BSC lock-up plummets, and the exchange public chain in the bear market may usher in a "complete collapse"

Wu said the author | WS

Editor of this issue | Colin Wu

With the sharp drop in the price of coins, China's tightening regulation and frequent hacker attacks, Binance Smart Chain seems to have ushered in the darkest weeks. Existing users stayed in Ethereum, and new users moved to Polygon. The locked amount and Pancake transaction volume of BSC both fell sharply.

In a bull market, BSC will be the most popular public chain; but if a bear market comes, the user loyalty on the BSC chain is too low. In addition, if a bear market comes, the users on the chain will care most about the principal rather than the income.

BSC has attracted a large number of users and project owners who are unfamiliar with DeFi by being able to easily copy projects from Ethereum, having low gas, and the brand effect of Binance. There have been too many violent increases on BSC, and even more violent escapes and hacker attacks. This is because most of the users behind BSC are novice users who are unfamiliar with DeFi, and project owners who want to make quick money and cut leeks. Although there are a large number of users on BSC, the speculative atmosphere among them is too heavy. With the gradual reduction of mining rewards for the current top mining projects, serious hacker attacks, and the 521 crash, the DeFi lock-up volume on BSC has experienced a cliff-like decline. The main users of BSC are from Asia. After the 512 crash, BSC seems to be transforming from an "incremental market" to a "stock market", and the existing BSC old users will switch to the next new chain (such as polygon) to mine new mines due to recent hacker attacks and reduced DeFi mining rewards.

BSC is a "fork" project of Ethereum, and its innovation is very limited. In the "impossible triangle" of blockchain, BSC increases the number of transactions and reduces transaction costs by giving up "decentralization" and controlling the number of nodes to 21. However, its success lies in Binance's ability to attract new users to the market. Most of them want to make quick money, but they have little knowledge of blockchain. They mainly care about the possibility of speculating on new currencies and mining new mines with extremely high yields on BSC, and do not care about decentralization and risk control. This means that in a bull market, BSC will be the hottest public chain; but if a bear market comes, the user loyalty on the BSC chain is too low. With the 521 news, regulatory pressure and huge declines have a great impact on the entry of new users, especially for BSC, whose most glorious days may be behind it.

In the bull market, the developers brought a high lock-up rate to BSC by "forking" the DeFi project on Ethereum, and then through Binance's market capabilities and extremely low transaction costs on the chain, BNB and BSC have achieved amazing growth and user numbers. However, if the bear market comes, the users on the chain will care most about the principal rather than the return. Now it seems that the security on BSC is not enough to make existing users confident enough: the largest lending project and the largest machine gun pool project on BSC have both suffered serious hacker attacks this month. According to Chain Catcher statistics, at least 14 projects have been hacked this month, with a total loss of at least US$250 million, of which ten projects are on the BSC chain. This is the month with the highest frequency of attacks and the largest losses in the history of DeFi, and BSC has been hit hard. The most serious attack occurred on BSC's top lending project Venus, with a loss of up to US$100 million caused by the hacker attack, and its current lock-up volume has also fallen by as much as 70% from its high point.

Venus Locked Amount

In addition to the current attack losses on the leading BSC project, the decline in its mining yield rate is even worse for BSC. After the mining rewards of Pancakeswap, the leading BSC mine, were halved on May 7, the locked-up volume began to decline; under the influence of hacker attacks and regulatory news, BSC may experience a downward spiral in the locked-up volume and the number of users. Although Pancakeswap briefly surpassed Uniswap in terms of trading volume, its trading volume has fallen to its lowest point since March as its mining rewards decreased and speculative projects such as Animal Coin cooled down. The speculative sentiment of retail investors and the low transaction costs on BSC have led to a large number of Animal Coins and "Ponzi coins" represented by Safemoon on BSC. After this round of declines, most of these projects plummeted, with Safenoon falling 43% in 14 days.

Pancake Volume

Pancake lock-up volume

As the enthusiasm of Chinese investors decreases, it is difficult for BSC to maintain its current advantage in the stock market dominated by European and American users. BSC's locked-up volume was the most affected by this sharp drop, while Polygon's locked-up volume was rising sharply, which shows that DeFi whales have gradually left BSC and started to deploy new chains.

Polygan lock-up amount

BSC locked amount

The advantages of BSC are being absorbed by Polygon, which can directly connect to layer 2 projects on Ethereum, so original projects on Ethereum can be directly on the chain, which is safer and more decentralized than BSC. In addition, Polkadot/Kusama, which has been deeply involved in the Asian market, is about to start the parallel chain auction. After the operation, its mining income is bound to be higher than the yield of BSC projects, which will inevitably snatch the locked volume from the existing users of BSC.

Summarize:

· BSC is more like a bridge from centralized finance to decentralized finance. People will pass through, but they will not stay. In the first stage of the bull market, BSC successfully became the first public chain used by most users with the strong endorsement of Binance. However, as the maturity of new users gradually increases and mining rewards decrease, if BSC cannot continue to attract new users, its existing users will gradually switch to other public chains for mining, such as Polygon.

· 521 is the most negative news in this year's bull market. The biggest impact on the public chain is likely to be BSC. The biggest advantage of BSC is that it uses Binance, the world's largest centralized exchange, as an endorsement to attract new users to the chain. However, if the supervision is tightened, the number of new users from China will gradually decrease.

· In terms of the competition for existing users, with the demise of the Ponzi scheme on BSC and the recent security issues, BSC seems to be losing existing users. We see that liquidity is shifting to Polygon’s Ethereum layer 2 public chain, and its locked-in volume is growing rapidly.

· With the progress of Layer2 and ETH2.0, many developers have returned to Ethereum and Polygon for development, and BSC is no longer the first choice. However, Binance's "giant" blood transfusion is still a strong backing for BSC.

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