1. Introduction

Since its inception, blockchain technology has sparked widespread attention and exploration globally with its characteristics of decentralization, immutability, transparency, and more. As a significant innovative application in the blockchain field, Decentralized Finance (DeFi) has experienced explosive growth in the past few years and is gradually changing the landscape of traditional finance.

Decentralized Finance aims to build a financial system without centralized institutions’ endorsement through blockchain technology, covering multiple areas such as lending, trading, insurance, asset management, etc., to provide users with more open, efficient, and fair financial services. Users can freely borrow, trade assets, and earn profits on the DeFi platform without relying on traditional financial intermediaries. This innovative model has attracted a large number of developers, investors, and users to participate, and the DeFi ecosystem is rapidly flourishing.

Among many blockchain platforms supporting Decentralized Finance (DeFi) applications, Binance Smart Chain (BSC) stands out with its unique advantages, becoming an important force in the DeFi space. Launched by the globally renowned cryptocurrency exchange Binance, BSC operates parallel to Binance Chain, combining the high performance and low fees of Binance Chain with smart contract capabilities, achieving compatibility with the Ethereum Virtual Machine (EVM). This allows developers on Ethereum to easily migrate their projects to BSC, significantly reducing the development threshold and accelerating the deployment and growth of DeFi projects on BSC.

BSC provides users with a smoother and more cost-effective experience due to its high throughput and low transaction costs. In the face of congestion and high fees on the Ethereum network, BSC offers a highly attractive alternative for DeFi participants. At the same time, as a leading global cryptocurrency exchange, Binance has a large user base and strong brand influence, providing strong support and guarantees for the development of BSC, attracting a large amount of funds and projects into its ecosystem.

With the continuous emergence and development of DeFi projects on BSC, its ecosystem is becoming increasingly rich and mature. From decentralized exchanges (DEX) to lending protocols, from liquidity mining to insurance platforms, various DeFi applications are flourishing on BSC, forming a vibrant and innovative financial ecosystem. Some of these projects have achieved significant success in the market, becoming industry leaders that not only attract a large number of users to participate but also bring substantial returns to investors.

2. BSC Overview

2.1 BSC Introduction

Binance Smart Chain (BSC) is a blockchain launched by Binance Exchange in 2020 parallel to the Binance Chain. It was born with a mission to promote the expansion and innovation of blockchain technology applications. At that time, the decentralized finance (DeFi) wave in the blockchain industry emerged, and Ethereum, as the main smart contract platform, faced serious network congestion and high transaction fees.

To address these pain points, Binance has launched the Binance Smart Chain (BSC) leveraging its deep expertise and strong technical capabilities in the cryptocurrency field. BSC is based on the Proof of Staked Authority (PoSA) consensus mechanism, which allows nodes, token holders, developers, and users to operate within a mutually beneficial ecosystem. Under the PoSA mechanism, nodes stake BNB (Binance Coin) to become validators, participate in block validation and generation, and receive transaction fees as rewards. Compared to the traditional Proof of Work (PoW) mechanism, the PoSA mechanism significantly improves transaction processing efficiency, reduces energy consumption, and lowers entry barriers, enabling more participants to join the network.

One of the biggest technical highlights of BSC is its compatibility with the Ethereum Virtual Machine (EVM). This means that developers on Ethereum can easily migrate their smart contracts and decentralized applications (DApps) to BSC without the need for extensive code rewriting. This compatibility has brought rich technical resources and developer communities to BSC, accelerating the development of its ecosystem. For example, many DeFi projects originally running on Ethereum, such as decentralized exchanges (DEX), lending protocols, and liquidity mining projects, have migrated to BSC to take advantage of its low fees and high throughput. In addition, BSC also supports numerous Ethereum tools, such as the MetaMask wallet, Remix development environment, and Truffle framework, allowing developers to carry out project development and deployment in familiar development environments, further reducing development costs and difficulty.

