State of BNB Chain Q2 2024

Key Insights

• As a result of the staking migration, staked BNB increased 30% QoQ to 30.4 million BNB. BNB Smart Chain had the third-highest dollar value of funds staked at the end of Q2.
• Stablecoins were also a bright spot in Q2, increasing 6% QoQ to $5 billion. USDT was the biggest individual gainer and accounts for 79% of all stablecoins on BNB Smart Chain.
• BNB Smart Chain hosted a hackathon in Q2 consisting of over $490,000 in prizes. The hackathon included six different tracks for projects: AI, Infrastructure, Gaming, DePIN, DeSoc, and DeFi.
• BNB Chain hosted a series of ecosystem initiatives in Q2, including incentive programs, the Airdrop Alliance Program, the BNB Incubation Alliance, and the BNB Chain Meme Innovation Battle.
• Staking migrated from BNB Beacon Chain to BNB Smart Chain in April as a part of BNB Beacon Chain sunset plan. All BNB Beacon Chain functionality is in the process of migrating to BNB Smart Chain.

Primer

BNB Chain (BNB) is an ecosystem of blockchains where each chain serves a particular function. The three core components of BNB Chain are as follows:

• BNB Smart Chain (BSC): Smart contract layer and DeFi hub.
  • BNB Beacon Chain: current staking and governance layer (will migrate functionality to BSC and be discontinued to bring heightened efficiency and security to the ecosystem).
• BNB Greenfield: Decentralized storage network. As a vital component of the One BNB paradigm, Greenfield focuses on live, valuable data and lets users create their own personal data marketplace.
• opBNB: High-performance optimistic rollup. opBNB is ideal for Dapps that require high transaction frequency, like fully onchain games. It offers the lowest gas fees among L2s, with transactions costing <$0.0001. It delivers very high performance, processing between 5,000 and 10,000 TPS.

The metrics in this report will mostly focus on BNB Smart Chain (BSC). BSC is an EVM-compatible, Layer-1 blockchain secured by a form of Proof-of-Staked-Authority (PoSA) that combines aspects of Proof-of-Authority (PoA) and Delegated Proof-of-Stake (DPoS). In PoSA on BSC, the validator set is of fixed size and is elected by stake weight (staked plus bonded). In addition, validators must continue staking assets to secure the network, and validators chosen to produce blocks are rotated (not based on stake weight). For a full primer on the BNB Chain ecosystem, refer to our Ecosystem report.

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Key Metrics

Financial Overview

Market Cap and Revenue

Similarly to the rest of the market, the price of BNB was largely stagnant over Q2’24. At the end of the quarter, BNB’s market cap was $85.8 billion, down 5% QoQ. BNB’s market cap amongst all tokens (excluding stablecoins) remained flat at 3, lagging behind only by ETH and BTC. Additionally, BNB outperformed BTC in Q1, as the circulating market cap of Bitcoin increased by 65%.

Revenue, which measures all fees collected by the network, experienced a downturn in Q2. In USD terms, revenue in Q1 was $48.1 million, down 28% QoQ from Q1’s revenue of $66.8 million. However, in YoY terms, revenue was only down 8% from Q2’23’s $52.4 million. A large portion of Q2’s revenue was due to BNB’s price appreciation. Revenue in BNB was down QoQ from 165,100 to 81,300 BNB, down 51% QoQ.

Gas fees paid on DeFi-related transactions have historically been the largest individual contributor to revenue. Q2 continued this trend, as the DeFi category contributed 13,600 BNB in gas fees. Although this was a 46% QoQ decrease, DeFi’s share of gas fees paid increased 12% QoQ to 17%. No individual category had a QoQ increase in revenue. However, the categories with the biggest increases in revenue market share were CeFi (up 58% QoQ to 2%) and Stablecoins (up 50% QoQ to 8%). Market share losers included Infrastructure (down 22% QoQ to 2%) and Other (down 9% QoQ to 60%).

