The crypto markets have become very competitive, and not just for the coin developers who have to come up with revolutionary technologies, but also for the crypto platforms. One of the few companies to come out ahead of the competition has been Binance, which is now ranked first among global crypto platforms when ranked by adjusted trading volume. Now the company is moving forward by launching a Binance decentralized platform dubbed Binance DEX. It would be interesting to learn more about this decentralized platform and how it could be beneficial to its users, and this shall be our focus today. (Do you know these: 5 Tips to Choosing the Ideal Cryptocurrency Platform?)
On the road to Binance DEX
While the main focus of this post is on the Binance decentralized platform itself, it’s important to look at how the company got to this point too. Don’t worry, this won’t be a long history lesson about Binance, just a highlight reel. Furthermore, there isn’t much history to Binance anyway as it is just over 20 months old. (Do you know: How easy is it to trade Cryptocurrency in the Forex market?)
History of Binance
Binance was launched on the 14th of July 2017 by Changpeng Zhao and Yi He in Shanghai, China. Zhao has had a lot of experience in Fintech since he founded Fusion Systems back in 2005 to create high frequency trading algorithms for financial trading companies. From there, he moved into crypto by joining the crypto wallet Blockchain.info and then becoming CTO of OKCoin where Yi He was the head of marketing and branding. Binance was created following a successful ICO that raised some $17 million. Back then, we didn’t see a lot of ICOs raise triple-digit funds like we came to see later in the year. In anticipation of the changing crypto regulations in China, the company moved its headquarters to Japan, Hong Kong and finally to Malta seeking for favourable trading conditions. Malta is known for its friendliness to financial and crypto companies, so it wasn’t surprising Binance made it a home. They have also branched out to developing countries like Uganda with plans to open more offices in other African countries. (Find out more about the: Growth Of The Forex Market In Africa And Other Developing Countries)
According to a report by Binance, the company entered the top 10 list of crypto platforms after just 42 days and became number one after 165 days! This was remarkable, and should have earned the company a spot as a ‘unicorn’. In finance, a privately held start-up with more than a $1 billion valuation is called a unicorn because it rarely happens to be. A few private companies have managed to achieve unicorn status in under a year such as Lyft, Uber, Pinterest, Airbnb, Dropbox, etc. But then again most of the companies coined as unicorns were making losses rather than profits. At first, Sequoia Capital was interested in offering $80 million for a $400 million valuation but IDG Capital valued Binance at $1 billion right off the bat. This led to some legal trouble with Sequoia taking Binance to court in Hong Kong seeking an injunction to the deal with IDG, but Binance won the case and partnered with IDG. Even before the end of 2017, the company was valued at over $2 billion, unofficially making it one of the fastest growing companies ever. (Will Institutional Investors and Sharks Invest Massively in BTC in 2019?)
A lot of the company’s growth could be attributed to the extreme growth of crypto markets in 2017, but then again the company has still managed to stay at the top of the industry even following the slump of crypto markets. There are about 150 tokens listed with over 400 pairs to be traded on the platform. Unfortunately, there is no platform from fiat to crypto and vice versa, but Binance promises the lowest trading fees, which makes it very attractive for frequent traders. The only fiat-crypto trading is available in Uganda via Binance Uganda, but then again that isn’t a major hub for crypto trading. Therefore, it is no wonder that almost a billion airdrops and forked tokens have been distributed via Binance and the platform also handles token swaps. Perhaps the only reason why Binance is not officially listed as a unicorn could be the allegations of inflating trading volumes. Early this year, it was discovered that some platforms were artificially inflating their trade volumes to appear more relevant than they actually were. (After The BTC Cash Fork, Which Is The Real BTC?)
Binance was also one of four out of thirteen crypto platforms that refused to respond to the request by the New York Attorney General’s Office for information. Despite these run-ins with the law, Binance experienced a hack on the 7th of March 2018 where some users’ accounts spotted suspicious activity. Binance stopped trading for the day and advised its users to disable any management tools that used Binance APIs. Later, the company would issue a $25,000 bounty for information about the hackers. (These are: The Most Prominent Cryptocurrency Hacks and Scams You Should Know About)
Launch of Binance Coin
During the ICO for Binance, investors received Binance Coin (BNB) tokens in platform for their investment. BNB would come to be the native token for the Binance platform serving various functions. The main one is for the payment of trading fees, whereby payment using BNB attracts a discount. In the first year, you would get as much as a 50% discount, which is halved every year such that there will be no more discounts in the fifth year (2021). Since this is the most common use of BNB, the company was worried reducing the discounts would make the coin less attractive over time. To counteract this effect, some BNB are destroyed over time. A total of 200 million BNB tokens were created, but half of them will be destroyed, leaving just 100 million, maintaining a constant price for BNB. Besides paying for trading fees, BNB can also be used to invest in ICOs held on the Binance Launchpad program. As these coins become listed on the platform, investors will receive the coins they bought. (Investor Tips 2019: What To Include In Your Portfolio)
While BNB is primarily used within the Binance platform itself, it can also be used as a coin to invest in. The graph above represents the value of BNB ever since the platform went live, and you can see that there has been a 6,000% increase in its value since it was launched from about $0.01 to the current price of $6. Not many coins can brag about such remarkable growth, not even the top coins on CoinMarketCap. For example, Ethereum has actually decreased in value from about $200 in July 2017 to the current price of $130. This makes BNB one of the best, if not the best, performing coins over the past year. Today, it is ranked 14th by market capitalization, holding about $800 million in market cap. The graph below shows a correlation between the value of BNB in 2017 and the number of visitors to the Binance website. For investors, it’s easy to see that, as long as Binance remains the most active platform by trading volume, the value of BNB will not decrease by much since the demand will still remain high. (Gram (TON) Vs BTC in 2019: Best Worldwide Coin Fight, Pros and Cons)
Binance Decentralized Platform (DEX)
On the 13th of March 2018, Binance announced that they will be launching a decentralized platform in addition to their already established centralized platform in Malta. This would be possible first by creating a public blockchain named Binance Chain and moving their BNB tokens over to the blockchain. So far, BNB is an ERC-20 token that runs on the Ethereum platform, but perhaps through some kind of swap they can shift it over to the new Binance Chain where it will be the native token. The news came a few days after the attempted hack on their centralized platform, so they were probably trying to increase security by moving some of their services onto a blockchain. On the 9th of August, Zhao released a video of the first demo of the Binance DEX, which was still a basic display of the functionality rather than the actual user interface. The second demo video would be released on the 5th of December, this time showing a lot more progress as shown in the image below. So far, it doesn’t seem much different from the current Binance user interface. (How and When Do You Know You’re Ready for The Big Live Account Leagues?)
