BSC is one of the most popular blockchain networks to date. However, it does come with its own drawbacks. Some people claim that Binance Smart Chain is centralized, others argue that it isn't.

Unlike many of the other popular blockchain networks, Binance Smart Chain(BSC) is centralized. BNB, the cryptocurrency, is also centralized since it is the native currency of the BSC network. BSC is centralized because there aren't a lot of validators on the network and because the blockchain can be paused. There are also other reasons why the Binance smart chain is centralized.

In this blog post, we explore the question of whether Binance Smart Chain (BSC) is decentralized or not.

We will look at the reasons why the Binance Smart Chain is considered centralized, including the fact that only a select few can run BSC validators, the small number of validators on the network, and the ability for the network to be paused on command.

Additionally, we will examine whether the native currency of BSC, BNB, is centralized.

Binance Smart Chain Validators: Why Only a Select Type of People Can Run Them

To run a BNB validator, an individual needs 10,000 BNB or $2,700,00 dollars at the time of the writing of this article. Not just anyone can run a validator. Because of this barrier to entry, Binance smart chain is somewhat centralized.

The average individual could not run a Binance Smart Chain validator, nor could even a person who makes $100,000 per year or a person with a net worth of 1 million dollars. Only 66 accounts have over 10,000 BNB according to BSCScan. Now while this is on-chain, there are probably more accounts with this much BNB in Exchanges.

In contrast, Ethereum requires 32 Ethereum to run a validator, currently costing about $41,600. Avalanche requires 1000 AVAX to run a validator, currently costing about $15,700.

This high barrier to entry to be able to run a validator on BSC leads to a handful of people running validators on BSC. And this ends up making Binance Smart Chain a centralized blockchain.

Some say that most of these validators are connected and influenced by the Binance Company. We will see evidence of this later.

Binance Smart Chain Validators: The Small Number of Validators on the Network

As we mentioned previously, since there is a very high barrier to entry, not just anyone can run a validator node. You would require $2,700,000 worth of BNB or 10,000 BNB to be eligible to run a validator node on BSC.

BSC is centralized because there are only a handful of validators currently validating transactions. At the writing of this article, there are only 26 current validators on Binance Smart Chain. In contrast, Ethereum has about 448,820 validators. Avalanche has about 1,200 validators online.

What’s more interesting is that only 21 of the total 26 validators are chosen to validate blocks based on Voting power every 24 hours. So even if there were hypothetically 50 or more validators online, only 21 of those get chosen to validate blocks every 24 hours. These validators don’t get chosen randomly either. They get chosen in order of which validator has the most voting power.

An identity called Legend runs 3 of the 21 validator nodes on Binance Smart Chain. We don’t know exactly what institution runs these. However, it is thought that they are run by the same people since the nodes have the same email address, Logo, and name.

Additionally, while other validators have submitted the websites to their organizations, these people haven’t. This can be seen at the BNBStaking website.

Binance Smart Chain: The Centralized Nature of a Network That Can Be Paused on Command

A clear indication that a blockchain is centralized is that it gets paused by an organization or central authority. True decentralized blockchain networks, like Bitcoin and Ethereum, have been running straight with no downtime since the day they were launched.

Binance Smart chain is a centralized blockchain network because it can get paused on command. With truly decentralized blockchain networks, no one can pause the network. The networks run straight 24/7.

On October 6th, 2022 BSC was paused, after finding an exploit on the blockchain. Even though there was an exploit, the blockchain that is decentralized should not be able to be paused by anyone.

Due to irregular activity we're temporarily pausing BSC. We apologize for the inconvenience and will provide further updates here.

Thank you for your patience and understanding.

— BNB Chain (@BNBCHAIN) October 6, 2022

They later indicated that they had suspended the BSC blockchain network due to an exploit. The key word here is “WE”, there shouldn’t be a “WE”. This means that this blockchain has a central planner. It has a central institution that can pause the blockchain. Thus, Binance Smart Chain(BSC) is not decentralized.

We want to thank all node service providers for their quick and attentive response.

— BNB Chain (@BNBCHAIN) October 6, 2022

This also got confirmed on Reddit. BSC confirmed that they coordinated with all BSC validators to pause the BSC blockchain network. Coordinating with validators and then making sure that the blockchain is paused is exactly why the Binance Smart Chain is centralized.

In this particular scenario, Binance Smart chain got hacked and the hacker managed to print coins out of thin air. Moreover, it is irrelevant to the fact that BSC is centralized, that Binance Smart Chain was hacked. While it is unfortunate that BSC got hacked, it did help bring out the idea that BSC is a centralized network.

Binance Smart Chain Validators: How Validators are Connected to Binance

While Binance Smart Chain (BSC) may claim to be decentralized, its validators' relationship with Binance itself makes it more centralized than other truly decentralized blockchain networks. Validators are a crucial component of the BSC ecosystem, as they are responsible for verifying transactions and ensuring the network's security and reliability.

