Binance CEO Changpeng ‘CZ’ Zhao also confirmed that the exchange would offer a “simple UX”, full custody of coins for users, and “instant transactions” with one-second block time.
The benefit for traders using a decentralised exchange is that they retain full custody of coins or tokens while trading. This means that if an exchange was to go offline – or worse, get hacked – the coins would remain safe and in the control of the trader.
Three things about the @Binance_DEX
2. You control your funds (private keys). No holding of coins at the exchange.
— CZ Binance (@cz_binance) December 5, 2018
The two largest decentralised exchanges by trade volume have suffered a turbulent past year. Ether Delta’s founder Zachary Coburn was charged by the SEC for running an unregistered exchange, while IDEX forced their customers to undergo KYC checks, prompting concern about whether the exchange was actually decentralised at all.
As Binance are already an established name in the space, alternative decentralised exchanges may struggle to compete, especially in light of CZ’s promise to implement instant transactions.
The cryptocurrency community have been calling out for a reliable decentralised exchange following a number of exchange hacks over the past decade. MT Gox experienced a hack in 2014 that saw 850,000 Bitcoin siphoned out of the site, while Bitfinex suffered a similar hack in 2016, losing 120,000 coins.
The likes of BitShares, EtherDelta, and IDEX have attempted to fill the demand, but network instability has often halted the rate of progression. One example of when the ERC-20-based exchanges fell short was during the emergence of Crypto Kitties. Pending transactions soared on the Ethereum blockchain, causing slow transactions and inflated fees.
If Binance can fulfill their goals of instant transactions alongside their non-custodial model, it could well be the most innovative exchange to launch on the market.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.