In an era in which there’s a blockchain for everything and everyone is launching a blockchain, it’s not surprising that a cryptocurrency exchange should get in on the act. It’s even less surprising that Binance should be the platform to do so. The ambitious exchange, buoyed by record profits and substantial goodwill within the crypto community, is planning to launch a proprietary blockchain that will perform a number of roles.
Also read: Binance Offers $10 Million Hacker Bounty
Binance Goes It Alone
Binance hasn’t had much use for blockchain to date. Like every centralized cryptocurrency exchange, all of its action takes place off-chain, with transactions settled simply by updating the order book stored on the company’s servers. Its own BNB token is an ERC20, but doesn’t have much use for the Ethereum blockchain it lives on since its only real use case is when using the Binance platform, where BNB transactions are again settled off-chain. The only exception is customer deposits and withdrawals. On March 13, however, the company broke the news of Binance Chain, a proprietary blockchain with a range of applications.
Three paragraphs in, the statement reads: “After extensively researching decentralized exchange frameworks and analyzing existing implementations, we believe significant improvements can be made in providing Binance users with a level of trading experience to which they are already accustomed.” This is confusingly worded, but seems to be implying that if Binance were to switch to a hybrid model, user experience would not be impacted, for the statement continues: “Centralized and Decentralized exchanges will co-exist in the near future, complementing each other, while also having interdependence.”
Buy Why Blockchain?
The reason for Binance launching its own blockchain is buried deep within the statement, but it arrives, eventually: “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.”
Reading between the lines, it looks like Binance will launch a decentralized exchange that will operate alongside its existing exchange. In addition to facilitating the trade of digital assets, the DEX will likely operate as a launchpad for new coins and ICOs. Binance is a platform on the up right now, and it has earned praise for the way it has handled incidents such as the viacoin pump and dump and the unexpected downtime it was subjected to last month. It’s also got cash to splash, having already earmarked $10 million for hacker bounties this week.
12 months ago, Binance was a plucky contender that could only dream of taking on the likes of Coinbase and Bitfinex. It’s now on course to become crypto’s very own Google, a turnkey solution for a complete range of cryptocurrency services. Exchanges, perhaps in a bid to future-proof themselves and fend off the rise of DEXes and atomic swaps, are broadening their offerings, be it through custodial services, proprietary blockchains, or ICO incubators. Binance users have welcomed today’s news, but will be mindful of the risks of over-centralization and reliance on a single entity, even one whose platform may soon be partially decentralized.
How do you think Binance will use their blockchain? Let us know in the comments section below.
Images courtesy of Binance and Coinmarketcap
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