Binance, as the creator of BSC, has a significant degree of control over the validator set. While validators are chosen based on their reputation, technical expertise, and commitment to the network's principles of decentralization and security, Binance is responsible for selecting and managing the initial set of validators that run the network.

This centralized control over the validator set means that Binance can influence the network's operation and decision-making processes, leading to a more centralized ecosystem.

Wilson Withiam, a retired researcher from Messari, illustrated this on his Twitter that Binance chain Validators have close ties with Binance – and are possibly controlled by Binance.

Some might overlook the influence Binance Chain has over Binance Smart Chain's validator set.

BSC has 21 active validators, making it more centralized than most platforms.

This validator set is determined daily by Binance Chain, a network managed by just 11 validators. pic.twitter.com/UeWDj0o1DY

— Wilson Withiam (@WilsonWithiam) April 12, 2021

The relationship between the BSC validators and CZ, the CEO of Binance, further highlights the centralized nature of the network. As the leader of Binance, CZ has a significant influence on the direction and operation of the BSC ecosystem.

CZ has publicly praised the BSC network and actively promotes its adoption, further consolidating Binance's control over the network.

The relationship between CZ and validators on the BSC network is one of partnership and collaboration, which can further exacerbate the centralization of the network. CZ has worked closely with validators to ensure that the network operates smoothly and securely, providing resources and participating in community events.

While this collaboration can lead to improved network performance and security, it also further strengthens Binance's control over the network.

In conclusion, the relationship between the validators that run Binance Smart Chain and Binance itself, as well as the relationship between BSC validators and CZ, highlight the centralized nature of the network.

While BSC may offer high performance and low transaction fees, its centralized structure may not appeal to users who prioritize decentralization and trust lessness in their blockchain networks.

Is BNB Centralized? Understanding the Native Currency of Binance Smart Chain

BNB is the native currency of the Binance Smart Chain network. It is used for transaction fees, staking, and securing the network via validator collateral, and DeFi collateral. Because the blockchain can be paused on command, BNB by extension is also a centralized cryptocurrency.

A lot of the value of BNB comes from Binance itself. Traders who use the Binance exchange can get 25% off of their trading fees when they use BNB to pay for the fees. This effectively creates demand for BNB. Were this feature to end, most of the demand for BNB would be gone.

BSC can be paused on command as we saw earlier. When this happens, BNB also gets paused. People can’t transfer BNB to other people. All activity on Binance can be halted.

We can assume that if the Binance smart chain can be paused or halted on command, then the blockchain can also be reorganized. Since the network is centralized, then accounts can potentially get censored if Binance chooses.

Whether or not they chose to by their own admission or as a result of external pressure is irrelevant. The fact remains that the Binance coin is centralized because Binance smart chain is centralized.

The Path Towards Decentralization: What Binance Smart Chain Needs to Change

It is possible for BSC to become decentralized, though this is difficult because the image of BSC also influences the image of Binance CEX and vice versus.

There are many ways for BSC to become more decentralized. Below we illustrate some methods in which BSC can become more decentralized.

BSC Decentralization: Lower the barrier to entry for running a validator node

Currently, only those who have 10,000 BNB can run a validator node on Binance Smart Chain. This makes it very difficult for the average person to participate in validating transactions on the network.

Lowering this requirement could encourage more people to participate in the network and increase its decentralization. The more validators there are, the more decentralized a network becomes. The only way to make it possible for there to be more validators is to lower the barrier to entry.

BSC Decentralization: Increase the number of validators on the network

Binance Smart Chain currently has a very small number of validators compared to other popular blockchain networks. Increasing the number of validators would help to distribute power more evenly across the network.

Currently, there are about 21 validators presently on the network which get chosen every day out of the rest of the number of validator candidates that are online. Other Proof of Stake blockchains have a way higher number than this. For example, Celo has about 78 validators who participate in the consensus.

BSC can become more decentralized by increasing the number of validators that can participate in the consensus mechanism at any one time.

BSC Decentralization: Eliminate the ability to pause the network.

The fact that Binance Smart Chain can be paused on command by a central authority means that it is not truly decentralized. Eliminating this ability would make the network more decentralized.

There have been DeFi hacks on Ethereum plenty of times. Hundreds of thousands of Ethereum have been stolen. Never once has Ethereum been paused. It has continued to operate since the day it was created. The heart of Ethereum never starts beating.

Binance Smart chain can be more decentralized by removing its ability to be paused.

BSC Decentralization: Improve transparency

There are concerns that some validators on the Binance Smart Chain network are connected to Binance and are influenced by the company. Improving transparency around who runs validator nodes and how they are chosen could help alleviate these concerns and increase trust in the network.

Conclusion: Is Binance Decentralized?

In conclusion, Binance Smart Chain (BSC) is not a decentralized blockchain network. The high barrier to entry for running a validator, the small number of validators on the network, and the ability for the network to be paused on command, all contribute to the centralization of the network.

Additionally, BNB, the native currency of BSC, is also centralized. While Binance Smart Chain may offer certain benefits, it is important to understand the centralized nature of the network before making any investment or development decisions.