The characteristics and advantages of 2.2 BSC

1. High Performance: BSC’s transaction processing speed is extremely fast, processing thousands of transactions per second on average, with a block confirmation time of only about 3 seconds. This high-performance is attributed to its unique PoSA consensus mechanism and advanced technical architecture. In traditional blockchain networks like Ethereum, the PoW consensus mechanism requires a significant amount of computational resources to compete for the right to record transactions, resulting in slower transaction processing speeds and susceptibility to network congestion. On the other hand, BSC’s PoSA mechanism selects validators by staking BNB, significantly improving consensus efficiency, enabling transactions to be quickly confirmed and processed. This high-performance feature allows BSC to meet the needs of large-scale application scenarios, providing users with a smooth user experience. For example, in decentralized exchanges, fast transaction confirmation times can ensure that users’ transactions are executed in a timely manner, avoiding the risk of price fluctuations due to transaction delays.
2. Low Cost: Compared to public chains like Ethereum, BSC has extremely low transaction fees, as low as around 1 cent. This is mainly because the PoSA consensus mechanism does not require a large amount of energy consumption and hardware investment, thereby reducing operating costs. For users, low fees mean they can trade more frequently without worrying about high transaction costs. This advantage of low fees on BSC is particularly noticeable for small and high-frequency traders. For example, when conducting small cryptocurrency transfers or participating in liquidity mining, users’ fees on BSC are much lower than on Ethereum, enabling more users to participate in the DeFi ecosystem.
3. Scalability: BSC has good scalability, able to support a large number of users and applications. By using sharding technology and optimized network architecture, BSC can accommodate more transactions and users without compromising performance. Sharding divides the blockchain network into multiple shards, each capable of processing transactions independently, thereby increasing the overall network throughput and processing capacity. This scalability lays a solid foundation for the future development of BSC, enabling it to meet the growing market demands. With the increasing popularity of DeFi applications and the growing number of users, the scalability advantage of BSC will be further highlighted, attracting more projects and users to join its ecosystem.
4. Rich ecological resources: As one of the world’s largest cryptocurrency exchanges, Binance has a huge user base and rich ecological resources. BSC, as an important part of the Binance ecosystem, benefits from Binance’s brand influence and resource support. Binance provides various support for projects on BSC, including technical guidance, marketing, and financial support. At the same time, the deep integration between BSC and Binance Exchange allows users to conveniently trade assets on BSC on the Binance Exchange, further increasing asset liquidity and market efficiency.
5. Cross-chain interoperability: BSC supports cross-chain technology, enabling interoperability with other blockchain networks. This means that users can easily transfer and utilize assets from other blockchains on BSC, expanding the utility and liquidity of assets.

2.3 BSC compared to other public chains

1. Compare with Ethereum

• In terms of performance: Ethereum adopts the PoW consensus mechanism, which resulted in slow transaction processing in the early days, with an average of only a dozen transactions per second. As the number of users and applications increased, network congestion became increasingly severe. Although Ethereum is transitioning to the PoS consensus mechanism and using technologies such as Layer 2 to improve performance, at the current stage, its transaction processing speed and throughput still lag far behind BSC. BSC’s PoSA consensus mechanism enables it to achieve a transaction processing capacity of thousands of transactions per second, with a block confirmation time of only 3 seconds, giving it a significant performance advantage.
• Costs: The transaction fees on the Ethereum network fluctuate greatly. During network congestion, fees can sharply increase, even reaching tens of dollars. This makes it difficult for many small transactions and regular users to afford. On the other hand, BSC transaction fees are very low, typically only a few cents, greatly reducing the cost of transactions for users, especially for regular users and small transactions.
• Ecosystem: Ethereum has the largest and most mature Decentralized Finance ecosystem, accumulating a large number of developers and projects, with applications covering multiple areas such as finance, gaming, social, and more. However, with the rise of BSC, its ecosystem is also rapidly growing and expanding. Leveraging its performance and cost advantages, BSC has attracted a large number of Ethereum projects to migrate and new projects to settle in, forming a relatively complete DeFi ecosystem. In some areas such as decentralized exchanges, liquidity mining, etc., it has formed a competitive position with the Ethereum ecosystem.

