This Tuesday cryptocurrency exchange giant Binance revealed plans about launching a public blockchain to facilitate the creation of a new decentralized exchange.
The Hong Kong-based cryptocurrency exchange said the move forms part of a plan to transition from “a company to a community” by developing its new Binance Chain, which will be used to transfer or trade different blockchain assets. In addition, the company announced it would essentially shift its Binance Coin (BNB) to its own native blockchain (right now the coin is an ERC20 token that runs on the ethereum network). However, it’s unclear if there will be some kind of token swap for users who hold the exchange’s ERC-20-based token.
The company said that it made the decision to launch Binance Chain after conducting extensive research into currently-existent DEX frameworks.
Decentralized Exchanges allow users to trade cryptoassets without entrusting their coins to third parties, whose centralized platforms provide hackers with lucrative attack vectors and have collectively lost more than $1 billion worth of assets to thefts during the industry’s short history.
The most well-known DEX is EtherDelta, which uses smart contracts to allow users to trade ERC20 tokens, which all run on the Ethereum blockchain. DEX platforms are not completely safe since their website servers are centralized, but they are much less vulnerable to large-scale thefts than conventional exchanges.
The reason that currently-existent DEX platforms are not more widely used is that by-and-large, they can only be used to trade assets that run on a common blockchain. Technological upgrades such as the Lightning Network (LN) promise to make cross-blockchain trades — called atomic swaps — more accessible, but these technologies are not yet production-ready.
It is not yet clear how Binance’s DEX will operate, although it appears that it will exist alongside the company’s centralized exchange for the foreseeable future.
“Centralized and Decentralized exchanges will co-exist in the near future, complementing each other, while also having interdependence,” the company said, adding that more details about Binance Chain would be released in the coming days.
Notably, OKEx — another top-three cryptocurrency exchange based in Hong Kong — recently launched its own utility token and has said that it will create its own public blockchain, tentatively dubbed OKChain, as well.
The news comes a day after Binance announced a bounty program to track down the attackers who recently attempted to steal funds from the exchange’s users. Binance said it had allocated $250,000 worth of its BNB token for the first person who shares information leading to the arrest of the attackers.
As might be expected, the price of the exchange’s BNB token is up more than 20 percent on the news, according to data by CoinMarketCap. While it traded sideways at roughly $8 for the last several days, it reached a peak of nearly $10 in the last two hours. As of press time, BNB is trading at about $9.70 per token.