Supply Dynamics

The initial total token supply for BNB was 200 million tokens (launched in July 2017). BNB is deflationary through a series of burning mechanisms:

• Auto-Burn: A mechanism that automatically burns varying amounts of BNB every quarter, depending on the token’s price and the number of blocks generated on BNB Chain during said quarter.
• Pioneer Burn: A program that counts all BNB accidentally lost by new or careless BNB Chain users as part of the quarterly burns. The project team reimburses users for accepted cases.
• Gas Fees Burn: In accordance with BEP-95, 10% of all gas fees incurred on BNB Smart Chain are burned automatically. The remaining 90% is rewarded to validators and stakers.

By quarter end, the circulating supply of BNB was 147.6 million, giving BNB an annualized deflation rate of 4.4%. Furthermore, the annualized real rate for staking BNB was 5.3%, down 10% QoQ. BNB’s negative inflation rates made it one of the few deflationary Layer-1 networks in Q2.

Network Overview

Usage

Average daily transactions trended lower in Q2, down 10% QoQ from 4.2 million to 3.7 million. Average daily active addresses also experienced a downward trend in Q2, decreasing 18% QoQ from 1.3 million to 1.1 million. These decreases in network activity were not isolated to BNB Chain, as onchain activity decreased across most smart contract platforms in Q2 after an active Q1.

Tether’s USDT accounted for the majority of transactions related to a protocol on BNB Smart Chain in Q2. It averaged 617,300 daily transactions, essentially flat QoQ from 619,300. USDT more than doubled the second protocol with the most daily transactions, PancakeSwap, which averaged 187,200 daily transactions, down 46% QoQ from 345,200.

This decrease was in part due to the increasing prevalence of Uniswap, a competing DEX on BNB Smart Chain. Uniswap experienced the largest QoQ increase in daily transactions (+630%), from 12,200 in Q1 to 88,700 in Q2. Combined, PancakeSwap and Uniswap accounted for over 23% of protocol transactions. In total, daily average transactions involving a protocol were down 11% QoQ from 1.3 million to 1.2 million.

Daily active addresses interacting with protocols also experienced a downward trend in Q2. As with daily average transactions, USDT and PancakeSwap represented the bulk of active addresses that interacted with a protocol on BNB Smart Chain. USDT ended the quarter with an average of 271,800 daily active addresses (down 1% QoQ from 273,300), and PancakeSwap had an average of 51,800 daily active addresses (down 53% QoQ from 110,500). Combined, Tether and PancakeSwap accounted for 61% of active addresses that interacted with a protocol in Q2. Additionally, there was a noticeable shift in user preferences regarding DEXs in Q2. Uniswap saw a QoQ increase of 850%, going from 4,900 daily active addresses in Q1 to 46,600 in Q2. While PancakeSwap lost 58,700 daily active addresses, Uniswap gained 41,700 daily active addresses.

In Q4, BNB Smart Chain transitioned its Gas Grants program to the DAU Incentive Program. It awards up to $200,000 in BNB tokens, and individual projects can earn a share of the prize pool based on how many daily active users (DAUs) they have over a defined period. Eligible projects are ranked based on a weighted formula of average DAUs, incremental DAUs, and gas fees generated. During Q2, the program lasted from May 1 to May 31. Winners of the Q2 phase of this program were announced on June 1:

1. World of Dypians ($60,000) - 102,000 average DAU in May
2. Counter Fire ($45,000) - 173,000 DAU in May
3. Particle Network ($22,500) - 700,900 DAU in May
4. RIDO ($15,000) - 26,400 DAU in May
5. BounceBit ($7,500) - 27,700 DAU in May

Security and Decentralization

BNB Smart Chain utilizes a Proof-of-Staked Authority (PoSA) consensus mechanism in which 45 validator nodes are elected every 24 hours to participate in consensus. Their election is based on the total number of BNB tokens staked by/to each node. Of these 45 validators, the top 21 with the highest staked amounts are “Cabinets,” while the remaining 24 are “Candidates.” Then, 18 of the 21 “Cabinets” and 3 of the 18 “Candidates” are randomly selected to produce blocks for the given epoch. Selected validator nodes then take turns producing blocks based on Ethereum’s Clique consensus design.

