Binance Announces Public Blockchain for New Crypto Exchange
Binance, the world’s largest cyrptocurrency exchange by sheer trade volume, has announced that it will be launching a new, decentralized Binance blockchain. This new blockchain will be decentralized cryptocurrency exchange, focused on the transfer and trading of assets. Binance founder and Chief Executive Officer (CEO) Chanpeng Zhao indicated that the Binance team will have little to no say in the coins that are listed on the network, which is a move away from the current model of tight control over assets listed on its exchange.
Binance launched last September, and has quickly established itself in the crypto world as a popular exchange, with over 7.9 million users. After news broke of the new public blockchain initiative by Binance, their token value rose 25% overnight. In that time, Binance has also completed a “blockchain technology incubator” called Binance Labs, as well as their Codex, Binance Info. According to the company’s statement, they’ve also done extensive work to increase the components comprising their “Binance ecosystem.”
In conjunction with the announcement about the decentralized exchange, Binance has also announced that they will be holding a decentralizing exchange coding competition, called “Dexathon.” The coding competition will offer the chance to decrease latency and provide “high-throughput” on the decentralized blockchain, and will merge the winners’ offerings into the Binance Chain.
This decentralized blockchain represents a shift in the approach to cryptocurrency trading, one that goes back to embracing the community ideals rather than pushing the goals of a single company. The company’s statement read, “At the same time, Binance will transition from being a company to a community.” The new Binance public blockchain will be a decentralized exchange, many of which have been in existence for quite some time.
Unlike a centralized exchange, a decentralized exchange does not use a third-party provider to hold customer’s funds. As a result, individuals interact and transact with other individuals without the need for a middle man or third-party to process those transactions or hold records of them. Also unlike centralized exchanges, which are for-profit companies who store cryptocurrencies on behalf of their users, decentralized exchanges don’t have to be run by for-profit companies, and can provide trades without the fees associated with centralized exchange transactions. Decentralized exchanges do provide increased anonymity and security for users, as they are more difficult to hack into and thus steal from, but they can be also be difficult for newer users to understand. In their current form, many decentralized exchanges can be inefficient, and also don’t offer the liquidity or advanced trading features that are availablewith centralized exchanges.
Binance has been utilizing a centralized exchange for some time, storing transactions on company servers rather than on a public blockchain. The BNB token is built on the Ethereum blockchain, but is more commonly used on the Binance platform, where transactions utilizing the BNB token are handled on the Binance servers rather than on the Ethereum blockchain. Deposits and withdrawals are handled on the blockchain. As Binance will be shifting its coin to the new blockchain, it is unclear if the company will offer a token swap for individuals currently holding the BNB token on the ERC20 chain.
The company’s statement also said, “We believe that continuously supporting high-quality blockchain projects is the best way to develop this industry. We will continue to improve this part, as we committed in our whitepaper. However, for Binance, this is far from enough.” The statement indicated that they envision co-existence between centralized and decentralized exchanges, in which the two are interdependent and complementary. The new blockchain will “focus on the transfer and trading of blockchain assets, as well as provide new possibilities for the future flow of blockchain assets.”
In an interview with Bloomberg, Zhao said, “On the decentralized exchange we’ll have less control. More likely anybody can list any coin. That’s the philosophy of the decentralized exchange, it’s freedom of choice, freedom of investments.” Zhao also acknowledged that with less control comes potential issues from scammers, saying, “But with freedom there will be people who are scammers. That’s not something we can control.” Zhao’s statements reflect the current status of blockchain technology and the cryptocurrency market, which, due to its uncertain regulatory status, has allowed for the proliferation of dubious offerings. Investors have responded by increasing their initial evaluations of the veracity and legitimacy of token offerings prior to purchase, and the standard advice of “don’t invest more than you can afford to lose” has been held to be of significant importance.
The announcement was met with excitement by the cryptocurrency community, and the optimism was also expressed in the Binance statement, which read: “We know how hard it is to create a business, however, creating history is even harder. The real enemy is often ourselves. We need to continuously improve and disrupt ourselves. We need to work together to create a better version of ourselves. The futures belongs to the new us, together. Thank you for your unwavering support.”
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