2. Compared with Polkadot

• Technical Architecture: Polkadot is a cross-chain platform that adopts a unique relay chain and parachain architecture, aiming to achieve interoperability and shared security between different blockchains. Polkadot is designed to build a multi-chain ecosystem, where each parachain can customize different consensus mechanisms and functionalities according to its own needs. On the other hand, BSC is an independent blockchain that primarily attracts users and projects through its compatibility with Ethereum and high performance. Although BSC also supports cross-chain technology, there is still a certain gap compared to Polkadot in terms of the complexity and diversity of cross-chain.
• Use Cases: Polkadot’s cross-chain features make it more focused on the interaction and collaboration between different blockchains, providing strong support for the development of cross-chain applications.
• Ecological development: The Polkadot ecosystem is in a rapid development stage, attracting numerous projects and developers to participate. The projects in its ecosystem cover multiple areas including finance, Internet of Things, and identity verification. The BSC ecosystem, on the other hand, revolves around DeFi as its core, building a complete ecosystem around DeFi, including decentralized exchanges, lending protocols, liquidity mining, insurance, and various other applications. Currently, the development directions of the two ecosystems are somewhat different, but both are constantly expanding and improving their own ecosystem landscape.

3. Compare with Solana

• Performance: Solana is also a public chain known for its high performance. Its hybrid consensus mechanism of Proof of History (PoH) and Proof of Stake (PoS) allows it to achieve a transaction processing speed of up to 65,000 transactions per second (TPS) and extremely short transaction confirmation times. Compared to BSC, Solana has a stronger advantage in performance. However, BSC’s performance in actual applications is sufficient to meet the needs of most DeFi applications, and its compatibility with Ethereum provides developers and users with additional convenience.
• Ecological features: The Solana ecosystem is developing rapidly, attracting numerous innovative projects, especially in the Decentralized Finance (DeFi) and NFT fields. Projects on Solana focus on technological innovation and user experience, such as high-performance decentralized exchanges and unique NFT projects. The BSC ecosystem, supported by Binance’s resources and its compatibility with Ethereum, has attracted a large number of mature DeFi projects to migrate and new projects to join, giving it certain advantages in the richness and stability of its ecosystem.
• Community and User Base: Solana has an active technical community, attracting many developers and users pursuing high performance and innovative technology. BSC, leveraging Binance’s large user base and global influence, has a wide user base, especially in the Asian region. Both have their own characteristics in terms of community and user base, and are constantly expanding their influence.

3. Analysis of Top DeFi Projects on BSC

3.1 PancakeSwap

PancakeSwap is a decentralized exchange (DEX) built on the Binance Smart Chain (BSC). Since its launch in September 2020, with its innovative features and efficient operations, it has quickly emerged in the DeFi field, becoming one of the most influential and user-friendly projects on BSC.

In terms of trading mechanism, PancakeSwap adopts the Automated Market Maker (AMM) model, which is an innovative mechanism that differs from traditional order book trading. Under the AMM model, trades are not completed by directly matching orders between buyers and sellers but rather based on liquidity pools. Users deposit two different tokens into the liquidity pool to form a trading pair, such as BNB - USDT. The token ratio in the liquidity pool is automatically adjusted based on the trading situation, and the trading price is determined by a mathematical formula (usually a constant product formula, i.e., x * y = k, where x and y represent the quantities of the two tokens, and k is a constant). This mechanism makes trading more convenient and efficient, as users can trade at any time without waiting for counterparty orders. At the same time, the AMM model also provides continuous liquidity to the market, reduces trading slippage, and improves trading execution efficiency. For example, when a user wants to exchange BNB for USDT, they only need to select the corresponding trading pair on PancakeSwap, enter the exchange amount, and the trade can be completed immediately, with the trading price automatically calculated based on the real-time situation in the liquidity pool.

