to see why Pancake tokens have been sky rocketing 🚀.

To the Moon! $1 invested into $CAKE in Jan 2021 would have been $40 by end Apr 21. Not too shabby at all.

Growing the Ecosystem

Binance itself is not new to ecosystems. Remember how CZ launched it as a vanilla alt-coin exchange? It has now grown to a crypto behemoth, offering:

  • Direct banking transfers
  • Margin / Futures Trading
  • Binance Earn – Flexible and Locked Savings Plan
  • Loans
  • Options
  • Credit Card

My take is that Binance has an incentive to help Pancake succeed. Especially in this period of time (aka. alt season) where the crowd is crying out for an alternative, to the congested ETH network. And no time better than the present.

It now costs $75 in fees for a $54 transaction on Uniswap. 😱

So while you can argue that yes BSC not a pure decentralized network for now, Binance partnerships help platforms with that much needed booster to get further ahead in a shorter period of time.

And as we all know, time of is of the essence in the crypto world, specifically for establishing market dominance during periods of critical uptake.

Pancake Bunny TVL grew to $6.8bn in a span of only a few months

The funding that Binance Labs (Binance’s VC arm) gave to Pancake Bunny recently also serves as a stamp of approval in a time where rug pulls and scammers abound.

You can see that this led to their TVL spiking to $6.8bn in a matter of mere months. In contrast, Yearn Finance (also a Yield Optimizer but launched off the ETH network in Dec 2020) only has a TVL of $2.9bn.

What Happens When An Unstoppable Force Meets An Immovable Object?

BSC seems to have much going on for it. In fact, Pancake swap is only one of many DEX/AMMs/Platforms out there building on the BSC network.

Top 10 Platforms building off BSC network (source: Defistation)

We are seeing a resurgence in the DeFi wave and already there has been significant development in the ETH space from last year (Yearn Finance, Alpha Homora, Bancor).

Some of older platforms have even shifted to BSC, or are allowing users to access both networks (eg. SushiSwap, 1inch).

But let’s not forget what’s happening in the macro space as well.

Right now I have my eyes on EIP-1559 which is due in Jul 2021. A significant overhaul in the ETH network could lead to lower fees and see people shifting back to ETH – after all, crypto investors are a practical bunch.

Cheaper-better-faster can be a catalyst for change. But it’s not going to keep you there.

As an ex-markets person, what I’m really excited about is the constant wave of financial creativity that’s piling in. I genuinely get goosebumps whenever I think about the all the innovation that is happening in this space.

Of course it’s important to understand how and where the money is flowing. But at the same time, I think it’s also a good idea to zoom out and look at the big picture, and where we’re headed in 5-10 years – it’s really only a matter of time before DeFi takes over!

Overview of terms:

I know the various platform names can be a tad overwhelming at times, so here’s an overview of those that I spoke about here:

P.S. Nothing in this post is to be considered legal or financial advice. All of the writing here is meant for information and entertainment purposes, so DYOR and make decisions based on your own beliefs.

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