With BNB Chain’s Feynman Upgrade on April 18, the maximum amount of active validators on BNB Smart Chain increased from 40 to 45. By the end of Q2 active validators on BNB Smart Chain reached this maximum limit, signaling strong network security and a healthy appetite for operating validators on BNB Smart Chain.

Total BNB staked also had its largest QoQ increase in well over a year, in part due to the staking transitioning from BNB Beacon Chain to BNB Smart Chain. Total BNB staked increased 30% QoQ from 23.4 million to 30.4 million. BNB price slightly decreased in Q2, resulting in the total dollar amount of BNB staked increasing 24% QoQ from $14.2 billion to $17.7 billion. Compared to other PoS networks, BNB Smart Chain had the third-highest dollar value of funds staked by the end of Q2. However, the gap behind the second-highest (Solana) was $38.4 billion.

The Nakamoto coefficient is the number of node operators that collectively control more than 33% of the network. The higher the coefficient, the more resilient a network is to attacks and bugs. BNB Smart Chain’s Nakamoto coefficient ended the quarter at 7, flat QoQ.

MEV

BEP-322, a proposal for Proposer-Builder Separation (PBS) on BNB Smart Chain validators, went live in Q2. BEP-322 was implemented as a builder API specification to address the fragmentation of MEV (maximal extractable value) solutions on BSC. This specification creates a unified MEV market where block proposers (i.e., validators) do not play a role in selecting which transactions are included in the proposed block. Instead, block builders create possible blocks and submit them to the validator proposing a block. The validator then selects the proposed blocks that net them the most fees. This new mechanism brings stability and transparency to BNB Chain’s MEV market while also promoting healthy market competition for block builders.

BNB Smart Chain’s Builder API Specification went live in May. On the last day of the quarter, 73% of all blocks created that day (21,000 blocks) were built using the Builder API Specification. Furthermore, as of writing, there are 19 different block builders on BNB Smart Chain.

Technical Developments

During Q2, BNB Beacon Chain began the process of being sunset. While BNB Beacon Chain was used as BNB Chain’s staking and governance layer, it introduced complexity and some security vulnerabilities due to the bridging between BSC and BNB Beacon Chain. For this reason, BNB Chain began migrating BNB Beacon Chain functionality to BNB Smart Chain. BEP-333: Chain Fusion will be implemented across four different upgrades.

1. BNB Beacon Chain First Sunset Fork (Implemented on April 15) - Disabled cryptocurrency issuance and minting features on BNB Beacon Chain.
2. BNB Smart Chain Feynman Hard Fork (Implemented on April 18) - Enabled validator creation and governance functionality on BNB Smart Chain.
3. BNB Beacon Chain Second Sunset Fork (Scheduled for July 14) - Disables governance and delegation capabilities on BNB Beacon Chain.
4. BNB Beacon Chain Final Sunset Fork (Scheduled for August 15) - Halts BNB Beacon Chain and disables cross-chain communication to BNB Smart Chain.

BNB Chain also underwent a series of hard forks and technical upgrades unrelated to BNB Chain Fusion in Q2:

• BNB Greenfield Pawnee Hardfork (April 10) - Introduced new capabilities such as the addition of settlement events, atomic object updates, modifications to dependencies for custom block rollbacks, and the ability to delete objects in created status.
• opBNB Snow Hardfork (April 15) - Optimized gas pricing on opBNB. Gas prices are now calculated based on the median of the last 21 blocks' gas prices on BNB Smart Chain.
• BNB Greenfield Serengeti Hardfork (April 29) - Implemented several BEPs including BEP-361, BEP-362, BEP-363, and BEP-364. In combination, these upgrades aim to reduce developer complexity, improve the user experience, and simplify offchain interactions.
• BNB Greenfield Erdos Hardfork (May 29) - Changes included in this hard fork are adding the ExecutorApp, implementing the paymaster, fixing the uncharge issue when force-deleting objects, and upgrading dependencies for fixing vulnerabilities.
• BNB Smart Chain and opBNB Haber Hardfork (June 20) - Implemented BEP-336 on both BNB Smart Chain and opBNB. BEP-336, which is similar to Ethereum’s EIP-4844 upgrade, introduced blobs (BlobTx) on BNB Smart Chain. This upgrade reduced gas fees on opBNB by 90%, thereby improving the user experience and making data management more efficient.

