In February of this year, Binance Labs announced its plan to create a digital token called the Binance Coin (BNB). The BNB is a utility token that is used to pay transaction fees on the Binance cryptocurrency exchange. However, the BNB isn’t just any token. It’s part of a much larger initiative by the Binance team called Binance Nation. But what is a decentralized exchange (DEX)? What is Binance Coin? And why does Binance want to own your wallet? To answer all these questions and more, it’s best to begin by taking a look at the current state of the internet’s crypto exchanges.
What is a Decentralized Exchange?
Simply put, a decentralized exchange is an exchange that doesn’t rely on a centralized authority to operate. Instead, it uses a blockchain to create a decentralized marketplace with trading functionality. This type of exchange has many advantages, including reduced costs and improved security.
How Does a Decentralized Exchange Work?
A Decentralized Exchange allows users to create their own trading platforms similar to those found on centralized exchanges. However, instead of trusting a third party with their digital assets, users keep control of their assets themselves. Thus, a Decentralized Exchange is highly secure and transparent.
Binance Coin: The Heart of the Binance DECENTRALIZED Exchange
The Binance Coin (BNB) is the startup’s native token. It’s used to pay trading fees on the Binance platform as well as give incentives to users who upload content to the Binance ecosystem.
BNB is an ERC-20 token that uses the Ethereum blockchain. It holds significant value since it’s currently being traded at $12.71 with a market capitalization of $1.3 billion.
Binance’s Big Plan: Owning Its Own Wallet
While centralized exchanges are great for trading cryptocurrencies, most don’t offer the option to store tokens. Binance wants to change that. With the BNB token, the company will launch its very own wallet. The wallet will support the storage of any ERC-20 token and will have an easy-to-use interface. It will also have an integrated exchange, where users can trade BNB for other cryptocurrencies and fiat.
Binance’s Big Plan: Storing Your Crypto
Currently, there are few options available when it comes to storing your cryptocurrencies. Most centralized exchanges keep your assets in custodial wallets, which offer greater security than keeping coins on an online wallet. However, this comes at a price. You’re locked into that wallet’s platform. If they go out of business, you’re out of luck. You can only get access to your funds if the exchange you used offers support for that wallet’s platform.
The Problems with Existing Exchanges
Exchanges have come under scrutiny for their security and transparency issues. In some cases, users have reported losing funds after falling for scams or being hacked. Additionally, many existing exchanges don’t offer the option to trade fiat for cryptocurrencies. As a result, they can’t be used as a primary source of revenue for many start-ups.
The Future of Binance’s Decentralized Exchange
While Binance’s decentralized exchange has many benefits, it does come with a few risks. First, it’ll be a few months before the Binance platform is ready for prime time. During this initial launch phase, there may be issues with user experience, inadequate liquidity, or a lack of support for some tokens.
How to Buy your first cryptocurrency with no wallet
If you’re new to the world of cryptocurrencies, you’re probably looking for a straightforward how-to guide. In this case, we suggest you start by reading our Beginner’s Guide to Buying your First Cryptocurrency. It’ll get you up to speed in no time.
Once you’ve got the basics down, check out our article on the Best Cryptocurrency Exchanges. There are dozens of options out there, and all of them have unique benefits. It can be difficult to know which one to use. That’s where our cryptocurrency exchange reviews come in handy. We’ve tested and reviewed every major exchange, looking for usability, security, payment options, and more. Follow the links below to jump directly to one of our recommended exchanges.
Final Words: Is a Decentralized Exchange the Future of Cryptocurrency Trading?
Binance’s decentralized exchange has a lot of promise, and given the current state of existing cryptocurrency exchanges, it’s sorely needed. However, this is still a new concept that has yet to be fully tested. There are bound to be bugs in the system, and until Binance can guarantee 100% uptime and liquidity, the system is likely far from perfect. That said, it’s worth keeping an eye on as this technology develops. If Binance can iron out the bugs, the Binance Decentralized Exchange may become the dominant trading platform for cryptocurrencies in the future.