In addition to the basic trading functions, PancakeSwap has introduced rich liquidity mining and yield farming mechanisms, providing users with multiple ways to earn profits. Users can earn trading fee splits as rewards by providing liquidity to the liquidity pools. Specifically, whenever a transaction occurs, a certain percentage (usually 0.25%) of the trading fees will be allocated to the liquidity providers (LPs). For example, if a transaction amount is $1000, based on a 0.25% fee rate, $2.5 of fees will be distributed to the liquidity providers of that trading pair. Furthermore, PancakeSwap has introduced unique features such as Syrup Pools and Farms. In the Syrup Pool, users can stake CAKE (PancakeSwap’s native governance token) to earn additional CAKE rewards. In the Farm, users can deposit LP tokens, participate in liquidity mining, and earn CAKE and other token rewards. Different Farms may offer varying yields and risk levels, allowing users to choose based on their risk preferences and profit expectations. For instance, a Farm may provide a higher annualized yield but also come with greater market volatility risks, while another Farm may have a relatively lower yield but more stable risks. This diversified yield farming mechanism has attracted a large number of users, further enhancing the platform’s liquidity and activity.

The success of PancakeSwap is not only due to its innovative trading mechanism and rich revenue model, but also closely related to the high performance and low transaction fees of the Binance Smart Chain. The fast transaction confirmation time and low transaction costs of BSC enable users to enjoy a smooth trading experience on PancakeSwap without worrying about high fees and transaction delays. At the same time, PancakeSwap actively expands its ecological cooperation, establishing partnerships with numerous projects and launching a variety of innovative applications including lotteries, NFT trading, prediction markets, etc., further enriching the user’s usage scenarios and experience. For example, PancakeSwap’s lottery feature allows users to participate in the lottery using CAKE and have the chance to win substantial prizes; the NFT trading platform provides users with a new channel for trading digital assets, promoting the development of the NFT market.

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3.2 Venus

Venus is an algorithmic money market and stablecoin protocol running on the Binance Smart Chain (BSC), which innovatively combines MakerDAO’s stablecoin minting mechanism with Compound’s algorithmic money market, aiming to provide users with efficient and convenient decentralized financial services, occupying an important position in the DeFi ecosystem on BSC.

One of the core functions of Venus is the minting and lending services of the stablecoin VAI. In terms of stablecoin minting, Venus adopts a method of over-collateralization. Users need to deposit a certain amount of crypto assets (such as BNB, BTCB, etc.) as collateral into the Venus protocol. Then, based on the value of the collateral assets and the collateralization ratio set by the system, they can mint the corresponding amount of stablecoin VAI, which is pegged to 1 US dollar. This mechanism is similar to how MakerDAO mints the stablecoin DAI, but Venus’s unique feature is the release of liquidity from the collateral assets. In MakerDAO, when users mint DAI, the collateral assets are locked and cannot be used for other purposes. In contrast, in Venus, these collateral assets can be used as collateral in the lending market, providing users with lending services, similar to providing liquidity as a liquidity provider (LP) on the Compound platform and earning income. This innovation makes Venus not only a stablecoin minting platform but also a comprehensive liquidity supply market, improving the efficiency of asset utilization. For example, User A owns 10 BNB, which they collateralize into the Venus protocol. Assuming a collateralization ratio of 150%, they can mint approximately 6.67 BNB worth of VAI stablecoin (10 / 1.5). At the same time, these 10 BNB can also be used as collateral for lending operations on Venus.

In the lending business, Venus provides users with flexible borrowing and lending options. Borrowers can borrow VAI or other supported cryptocurrencies by collateralizing assets, while lenders can deposit their idle funds into Venus to provide liquidity to the lending market and earn corresponding interest income. The lending interest rate is dynamically adjusted based on market supply and demand to ensure market balance and stability. For example, when there is high demand for VAI in the market, the lending interest rate will correspondingly increase to attract more lenders to provide funds; conversely, when demand is low, the interest rate will decrease. This market-driven interest rate adjustment mechanism enables Venus’s lending market to operate more efficiently.