2024 Development Roadmap

On January 31, BNB Chain released its roadmap for 2024. The roadmap is multifaceted, featuring robust plans for BNB Smart Chain, BNB Greenfield, opBNB, and more. The goal of future development efforts is to unify the current ecosystems and chains with the multichain paradigm, One BNB within BNB Chain for a unified, seamless experience. Some key highlights include:

• BNB Smart Chain - Complete the BNB Chain Fusion, expand the validator set to 100, introduce delegate voting, MEV proposer-builder separation, and a new parallelized EVM.
• opBNB - Increase the gas limit to 200 million (10,000 TPS), implement BEP-336, and introduce fraud proofs and a shared sequencer set.
• BNB Greenfield - Add permanent storage and make it a data availability layer.

Ecosystem Overview

DeFi

BNB Smart Chain DeFi TVL denominated in USD decreased from $7.2 billion in Q1 to $5.5 billion, a 24% QoQ decrease. This ranked BNB Smart Chain as the third highest chain by TVL denominated in USD by the end of the quarter. Furthermore, TVL denominated in BNB also fell, decreasing 21% QoQ from 11.9 million to 9.4 million BNB. This dynamic indicates that part of the TVL decrease in USD was driven by BNB price depreciation.

The top two protocols by TVL on BNB Smart Chain are Venus Finance and PancakeSwap. Venus Finance, the largest protocol by TVL, decreased 20% QoQ from $2.8 billion to $2.3 billion. Notably, borrowing decreased by $471 million (a 41% QoQ decrease), accounting for nearly all of TVL's losses for Q2. By the end of Q2, Venus Finance’s TVL dominance was 41% (up 5% QoQ from 39%). PancakeSwap also saw a decline in TVL in Q2, falling from $2.3 billion to $1.7 billion, a 26% QoQ decrease.

PancakeSwap consists of three different AMMs (PancakeSwap AMM, StableSwap, and AMM V3). By the end of Q2, AMM TVL was $1.3 billion (76% of TVL), StableSwap TVL was $18.8 million (1% of TVL), and AMM V3 TVL was $374.5 million (22% of TVL). However, PancakeSwap’s TVL dominance decreased to 31% (down 2% QoQ from 32%). In sum, Venus Finance and PancakeSwap represented 72% of TVL on BNB Smart Chain.

The only protocol within the top six with a TVL gain was Lista DAO, a CDP stablecoin lending protocol. In Q1, Lista DAO launched a rewards program to encourage protocol usage. In part due to this rewards program, Lista DAO TVL continued growing in Q2, up 4% QoQ from $306.0 million to $317.6 million. As for the rest of the top six, PinkSale, a token launchpad protocol, had a 28% QoQ decrease from $277.9 million to $200.2 million.

Kinza Finance, a lending protocol, saw its TVL decrease 55% QoQ from $204.5 million to $92.7 million. Rounding out the top six was UNCX Network, a DeFi infrastructure protocol that provides various token services. Its TVL decreased 25% QoQ from $110.9 million to $83.6 million.

In Q4, BNB Smart Chain introduced the TVL Incentive Program. The program aims to reward projects deployed within the ecosystem that attract significant amounts of TVL. In Q2, Phase 2 ended, running from March 15 to April 14. In total, $160,000 was rewarded to the five projects with the highest incremental TVL gains on April 17:

1. Kinza Finance - $37.6 million incremental TVL

2. B² Buzz - $33.2 million incremental TVL

3. THENA - $11.2 million incremental TVL

4. Ambit Finance - $8.9 million incremental TVL

5. Gamma - $7.2 million incremental TVL

On June 19, Phase 3 of the TVL Incentive Program was announced. Phase 3 is a two-part program featuring prize pools for two categories: Liquid Staking and DeFi. The liquid staking prize pool is $100,000 and will be split amongst three winners, while the DeFi prize pool is up to $200,000 and will be split amongst five winners. Phase 3 runs from June 27 to July 27.

DEX volumes were down for most smart contract platforms in Q2 after peaking in March, and BNB Smart Chain was no exception. Average daily DEX volume decreased 23% QoQ from $962.0 million to $737.4 million. Despite this decrease, BNB Smart Chain still had the third most DEX volumes of any chain in Q2 ($66 billion). Only Ethereum ($180.4 billion) and Solana ($108.8 billion) had more DEX volume.

By the end of Q1, there were 66 different DEXs on BNB Smart Chain. Despite the high level of competition, PancakeSwap has historically been the most dominant DEX on BNB Smart Chain. In Q2, PancakeSwap’s average daily DEX volume was $630.5 million, down 17% QoQ from $762.5 million. Despite the decline in volume, PancakeSwap’s share of DEX volumes actually increased in Q2 to 86% (up 8% QoQ).

PancakeSwap’s increasing dominance came at the expense of the rest of the top five. No single protocol other than PancakeSwap eclipsed $50 million in average daily trading volume, despite both Uniswap and THENA achieving that mark last quarter. For Q2, the top five DEXs by average daily trading volume were:

1. PancakeSwap ($630.5 million - 86% of BNB Smart Chain DEX volume)

2. THENA ($35.7 million - 5% of BNB Smart Chain DEX volume)

3. Uniswap ($33.5 million - 5% of BNB Smart Chain DEX volume)

4. DODO ($17.8 million - 2% of BNB Smart Chain DEX volume)

5. WOOFi ($868,400 - 0.13% of BNB Smart Chain DEX volume)

On May 21, BNB Chain announced the Trading Volume Incentive Program. The program aims to increase trading volumes on protocols through prize-based rewards. The total prize pool consists of $200,000, and the top ten protocols will split the prize pools. Winners are determined both by total trading volume and incremental trading volume over the period. The program lasts until July 9, by which point rewards will have been sent to the 10 projects with the most incremental volume gains. As of writing, the top five projects in line to receive rewards from this program are:

1. PancakeSwap - $14.4 billion in trading volume

2. APX Finance - $2.5 billion in trading volume

3. THENA - $956.8 million in trading volume

4. KiloEx - $596.8 million in trading volume

5. 1inch - $503.6 million in trading volume

Stablecoins

The stablecoin market cap on BNB Smart Chain was on a downtrend in 2023, primarily due to the decrease BUSD’s supply. In Q1’23, NYDFS ordered Paxos (the BUSD issuer) to cease issuance, and various centralized exchanges, such as Coinbase, suspended BUSD trading. As such, the stablecoin market cap on BNB Smart Chain decreased every quarter in 2023.

However, that trend has reversed in 2024, with two straight quarters of stablecoin market cap growth. In total, the stablecoin market cap increased 6% QoQ from $4.7 billion to $5.0 billion. USDT had the biggest gains in both absolute and percentage terms, gaining $390.4 million in market cap (up 11% QoQ from $3.6 billion to $4.0 billion). By the end of Q2, USDT represented 79% of the stablecoin market on BNB Smart Chain. USDC, on the other hand, was essentially flat QoQ as it only gained $218,300 in market cap ($543.4 million in total). By the end of Q2, USDC represented 11% of the stablecoin market on BNB Smart Chain.

opBNB

opBNB is an EVM-compatible optimistic rollup that helps scale execution throughput for BNB Smart Chain. Since launching in the middle of Q3, total value bridged (TVB) has been in a consistent uptrend. In Q2, $12.3 million was bridged to opBNB, bringing TVB to $75.9 million (up 19% QoQ from $63.7 million). USDT (up 15% QoQ to $50.4 million) remains the most popular bridged token on opBNB, representing 66% of all TVB. In percentage terms, BNB (gas token for opBNB) was the biggest gainer in Q2, increasing 38% QoQ to $22.8 million. Combined, USDT and BNB account for 96% of opBNB’s TVB.

DeFi TVL on opBNB has been consistently trending higher in 2024, in part due to a TVL Incentive Program in Q4 and Q1. On January 1, 2024, DeFi TVL stood at $15.2 million. By the end of Q2, DeFi TVL was $29.1 million, a 91% YTD increase. DeFi TVL on opBNB has been primarily bolstered by two projects: KiloEx ($13.5 million in TVL) and PancakeSwap ($12.5 million). Collectively, the two projects accounted for 89% of the TVL on opBNB during Q2.