Besides the actual platform, BNCE DEX would also include a crypto wallet and a block explorer shown in the image below. Along with the video, BNCE announced that BNCE Chain would be available in the coming months, so probably some time in 2019. For the crypto wallet, BNCE acquired Trust Wallet, and Zhao stated that it would become the primary wallet for the DEX. The video also promises one-second block times for trades, making it very fast in processing trades. Moreover, with the block explorer, users will be able to search for any individual block and see the trades done within that block. (Some of the: Alternative Coins beside BTC to invest in)
Why create a delocalized platform anyway?
One might wonder why such a well-performing company could be incentivised to create a delocalized platform like the BNCE DEX. First of all, it’s not the only platform with such plans since Huobi also announced similar plans. Clearly, therefore, there must be something pushing these platforms to the ledger and away from conventional systems. Perhaps the main reason for the move is to increase security for their clients. Although BNCE has been lucky enough so far not to be hit by any major hack (as far as we know), there is still the risk of such attacks. Many platforms and wallets have suffered in the past from them, and no one is immune. When an platform holds all the cards, it creates a central point of attack for hackers. However, a delocalized platform means that all their clients would be in possession of their own private keys, essentially eliminating the centralized nature of an platform. (These are the: 10 Most Important Resources to a Coin Trader)
Another advantage to a delocalized platform is that such a platform is borderless and not subject to any regulations. As an established company, BNCE was supposed to be regulated in whichever jurisdiction it was based. This is why the company had to move around a bit before getting to their current headquarters in Malta. Even so, the company is still under a lot of scrutiny because it should not operate in certain areas. As previously mentioned, BNCE was among four out of eleven crypto platforms that did not respond to a request by the New York OAG to provide information. As a result, they were referred to the Department of Financial Services for possibly violating currency laws in New York. BNCE still operates in the US and many other areas where it is technically not allowed to, but this places them at a great risk of prosecution. By moving over to a delocalized platform, the company would no longer be responsible nor liable for any of the activities carried on in their platform. The BNCE DEX basically becomes more of a peer-to-peer platform without a clear centre. As Zhao said during the initial stages of the project, they intend to change BNCE from a company and into a community. (Learn the: 5 tips to forming the most promising coin investment portfolio)
What will be the impact of the Binance DEX?
These days, the launch of a new ledger company is not enough to even raise a few eyebrows, but the BNCE DEX will be different. After all, it is the top crypto platform globally. For traders using the platform, there probably won’t be much of a difference in the way trades are handled. As we have already seen in previous images, the demo platform looks similar to that of BNCE today while still centralized. You can also bet that the creators of the ledger will be very careful to ensure it works perfectly after launch. With almost $1 billion being traded every day, they cannot afford any errors on the platform whatsoever. Apart from the platform, BNB tokens will still be ERC-20 compliant, so they will be accepted by most crypto wallets. Trust Wallet will of course be the default wallet, but most other wallets also accept these kinds of tokens, so there won’t be any difficulty in trading and enjoying the perks of using BNB. (Have you ever wondered: How Did Tether Coin Survive The Coin Arena Selloff?)
The structure of the ledger has yet to be announced, but we believe BNCE could achieve the kinds of processing speeds they claim to have. Once again, with so much trading volume being handled, it is essential that the ledger be fast to process any trades and not experience any lags as seen in Bitcoin and Ethereum. Most likely, this will involve an innovative system that doesn’t require miners to use their brute computing power to hash blocks, thus speeding up the process. (Learn more about: The Future Of ETH In 2019 And What To Expect)
Out of all differences to be seen, perhaps the delocalized bank will be the most significant change that could come out of the DEX. As early as the 12th of July 2018, Bloomberg had already reported that BNCE had invested in a 5% share of the Founders Bank, which already had a $155 million pre-investment valuation. Neufund will be used to issue equity tokens, which shall be legally binding, and the platform will be launched on the ledger. The plan is still far from being complete since the Founders Bank needs a license from the EU state’s government. Fortunately, Malta has proven to be friendly to crypto investments as they already passed several laws through parliament on distributed ledger technology (DLT) and other crypto-related areas. The Founders Bank will be the first global community-based bank and also based on ledger, which BNCE will be at the centre of it everything goes according to plan. (Do you know: What Is The Future Of Coin In Finance?)
There are some very obvious advantages to the creation of a delocalized platform by BNCE, and 2019 will be a very interesting year as this and many other developments in the crypto-sphere will be coming into effect. What’s for sure is that BNCE will only be the first to launch a delocalized platform before others follow suit. It all comes down to how well the platform performs, but we all know that crypto companies need to find innovative solutions to some of the problems they are facing.
If you’re interested in learning more about the BNCE delocalized platform, why not see how it’s going to work through this video: