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Tracking the data on the BSC smart chain, is the surge of transactions true or false?

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There is not much evidence to confirm that there is a lot of fake trading activity on the Binance smart chain; Instead, much of the fast-growing activity is real deals initiated by new investors.

Andrew Kang: Is there really fake trading activity on Binance's smart chain?

Andrew Kang is a cryptocurrency investor and market analyst

Original source: chain smell

In the past few weeks, there have been many allegations of fraudulent trading activities by the Binance Smart Chain, but little hard evidence. Mechanism Capital has looked at the users and economic activity of the Binance smart chain and compared it with other Dex's. Let's take a look at the results below.

We found that the currency intelligence chain is one of most reviled "suspicious activity" is the only address activity, is a surge in the index data, mainly because of a lot of CHI tokens have been forged, after BSCscan adjustment algorithm and eliminate CHI address generated by the contract, the index fell quickly and return to normal.

Andrew Kang：币安智能链上真的有虚假交易活动吗？

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Another suspect may be the high volume of lockups in Pancakeswap (PCS). Of course, this may be due to a bias against Asian cryptocurrency exchanges, which are more or less known as "wash trading". However, if we take a closer look at Pancakeswap's Automated Market Makers (AMM) mechanism, perhaps we can understand why they get so much lockup in such a short period of time.

Andrew Kang：币安智能链上真的有虚假交易活动吗？

First, we need to understand that cleaning trades on a decentralized exchange (DEX) are often much harder than cleaning trades on a centralized exchange (CEX). While Binance's smart chain is not entirely censored, transaction data is open and verifiable, which is very different from transactions on CEX, where transaction volume data is easier to fake.

On the Binance smart chain, if they perform a cleansing transaction, it means they have to pay a fee, rather than a fee refund or waiver as some CEX do. With an average daily transaction volume of $1 billion on Binance's smart chain, a rate of around 20% would mean paying about $2 million a day, or $730 million over the course of a year.

Suppose Binance had enough money in its pocket to cover the costs? Let's continue our analysis. Often, when identifying bogus trades, it is necessary to compare liquidity positions and trading volumes. An exchange with high turnover but low liquidity is likely to cause more serious problems.

For CEX, there are many ways to assess liquidity, the best of which is to test the trading platform's order slip-point. Back in 2018, well-known trader Sylvain Ribes did a great job with thisAnalysis of the. For automated market maker DEX, it is actually much simpler to assess liquidity, where locked up positions are a direct manifestation of liquidity and are easy to quantify. There is no denying that there is real liquidity on the Binance smart chain. As expected, as the volume of lockups increases, so does the volume, which is boosted by liquidity, which feeds liquidity in turn.

Andrew Kang：币安智能链上真的有虚假交易活动吗？

Next, we'll introduce another concept: automated market-makers decentralized exchange rate (DEX AMM Velocity), namely the ratio of volume and lock up, the index can be used to track AMM capital turnover speed, if the index number is higher, mean money faster transfer also higher (capital), cash flow can be subdivided into two categories:

Non-arbitrage flows

Arbitrage flows

Andrew Kang：币安智能链上真的有虚假交易活动吗？

Non-arbitrage flows are essentially the result of trading activity by real users (or, of course, by bots making non-arbitrage trades). In this respect, Uniswap clearly has a number of advantages, as the Dex is the preferred trading site for most traders. However, based on Dappradar's transaction data, we find that there are not many users of Pancakeswap.

Andrew Kang：币安智能链上真的有虚假交易活动吗？

In comparison, none of the other Dex has as many users as Uniswap and Pancakeswap, indicating that there are relatively more non-arbitrage flows on Uniswap and Pancakeswap. In addition, in terms of user volume, only Pancakeswap and Bancor are growing at present. Although Sushiswap has high lockup volume and traffic, it can only steadily "attract" 2000-3000 users per day.

Andrew Kang：币安智能链上真的有虚假交易活动吗？

If we look at the "transaction volume/users" metric, we can see that:

The volume of transactions/users increased across the board, reflecting higher asset prices;

Curve has a higher value per transaction;

The high volume/user volumes of Sushiswap and Balancer indicate that these two platforms are dominated by "giant whales" and there is an arbitrage trade;

In contrast, Uniswap and Pancakeswap are the top choices for retail investors.

Andrew Kang：币安智能链上真的有虚假交易活动吗？

Here's the catch: if the volume/user ratio turns out to be low, it doesn't mean the arbitrage money is also low. There are also high arbitrage trades on Uniswap and Pancakeswap due to the high lock-in volumes on both exchanges and the low gas fees. Higher liquidity and lower trading costs will lead to greater arbitrage opportunities.

Pancakeswap transaction costs on the Binance smart chain are 100 times cheaper than the transaction costs on Uniswap, with a transaction fee of only 20% (30% on Uniswap), so you'll see more arbitrage opportunities on Pancakeswap. To understand this further, let's imagine a scenario like this:

On a centralised cryptocurrency exchange, ETH prices first rose by 35%, then fell by 35%.

On Uniswap, even taking into account CEX/DEX transaction fees, gas costs, sliding points, etc., the total transaction cost of an arbitrage robot will not exceed 35 basis points. On Pancakeswap, carry trade costs can reach 25 basis points, so carry trades can be made on both platforms.

In short, a DEX with lower execution costs is able to obtain liquidity at a higher trading frequency than other DEX's. To further illustrate the relevant discussion, we captured the social media of various smart chain channels of Binance, such as Twitter, Telegram, etc. Since it's not quantitative, we don't have pretty charts, but the community engagement on Binance Smart Chain is high and very real -- an order of magnitude higher than even the projects on Ethereum.

Andrew Kang：币安智能链上真的有虚假交易活动吗？

Given the large user base of the Binance exchange itself and the high cost of the Ethereum Defi project, it is possible that the Binance smart chain could flood into a large number of transactions in a short period of time. In terms of retention rates, project-level activities, and other aspects such as platform dollars, data analysis has not shown significant differences so far.

Andrew Kang：币安智能链上真的有虚假交易活动吗？

In general, based on our analysis, there is not much evidence to prove that there are a lot of fake transaction activities and robot activities on the Binance smart chain. Instead, much of the fast-growing trading activity on Binance's chain is real, largely initiated by new, less sophisticated retail investors.