NFTs

After an impressive Q1 performance for NFTs on BNB Smart Chain, both volumes and sales experienced a downtrend in Q2. The average daily NFT trading volume decreased 80% QoQ from $778,700 to $156,900. Average daily sales also had a large decrease, down 53% QoQ from 12,900 to 6,000. However, average daily buyers actually bucked the downtrend and saw a QoQ increase of 9%, from 4,500 to 4,900. This combination of volume and buyers suggests that NFT activity in Q2 was driven by small users, rather than whales.

Ecosystem Growth

In Q2, three projects building primarily on BNB Smart Chain announced funding rounds, totaling $6 million raised. This was a 50% QoQ decrease compared to Q1 when six different projects raised $37.6 million in total.

BNB Smart Chain continues to support new projects within its ecosystem outside of private fundraising through its Most Valuable Builder (MVB) Accelerator Program. The seventh season of this program ended in Q1. Although the next season has not yet been announced, BNB Chain announced in June that it was offering a Launch-as-a-Service (LaaS) program. This LaaS program is free for MVB projects and includes services such as RPC services, key management, data analytics, web hosting, audits, and more.

Outside of the MVB Accelerator Program, BNB Smart Chain hosted a hackathon in Q2. Application submissions were open from April 11 to June 4, and just under 200 different applications were submitted. The total prize pool consisted of over $490,000, and there were six different tracks: AI, Infrastructure, Gaming, DePIN, DeSoc, and DeFi. The winners of the hackathon were announced on July 2:

1. First place ($15,000) - Context Pilot.

2. Second Place ($10,000 each) - Kiwi Pad Bot and Memehub.AI.

3. Third Place ($5,000 each) - Babydrop, Advanced BNB L2 Analytics, and Dexa.

A list of all other projects that qualified for prize money can be found here.

BNB Chain also launched a series of community and ecosystem initiatives in Q2:

• Airdrop Alliance Program – In March, BNB Chain announced its Airdrop Alliance Program. This program was done in collaboration with select ecosystem projects to reward BNB Chain ecosystem users with various token airdrops. There are various requirements for users, such as onchain transactions or NFT holdings, to be eligible for airdrops. To date, three different chapters of the program have been conducted, with the most recent one ending in June and rewarding over 12,000 addresses with airdrops.
• BNB Chain Web3 Gaming Ecosystem Report - In May, BNB Chain released a report about BNB Chain’s Web3 gaming ecosystem, covering various projects within the space. BNB Chain is a suitable environment for gaming projects due to its fast transaction times, cheap fees, and established community. As of writing, 565 gaming projects exist within the ecosystem (both BNB Smart Chain and opBNB). Several projects highlighted by the report include Gaimin, SkyArk Chronicles, BinaryX, Xterio, and COMBO.
• BNB Incubation Alliance – On June 13, BNB Chain announced its BNB Incubation Alliance, an incubator program for early-stage ecosystem projects seeking BNB grants and investments from Binance Labs. Any project can apply to the alliance, but only three projects will be chosen to join.
• BNB Chain Meme Innovation Battle – BNB Chain announced a community initiative in April to help support and grow BNB Smart Chain’s memecoin ecosystem. The initiative is comprised of rewards for both creators and traders, in addition to liquidity pool support for popular memecoins.

Closing Summary

After the return of the bull market in Q1, growth slowed on BNB Smart Chain during Q2 as the market corrected. Nevertheless, there were various key developments for BNB Smart Chain over the course of the quarter. For example, staked BNB increased 30% QoQ to 30.4 million after the successful implementation of the Feynman Hard Fork, which migrated staking capabilities from BNB Beacon Chain to BNB Smart Chain.

Despite the market slowdown, ecosystem growth and development were supported through various initiatives such as incentive programs, the Airdrop Alliance Program, the BNB Incubation Alliance, and the BNB Chain Meme Innovation Battle. On the technical side, BNB Chain began progressing to one singular, unified solution encompassing BNB Smart Chain, opBNB, and BNB Greenfield with One BNB.