The idea is strong, but until decentralized exchanges become more user-friendly, centralized exchanges will still be popular.
With Decentralized Finance (DeFi) gaining steam, exchanges like Binance find ways to co-exist with innovations like DeFi. Binance Co-Founder and CEO Changpeng Zhao (CZ) said DeFi is an innovative space and investing decentralized exchanges will not be a challenge for regular exchanges.
In an interview at the Boxmining Youtube channel, CZ said DeFi makes the space more attractive. In particular, he pointed to automatic market makers (AMM) as a fascinating invention.
“I think DeFi is a really innovative space and I think that’s really good. Initially, when people talk about DeFi they think about lending so you can lend your coins but now, you lend the coins to provide liquidity. When the liquidity is good, people trade more and trade more easily. I think automatic market makers are an interesting invention and it’s really simple. That aspect of it will stay.”
CZ added Binance “is very supportive of DeFi” and is doing many projects around DeFi and AMM.
But as much as CZ believes in DeFi, he does acknowledge that it’s a new field and the majority of projects do fail. So if you’re investing in DeFi, it’s good to keep that in mind. “I want to say most projects in DeFi will fail; it does not mean DeFi is not good, but that only a few will succeed. The few that succeed will succeed wildly.”
Binance has been investing heavily in DeFi and has been listing many DeFi tokens on the exchange. And while Binance believes in DeFi, CZ said most users today still prefer a centralized exchange, so Binance will keep providing products people want to use.
“I think we go by user numbers to see what they want to use and push it. Today the majority of users still choose a centralized exchange because it’s much easier to deal with an email and password and have customer support than saying do a backup of your own keys and if you lose it you’re screwed. I do think in the figure if we can make the secure backup easier and useable, I think DEX is going to be the future. So we will continue to invest in the DEX and also form multiple projects. Right now, centralized exchanges are more popular by user numbers and we just want to provide products that people use.”
Smart Chain
CZ also talked about the Binance Smart Chain, which wants to match orders on the chain very quickly and can handle around a hundred thousand orders per second. He said that in order to achieve that level of performance, they had to take out the smart contract capabilities of Binance Chain. The Binance Smart Chain was released as a parallel chain that supports smart contracts compatible with Ethereum, so it supports solidity and is compatible with the Ethereum Virtual Machine (EVM).
The main feature of Binance Smart Chain is that it is compatible with Ethereum-based smart contracts. Also, it will be fully open-sourced so anyone can deploy contracts on the platform. According to CZ, Binance Smart Chain is an easy way for users to deploy smart contracts on Binance Chain without any additional learning curve.
CZ also revealed that they are working at Binance on designing a staking mechanism for BNB on Binance Smart Chain. CZ expects to launch the staking mechanism between late August and early September 2020.