Venus has significant advantages. Its deep integration with BSC enables low transaction fees and fast transaction speeds, providing users with a good trading experience. Venus strengthens risk management by introducing isolated pools, more complex risk parameters, establishing risk funds and bad debt handling mechanisms, effectively defending against black swan events, and safeguarding user funds. Its governance model is continuously improving by introducing features such as a fast-track VIP, role-based access control, and fine-grained pause mechanisms, enhancing decentralization and enabling users to participate more directly in platform governance.

However, Venus also faces some challenges. The market competition is fierce, with the development of Decentralized Finance (DeFi) industry, more and more lending protocols and stablecoin projects emerge. Venus needs to continuously innovate and optimize to maintain its competitive edge. The high volatility of the cryptocurrency market tests the value of Venus’s collateral assets and the stability of stablecoin anchoring. A significant drop in the collateral asset prices may lead to insufficient collateral, affecting the stability of stablecoins and the normal operation of the platform. Smart contract risks are also potential threats. Although Venus has undergone multiple rigorous code audits, the possibility of smart contract vulnerabilities cannot be completely ruled out. Once a security incident occurs, it will cause significant losses to users and the platform.

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3.4 Alpaca Finance

Alpaca Finance is a leveraged yield farming protocol built on the Binance Smart Chain (BSC), providing users with an innovative way of cultivating profits. By introducing a leverage mechanism, users can achieve higher returns in the cryptocurrency market, while also bringing unique risks and opportunities, holding a significant position in the DeFi ecosystem of BSC.

The core principle of Alpaca Finance is leveraged yield farming. Users can collateralize a certain amount of crypto assets (such as BNB, BUSD, etc.) on the platform as margin, borrow additional assets, and then deploy these assets into liquidity mining or other yield farming activities to amplify returns. For example, User A has 1000 USD worth of BUSD, which they collateralize on the Alpaca Finance platform. Assuming the platform’s leverage is 3x, User A can borrow 2000 USD worth of assets (usually the other asset in a trading pair related to the collateralized asset, such as BNB). User A combines the borrowed 2000 USD worth of BNB with their original 1000 USD worth of BUSD to form a liquidity pair, and then deposits it into a specific liquidity pool for mining. If the annualized yield of the liquidity pool is 20%, without leverage, User A’s annual return would be 1000 20% = $200. With 3x leverage, User A’s total investment becomes $3000, with an annual return of $3000 20% = $600. After deducting the borrowing interest, User A’s actual income will increase significantly.

ALPACA is the native token of the Alpaca Finance platform with multiple functions. It is used to share mining rewards, where users receive a portion of the rewards in the form of ALPACA when participating in leveraged yield farming on the platform. ALPACA tokens are also used for rewards, such as participating in platform governance, completing specific tasks, or achieving a certain level of trading activity, all of which may result in ALPACA rewards. In terms of network governance, ALPACA token holders have voting rights to make important decisions for the platform, such as parameter adjustments, new feature launches, etc., thus influencing the platform’s development direction. ALPACA also offers exclusive NFT permissions, where users holding a certain amount of ALPACA can obtain platform-exclusive NFTs that may have special rights or symbolic significance.

The income feature of Alpaca Finance is the potential for high returns, but it also comes with high risks. On the one hand, the use of leverage amplifies the returns, giving users the opportunity to achieve higher returns than traditional income farming when the market conditions are favorable. In a bull market, many users who use leverage for yield farming have gained several times or even tens of times the returns. On the other hand, leverage also amplifies the risks. If the market conditions are unfavorable and asset prices fall, users may not only lose all their mining income, but also face the risk of insufficient margin, leading to collateral liquidation and principal losses. Market fluctuations, smart contract risks, liquidation risks, etc., are also challenges that users need to face. For example, if the price of the collateral assets suddenly drops significantly during the process of leveraged mining, when the margin ratio is lower than the platform’s set liquidation line, the platform will automatically liquidate the user’s collateral assets to repay the loan, and users may suffer significant losses as a result. In addition, smart contract vulnerabilities may also lead to security issues, although Alpaca Finance has undergone rigorous audits, smart contract risks cannot be completely ruled out.

