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blakicious

Will Binance DEX be totally decentralized?

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Binance has just released a preview of its soon to be launched DEX, slated for early 2019. You can see preview here:

 

 

Hybrid Decentralization

Rather than focus on the advantages of decentralization for providing censorship freedom, the Binance DEX seems to aim more at using decentralization to offer better security as well as inspire a more involved community. To make this happen, this new DEX will be created on the Binance chain (its own blockchain), which utilizes dBFT – Delegated Byzantine Fault Tolerance. dBFT is a consensus algorithm also utilized by the NEO blockchain which was once criticized for permitting centralization. In addition, as Binance are said to hold most Binance coins (BNB), technically the exchange will be semi-decentralized. With the exchange, users can propose new trading pairs as well as carry out a democratic vote in order to know which should be listed. With the exception of the Token Store (a small exchange), the Binance DEX will be the first to allow users add tokens, a process not successfully decentralized most probably due to the ease with which scams operate.

It’s still uncertain if Binance will request a listing fee for each token on its exchange. In the past, the company has faced heavy criticism from the community for its high listing fees. DEX’s main selling point is still security, which will make it possible for traders to have full control over their private keys. 

Also, it allows traders to exchange and issue digital assets without the need to make deposits on a central exchange. This feature was credited by Changpeng Zhao, when he said that it “makes it possible for your funds to be more SAFU than ever before.”  Traders will eventually be able to make use of hardware wallets like Ledger, along with Binance's dApps like Trust Wallet to trade on the exchange.

 

Till date, DEX has faced three big problems, which are: poor user experience, lack of liquidity and price slippage. The user experience was addressed by when Zhao said that the user interface will be much similar to that of the present Binance exchange. As per the liquidity issues, Binance is more preferred in terms of converting potential users, giving an indication to the market, the presence of its present centralized exchange. Slippage happens when prices paid by users for their trades can be affected by the delays in order settlement.

With CZ being a popular figure in the community, we can easily suggest that the Binance DEX was never meant to be completely decentralized. And as suggested by some Twitter commentators, it will be more appropriate to term it as the non-custodial exchange.

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