The Binance Chain Affect
Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies. Since early 2018, Binance is considered as the biggest cryptocurrency exchange in the world in terms of trading volume
On 18 February 2019, a Binance blog post explained that the testnet for Binance Chain would be launched on 20 February 2019. And the “first use case for Binance Chain is Binance DEX, a new decentralized exchange (DEX) that aims to carry over the best features of the current Binance exchange in a decentralized setting, while also offering the benefits and security of a DEX.
“As a public blockchain, Binance Chain will mainly focus on the transfer and trading of blockchain assets, as well as provide new possibilities for the future flow of blockchain assets. Binance Chain will focus on performance, ease-of-use, and liquidity. Binance Coin (BNB) will be upgraded to exist on its own blockchain mainnet, becoming a native coin. At the same time, Binance will transition from being a company to a community.”
Binance team wrote about Binance Chain on 13 March 2018, the day that the development process for this project was officially launched
According to the documentation provided by Binance, the following were the main design goals for Binance Chain and Binance DEX (a decentralized exchange powered by Binance Chain):
- “No custody of funds: traders maintain control of their private keys and funds.”
- “High performance: low latency, high throughput for a large user base, and high liquidity trading. We target to achieve 1 second block times, with 1 confirmation finality.”
- “Low cost: in both fees and liquidity cost.”
- “Easy user experience: as friendly as Binance.com.”
- “Fair trading: minimize front-running, to the extent possible.””Evolvable: able to develop with forever-improving technology stack, architecture, and ideas.”
CZ says two very interesting things in this tweet:
- Binance Chain/DEX “does not challenge Ethereum”
- Binance Chain/DEX “challenges ourselves, the exchanges”
- Different Consensus Algorithm. Binance Chain uses Tendermint’s consensus algorithm which offers much higher performance, a lot more scalability, and much lower time to settlement finality than Ethereum’s Proof-of-Work (PoW) based consensus algorithm.
- No support for smart contracts. Binance Chain was built for speed rather than flexibility so that Binance DEX could handle the same kind of loads as Binance’s centralized exchange platform.
Binance DEX is the first dApp that runs on Binance Chain.
It will be an evolution of an established centralized business. Admitting centralized control and playing it out to the max will allow Binance to offer the best possible service to its customers while greatly improving transparency. Binance will truly become the most evolved and advanced centralized exchange on Earth, and the best possible tool for speculators.
What Binance DEX is really replacing is not the Binance Exchange. It is replacing the user account model.
Binance will launch Tether-like stablecoins for every listed currency. Deposit real BTC to Binance, they credit btc-token-on-binance-chain balance to your account for trading. When you want to convert back to real BTC you’ll most likely have to pass KYC and burn btc-token-on-binance-chain, and Binance will send the real BTC to the address you provide, just like on a normal centralized exchange.
The real biggest feature is that Binance is simply the most convenient wallet for all the cryptos. If you have ever tried to diversify your crypto portfolio into at least top-10 coins you would know that is is a nightmare to download, install and sync all these wallets, as well as securely store the private keys for them. The only problem with this approach is that Binance is pretty much desktop only. Native integration of Binance DEX & credit card purchases into Trust Wallet will allow Binance to tap into the emerging mobile market and position Binance for success with Gen Z consumers in developed countries and mainstream consumers in emerging markets.
Binance has already attracted a slew of existing and upcoming cryptocurrency projects for switching to the new platform.
Mithril was the first project to migrate to Binance Chain following its mainnet launch on Apr. 18th.
The decentralized social media platform saw its native coin MITH nearly double in value the day it launched, jumping from $0.04 to roughly $0.08 in less than 24-hours.
Red Pulse, a market intelligence platform that connects non-Chinese speaking clients with experts in China’s capital markets, recently revealed its integration with Binance Chain. Following the announcement of the migration, the company’s Red Pulse Phoenix (PHX) coin was up a staggering 42 percent.
Announcing a partnership with Binance Chain had the same effect for Enjin wallet and its ENJ coin. After announcing support for Binance Chain on Apr. 19th, the coin’s market cap rose from $132 million to $150 million in a matter of hours.
Cryptocurrency wallet Magnum also announced that it will begin supporting both the Binance Chain mainnet and the Binance DEX. The same day, Atomic Wallet (AWC) followed suit and saw its coin’s value increase fivefold—jumping from $0.03 to $0.15 in a single day.
Binance showed how deep their intentions run for their decentralised blockchain network when they announced their ‘Binance Dexathon’ in March 2018.
The result of the collective toil of the company and the coders who entered the competition was Binance DEX, a decentralised exchange that’s set to support ‘millions’ of crypto assets, saving fees and unnecessary delays.
Most significantly, Binance DEX represents a significant leap forward for crypto exchange technology. As opposed to centralised exchanges that rely on data being stored safely in one central location in order to operate, a decentralised system has no need for storage in one place and allows users to control their own private keys instead. This, in turn, helps to keep investors’ assets safe while not carrying as much of a data processing burden on one single location.
Fundamentally, Binance outgrew its centralised system, and Binance Chain coupled with Binance DEX is its solution to ensure more growth as it continues to gain popularity.
At a time where hacks of crypto exchanges are becoming more frequent, Binance’s shift to decentralised blockchain technology paves the way for greater security with digital assets.
The prevalence of these hacks are due, in no small part, to the centralised nature of the majority of the exchanges we’re used to utilising today. With nearly $1bn worth of cryptocurrencies stolen in 2018 alone, security will have no doubt been among Binance’s top priorities when devising a plan for an exchange that’ll catapult crypto trading into a more modern age.
Given that the data stored on Binance DEX will be done so in a decentralised manner, there’s no specific location for hackers to attack. This gives investors an unprecedented level of control over their finances and significantly more peace of mind than through rival exchange companies.
Published By: Alvaro