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4. The impact of the top DeFi projects on the BSC ecosystem

4.1 Promote the development and prosperity of the BSC ecosystem

Top DeFi projects play a key role in the BSC ecosystem, greatly driving its development and prosperity. These projects have attracted a large influx of funds into the BSC ecosystem. Taking PancakeSwap as an example, as one of the largest decentralized exchanges on BSC, its Total Value Locked (TVL) has been maintained at a high level for a long time. During active market periods, PancakeSwap’s TVL has exceeded billions of dollars, attracting investors from around the world to provide liquidity to its pools. These funds not only provide a solid financial foundation for the project’s own development, but also drive the overall flow of funds in the BSC ecosystem, promoting the development of other projects. Venus, as a lending protocol, has attracted a large number of users to deposit assets into the platform by providing collateralized lending services, further increasing the total amount of funds within the BSC ecosystem.

In terms of attracting users, Top Decentralized Finance projects have attracted a large number of users with their rich features and innovative models. PancakeSwap provides a variety of functions such as liquidity mining and trading, meeting the diverse needs of users. According to statistics, PancakeSwap has had hundreds of thousands of daily active users, with a cumulative user base exceeding millions. These users come not only from the field of cryptocurrency professional investors but also include a large number of ordinary users. By participating in various activities on PancakeSwap, they have deeply experienced the charm of Decentralized Finance and subsequently stayed in the BSC ecosystem. Venus’s lending services have also attracted many users with funding and financial management needs, providing them with convenient financial solutions, further expanding the user base of the BSC ecosystem.

The growth of the developer community is also one of the important contributions of top DeFi projects to the BSC ecosystem. These projects provide developers with rich development resources and vast innovative space. PancakeSwap’s open-source code and open API interface allow developers to carry out secondary development based on its platform, creating various derivative applications and tools. Many developers see the potential of PancakeSwap and have actively participated in the development of related projects, forming a large developer community. These developers not only provide continuous technical support and innovation power for the development of PancakeSwap but also apply their development experience and technology to other projects in the BSC ecosystem, promoting the technological progress and innovative development of the entire ecosystem. For example, some developers have developed more efficient trading tools and data analysis platforms based on PancakeSwap, enhancing users’ experience and efficiency in DeFi trading.

Enhancing the market competitiveness of BSC

Top DeFi projects have significantly enhanced the competitiveness of BSC in the public chain market. In terms of performance and user experience, top DeFi projects represented by PancakeSwap have fully utilized the high performance and low transaction fee characteristics of BSC. PancakeSwap has extremely fast transaction processing speed, allowing orders to be confirmed and executed in a short period of time, greatly improving transaction efficiency. At the same time, its low transaction fees mean that users do not have to bear high costs when trading frequently, in sharp contrast to the high transaction fees and transaction congestion faced by public chains such as Ethereum during peak periods. During Ethereum network congestion, the transaction fees for a single transaction may be as high as several dollars or even higher, and the transaction confirmation time may be as long as several minutes or even tens of minutes; whereas on PancakeSwap, the transaction fees for a similar amount of transaction are only a few cents, and the transaction confirmation time only takes a few seconds. This efficient and low-cost trading experience has attracted a large number of users and projects originally on public chains such as Ethereum, making BSC stand out in the public chain market.

