As was promised a few months ago, popular centralized exchange Binance has launched a decentralized version of its exchange (Binance DEX) in the last week of April. The DEX version is expected to solve a majority of hurdles faced by current DEXs by offering high throughput and almost instant settlement, without compromising on the features of permissionlessness, anonymity and non-custodial trading facilitated by DEXs in general.
The DEX runs on a proprietary BNB blockchain, which reportedly is managed by a distributed network of nodes that maintain the BNB ledger. As seen from the screenshot below, the DEX closely replicates its centralized counterpart’s trading UI/UX.
Initially touted to be cross chain compatible, it currently supports only BEP2 standard tokens, a standard that is native to the Binance chain much like how ERC20 standard is native to the Ethereum blockchain. However, Binance has teamed up with Fantom to improve the interoperability between the Binance and Ethereum blockchains.
Constrained by the lack of cross chain compatibility, the current list of tokens listed on the DEX predominantly includes lesser known names, with BNB being the only token with more than one billion dollar market cap. Moreover, the liquidity for trading remains obtrusively thin when compared to the centralized version for the same token pairs (160k BNB in 24-hour volume for ONE/BNB pair on the centralized exchange vs. 1.6k BNB 24-hour volume on the DEX).
One can’t help wonder if this is just a diversionary tactic, or a token gesture from Binance. A number of the core crypto believers that only trade on DEXs do not really trust that a Binance DEX will be truly decentralized. The core DEX audience will continue to stay on 0x, Bancor etc. Folks that trade on Binance do so because it is convenient for them to do so. The Binance DEX, at least in its current avatar is neither pulling folks from other centralized exchanges, and nor is it converting folks from other DEXs. It remains to be seen what Binance’s play book here is with the DEX. Could security tokens be something that could be exchanged on a DEX with minimal attribution to the venue provider, thus lowering his regulatory burden, especially in non-US geographies, which is where most of Binance traders come from?