- BNB has jumped 75% as Binance CEO Changpeng Zhao has been talking up Binance Chain
- Zhao hopes that Binance Chain can do for DeFi what Binance Launchpad did for the ICO space
- There are advantages and disadvantages to the CeFi principle
BNB has enjoyed a stellar week, rising 75% as Binance prepares to enter the DeFi battle with Binance Chain, the CeFi (centralized finance) offering that CEO Changpeng Zhao says will redefine the fledgling space. Zhao is hoping that CeFi can revolutionize the concept of DeFi in the same way that it revolutionized the ICO with the exchange-launched IEO, utilizing the benefits of the centralized system to, to his mind, negate some of the current issues with DeFi projects.
#DeFi is great. I love it. But #CeFi is about to give it a run for its money.
2 advantages CeDeFi offers:
(short thread)
— CZ Binance (@cz_binance) September 10, 2020
CZ Outlines DeFi Problems
Zhao says that CeFi has two significant advantages over DeFi, with the first being the fact that Binance Chain users will be able to stake their BNB across multiple projects simultaneously, rather than having to manually stake tokens for each individual one. This certainly is a benefit compared to the existing system, and ties into a point that Zhao doesn’t mention in his tweet but that is one that others have already brought up – that of cheaper transaction fees.
Famously, the popularity of Ethereum-based yield farming sent the transactions prices soaring to ridiculous levels, and the advantage of everything being done on the Binance Chain means that transaction fees will be lower and will not suffer from the same volatility. Transactions will also be much quicker, bringing an end to the lottery of waiting for your Uniswap transaction to go through, only for it to reject and lose your fees.
Binance Chain to the Rescue?
The second point Zhao offers is more debatable. Zhao claims that Binance will act as a quality filter, only allowing “vetted” projects onto the platform, much as it does with regular crypto projects on its exchange. However, as the SushiSwap debacle has proved, Binance is no different to any other project in that it rarely lets project quality get in the way of cashing in on what’s hot, and there is no reason to think that its CeFi offering will be any different.
Zhao says that this system is “not bulletproof” but that a centralized exchange like Binance is financially incentivized to ensure quality. This is partly true, although the cost of addition is extremely low (and is often paid for by the project anyway) and delisting low volume projects is no harder than a few mouse clicks, so the financial incentivization argument isn’t exactly a winning one either.
A Good Option for the Mainstream
There is no doubt the Binance Chain will be an interesting addition to the DeFi space, and it will certainly have its advantages, but there will be a core of users who will prefer to use decentralized services like Uniswap out of principle. If Binance can make a go of their CeFi offering however, these individuals will likely be in the minority.