In terms of project innovation and ecosystem richness, Top DeFi projects continue to introduce innovative business models and use cases, enriching the ecosystem content of BSC. The leveraged yield farming protocol introduced by Alpaca Finance provides users with a new way of cultivating income, attracting many users seeking high returns by amplifying profits through leverage. This innovative model not only brings more investment choices to users but also provides new ideas and directions for the development of the DeFi industry. Biswap’s three-tier recommendation system innovatively utilizes social relationships and word-of-mouth communication among users, achieving rapid user growth and widespread project promotion. The emergence of these innovative projects has made the BSC ecosystem more diverse, attracting more developers and projects to settle in, further enhancing the market competitiveness of BSC. For example, some emerging DeFi projects inspired by Alpaca Finance and Biswap have developed similar innovative applications on BSC, such as yield farming projects with different leverage strategies, and financial service projects based on social recommendations, further enriching the ecological landscape of BSC.

Risks and Challenges Brought by 4.3

Top DeFi projects bring development opportunities to the BSC ecosystem, as well as a series of risks and challenges. In terms of security risks, smart contract vulnerabilities are a prominent issue. The smart contract code of many DeFi projects is complex, and although it has undergone some auditing, it is still difficult to completely eliminate the existence of vulnerabilities. For example, in May 2021, PancakeBunny suffered a flash loan attack, where the attacker manipulated the price of the PancakeSwap USDT - BNB V1 pool through a smart contract vulnerability, causing a large amount of BNB to flow into the BNB - Bunny pool, illegally obtaining assets worth approximately 40 million US dollars. This attack not only caused significant losses to PancakeBunny project users, but also had a negative impact on the reputation of the BSC ecosystem. Improper private key management may also lead to the theft of user assets. If a user’s private key is leaked, attackers can easily transfer the user’s assets in DeFi projects, resulting in direct financial losses for the user.

Market volatility risk is also not to be ignored. The cryptocurrency market has a high degree of volatility, and DeFi projects on BSC are also not immune. Take Venus as an example, the value of collateral assets in its lending business will change with market fluctuations. In a market downturn, the value of collateral assets may shrink significantly, leading to insufficient collateral and users facing liquidation risks. If a large number of users are liquidated at the same time, it may trigger market panic, further exacerbating market volatility. Fluctuations in market interest rates will also affect the borrowing rates and returns of DeFi projects, bringing uncertainty to investors. If market interest rates suddenly rise, borrowing costs will increase, potentially causing a decline in the returns of some lending projects, affecting investors’ enthusiasm.

The challenge to the stability of the BSC ecosystem also exists. The rapid development of Top DeFi projects may lead to congestion on the BSC network. With the continuous increase in users and transaction volume, the network’s processing capacity may come under pressure. When the network is congested, transaction confirmation times will lengthen, and fees will also rise, affecting user experience and potentially causing some projects to malfunction. The excessive prosperity of some DeFi projects may attract a concentration of funds and resources, leading to unbalanced development of the ecosystem. If a project occupies too many resources, it may squeeze the survival space of other projects, affecting the healthy development of the entire ecosystem.

5. The development trend of DeFi projects on BSC

5.1 Technological Innovation Trends

In the DeFi projects on BSC, cross-chain technology is becoming a key force driving ecosystem development. With the development of the blockchain industry, the demand for asset and data interoperability between different blockchains is increasing. Cross-chain technology can break down barriers between blockchains, enabling free flow of assets and data sharing, bringing broader development opportunities for DeFi projects. Many DeFi projects on BSC are starting to introduce cross-chain technology, achieving interoperability with other mainstream public chains such as Ethereum and Polkadot. Through cross-chain bridges, users can transfer assets from Ethereum to BSC to participate in DeFi applications in the BSC ecosystem, and vice versa. This not only increases asset liquidity but also enriches user choices, promoting integration between different blockchain ecosystems.

Smart contract upgrades are also an important technical development direction for BSC Decentralized Finance projects. With the continuous expansion of application scenarios and the increasing complexity of user demands, smart contracts need to be continuously optimized and upgraded to improve performance, enhance security, and enrich functionality. Developers use various technical means to achieve smart contract upgrades. A common method is to use the proxy contract pattern to separate the logic and state of the smart contract. In the proxy contract pattern, the proxy contract is responsible for storing user assets and state information, while the logic contract contains specific business logic. When it is necessary to upgrade the smart contract, only the logic contract needs to be updated, while the address of the proxy contract and the user asset state remain unchanged, thus achieving seamless upgrades. This approach ensures both the upgradability of smart contracts and the security of user assets and transaction continuity. Some projects also use formal verification techniques to verify the code of smart contracts through mathematical methods, ensuring the correctness and security of their logic, and reducing security risks caused by code vulnerabilities.

