What were the trade offs for the security model?
It requires trust on both binance chain's and neo's validators, as, if either of them get compromised, it would be possible, with the collaboration of collateral providers or sbnb holders, to steal part of the money put into the system. Neo holders already trust neo validators but the trust that needs to be placed on binance chain's validators is something they may not feel comfortable with and viceversa. I don't believe this will be a problem because both chains have a very similar security models and are well established.
On the user side, something that may be seen as a problem is that, in order to incentivize collateral providers, bnb put into the system is constantly being burnt at a very slow rate. This rate is configurable and will be adjusted later, but at the basic level, it means that users will have costs similar to those incurred when trading with leverage.
On the collateral side, the main possible concerns are:
- Locked deposits: The collateral needs to be locked for some time in order to get rewards. This time interval has an upper bound (given by the burning of sbnb), which will be shortened if users withdraw their bnb.
- Node requirement: Apart from locking collateral, providers will need to answer to contract events (eg: withdrawal of bnb) within a 12 hour deadline. This can possibly be done manually (setting up alerts for example) but we strongly recommend setting up a node to handle these automatically. This means that collateral providers will need to maintain a node, like in staking protocols.
Why don't some BNB users/projects like it?
So far we haven't seen any resistance to it, but I predict there will be. At the same time I also believe that there will be a large amount of projects and users that accept the trade-offs. I base that prediction on the following observations:
- Collateral providers
- Dash currently has 46% (~300 mil USD) of it's total supply locked in masternodes ^[1]
- ETH 2.0 devs expect to have ~30% of it's supply locked for staking, as of now that would be ~5 trillion USD ^[2]
- Users
- So far the major smart contract usecases for tokens on Ethereum have been projects built around trading, so it's safe to assume that this will also hold true for sBNB. Therefore, the major users of sBNB will be traders, and currently among the top 4 derivatives exchanges (BitMEX, OKEX, Huobi and FTX) there's ~1.8 billion USD locked in products that pay interest, making it clear that there is a huge market for this. ^[3]
[1] https://masternode.live/currencies/DASH/Dash
[2] I don't have the source for that because it was said in a presentation done in Devcon V
[3] https://www.coingecko.com/en/exchanges/derivatives
Also, what's your theory on how the NEO market size could grow via SmartBNB integration?
Direct consequence of all the new usecases I mentioned:
- Birth of a DeFi project on NEO that returns interest on locked money
- Addressable market for NEO dApps growing 3.5x
- New projects being built on NEO by teams coming from Binance Chain
- ...
And, what are the next steps? What does SmartBNB's path look like looking forward?
Right now we are finishing up some parts of the protocol as well as the node software. We are also asking for quotes on a security audit of it. Once we are done we will market it heavily to projects building on Binance Chain and will encourage teams building on NEO to integrate smartBNB into their projects.