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Binance. Decent DEX?

Yesterday CZ, CEO of the leading centralized exchange Binance, announced that the decentralized version of Binance DEX is expected to launch on mainnet later this month. Binance announced its intention to launch a decentralized exchange that will offer non-custodial and trustless trading a few months ago. DEXs for long have been facing issues around low liquidity and high-latency in trade execution, causing crypto traders to continue to use centralized exchanges which offer more efficiency. That being said, with the growing number of hacks we are seeing with centralized exchanges, DEXs have put the marker down once again as a relatively safe platform for trading with their non-custodial feature set. In our view, Binance has understood that there exists a dedicated user base that wants to use DEXs to trade and their Binance DEX is a solution to cater to those users. Binance DEX reportedly can handle volumes that are orders of magnitude higher when compared to incumbent DEX platforms, which are hamstrung by Ethereum’s limitations on transaction throughput. Binance is launching its own blockchain (based on the tendermint protocol) to support the DEX platform and is supposedly interoperable, meaning it can support cross blockchain trades, a feature that only centralized exchanges have and that current DEXs cannot support for a while yet. After having taken over the centralized exchange market in a short period of time, albeit with some nifty regulatory arbitrage, can Binance do the same to the currently struggling DEX markets?

This is the issue Binance will face; even with a DEX that is 10x superior in terms of tech, it is still centralized, in a manner that a 0x or a Uniswap are not. As we have seen with Microsoft v Linux, or with Encarta v Wikipedia, motivated distributed teams building out, sometimes, competing code bases around a core platform will in the long run beat out traditional profit-seeking corporations! And Binance necessarily does not cater to the hard core DEX user. There is a regulatory arbitrage angle here that Binance gets from a DEX – it can claim that it is not responsible, for instance, if someone from the US swaps a security token on Binance DEX with say, someone from Singapore, using VPNs for instance. There is definitely plausible deniability here, but when you are the 800-pound gorilla, you have a pretty big red X on your back, it is safe to assume. DEX is therefore likely a defensive play, an optionality, similar to  Coinbase’s acquisition of Paradex.

Btw, we are quietly excited by the progress that our own Fordex has made within a few weeks of its launch; it is now among the top 5 0x relayers globally, with daily volumes between 15-20k. This is hugely promising, as this volume is completely organic, with no wash trades, zero marketing, minimal PR and no market-maker engagements. We have covered DEXs a fair bit earlier, including here, and believe they are foundational to the emerging DeFi stack.

Meanwhile in Crypto Wonderland….

“Regulatory Uncertainty in India” The court case involving the Indian cryptocurrency exchanges and the country’s central bank, the Reserve Bank of India (RBI) has dragged to the ninth month now. Despite the long period, crypto related businesses are likely to wait longer for a conclusion. This is because the Supreme Court of India postponed the hearing of the case to a later date in July. The recent delay brings the total number of delays to six. The extension means that the ban imposed by RBI will continue. Lack of banking services has raised operational costs for cryptocurrencies exchanges. In fact, several exchanges have had to shut down citing unviable business structure due to lack of banking services.

“Ed Felten’s Arbitrum Raises $3.7 Million in Seed Capital” A startup spun out of research from Princeton University is helping facilitate blockchain adoption for enterprises. Offchain Labs is providing the connective tissue between blockchain and businesses with a unique smart contract scaling and privacy layer called Arbitrum. Felten, along with a team of academics and PhD technologists, including Steven Goldfeder and Harry Kalodner, are responsible for leading the development of Arbitrum. Today, Offchain Labs announced it has raised a $3.7 million USD Seed Round led by Pantera Capital. The funding will be used to grow the team of developers to build Arbitrum.

“KuCoin’s First IEO” Singapore-based KuCoin is the latest crypto exchange to introduce a platform for public token sales (“IEOs“). Called KuCoin Spotlight, the new platform allows KYC-verified investors (excluding U.S. residents) who hold a sufficient number of KuCoin Shares (KCS) to participate in the public token sale — essentially underwriting the token’s future listing. The first Spotlight token sale kicked off this morning at 10:00 AM (EDT), with 600,000,000 MultiVAC (MTV) offered at $0.006 per MTV. The sale sold out in 7 seconds, raising 1,902,000 KCS — worth around $3.44 million at present. Each participant was allowed to purchase a maximum of 600,000 MTV, with a 30,000 minimum buy, however, many users encountered problems, leaving them unable to participate.

“Over 40 Central Banks to Tinker With Blockchain”The report was published earlier today and takes an analysis of how different central banks are either studying how the blockchain technology can be utilized or are outrightly experimenting with central bank digital currencies (CBDCs). Most of these projects are aimed at resolving issues such as financial inclusion, payments efficiency, and cybersecurity. The report further states that CBDCs (central bank digital currencies), which are issued on distributed ledgers and can be transacted in a peer-to-peer manner, will enable faster and more cost-efficient transactions.

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