5.2 Application Scenario Expansion

The integration of DeFi and NFTs demonstrates significant potential, opening up new use cases for DeFi projects on BSC. NFTs, with their uniqueness and indivisibility, represent one-of-a-kind digital assets such as digital artworks, virtual land, and in-game items. Combining NFTs with DeFi can create a variety of innovative financial products and services. In the lending sector, users can use NFTs as collateral to borrow funds. Due to the unique value of NFTs, using them as collateral injects new life into the lending market. Some projects have introduced NFT-based lending platforms, where users can deposit their NFT assets and receive corresponding loan amounts based on the valuation of the NFTs. In terms of trading, the integration of NFTs and DeFi has also led to new trading models. For example, some decentralized exchanges have started supporting NFT trading, allowing users to freely buy and sell NFTs on these platforms, thus facilitating asset circulation and value discovery. NFT fractionalization is also a popular trend, which involves dividing high-value NFTs into multiple shares. This allows more investors to participate in the NFT market, thereby increasing liquidity and market participation in NFTs.

The integration of DeFi and GameFi also brings new opportunities to the BSC ecosystem. GameFi combines games with finance, allowing players to earn real economic benefits in the game, which has attracted a large number of users. On BSC, many GameFi projects are integrated with DeFi protocols, creating rich gameplay and economic models. In some GameFi projects, players can obtain in-game tokens or NFT assets by participating in game activities. These assets can not only be used in the game, but also traded, borrowed, or staked through DeFi protocols to increase their value. Some projects also introduce liquidity mining mechanisms, allowing players to deposit in-game assets into liquidity pools, providing liquidity to the game ecosystem and earning corresponding returns. This integration not only increases the fun and attractiveness of the game, but also provides players with more economic returns, further promoting the development of GameFi.

Changes in the market competition pattern 5.3

With the continuous development of the BSC ecosystem, more and more projects will enter the DeFi market on BSC, and the market competition pattern will undergo significant changes. New entrants usually bring innovative business models and technologies, posing challenges to existing projects. Some emerging DeFi projects may innovate in cross-chain technology, privacy protection, user experience, etc., to attract users and funds. Some DeFi projects focusing on privacy protection may use technologies such as zero-knowledge proof to provide users with a more private trading environment, thereby standing out in the market. New entrants may also seek market blank spaces and meet the needs of specific user groups through differentiated services and marketing strategies, gradually gaining a foothold in the market.

Existing projects will not sit idly by; they will implement a series of competitive strategies to consolidate their positions. On one hand, existing projects will continuously optimize their products and services to enhance the user experience. For example, decentralized exchanges may further optimize the trading interface, improve transaction speed, and reduce transaction fees to attract more users. Lending platforms may strengthen risk management, expand the types of collateral assets, and provide more flexible lending terms to meet diverse user needs. On the other hand, existing projects will enhance ecosystem development, expanding their business scope through collaboration with other projects, thereby forming a stronger ecosystem. Some leading DeFi projects may establish partnerships with NFT projects, GameFi projects, etc., to achieve resource sharing and complementary advantages, jointly creating a comprehensive financial services platform. Additionally, existing projects will focus on brand building and community operations to increase their competitiveness by boosting brand awareness and user loyalty.

Conclusion

Investors should continuously learn about blockchain and Decentralized Finance (DeFi), understand the latest industry trends, and changes in policies and regulations. Pay attention to various information in the market, including project announcements, industry news, expert opinions, etc., and adjust investment strategies in a timely manner. For example, when major events or policy adjustments occur in the market, investors should assess their impact on investment projects based on this information and adjust their investment portfolios accordingly.