Crypto Exchange Giant Binance to Launch Decentralized Exchange

Pratik Makadiya

Binance, the world’s largest crypto exchange by trading value, publicised that it will launch its “tailored blockchain”, for trading digital currencies. The new network is dubbed “Binance Chain” and it is a step forward in building a decentralized exchange (DEX).

Bitcoin gained popularity due to its decentralized nature. However, cryptocurrency trade until now was mostly managed by centralised exchanges. The new Binance Chain will offer traders a decentralized exchange which does not require any third party such as exchanges to hold funds.

Binance, the cryptocurrency exchange giant, noted on its blog that:

“As a public blockchain, Binance Chain will mainly focus on the transfer and trading of blockchain assets, as well as provide new possibilities for the future flow of blockchain assets”

Binance Blog

The company in it blog post stated that the company launched Binance Chain after “extensively researching decentralized exchange frameworks and analyzing existing implementations,”

With the use of decentralized exchanges, traders will not need to consign their crypto assets to centralized crypto exchanges. Centralised exchanges are vulnerable to hacks, which the crypto industry has repeatedly seen. The largest hacks in the industry include the Mt. Gox hack and the recent Coincheck hack of over $500m.

The Binance decentralised exchange will not be the only one in the market. EtherDelta is another DEX, that operates on Ethereum Blockchain, permits traders to trade ERC20 tokens in a decentralized manner. However, many regard the speed to be too slow and the liquidity insufficient. 

DEX Not Immune To Hacks

Decentralized exchanges are safe compared to centralized exchanges. However, DEX is not completely immune to hacks as their web hosting is centralized. DEX platforms have not gained much popularity as the can only trade digital assets that operate on the same blockchain. However, the introduction of Lightning Network - the “second layer” payment protocol, enables cross blockchain trades, it is still in its development stages.  

The Hong-Kong based company Binance have not clarified how it will operate its DEX platform along with its centralized exchange. Although it highlighted that more information will be revealed soon.

The company stated, “Centralized and Decentralized exchanges will co-exist in the near future, complementing each other, while also having interdependence,”

According to Bloomberg, hackers have managed to steal $700 million worth of digital assets since January. These hacks have put pressure on governments to further regulate the crypto market. Just days back, Binance was able to fend off a large scale phishing hack.

Binance Coin (BNB), is Binance’s cryptocurrency which is as an ERC20 token, will be Binance Chain’s native asset. For now, the new decentralized exchange is in its development phase. Binance has not mentioned when the exchange will go live. The news reflected well on the BNB price and saw a surge of about 25%.

Bitfinex and Tether Fraud Allegations: Analysis, Market Response, Community’s Reaction

On Thursday (April 25), New York Attorney General ("NYAG") Letitia James announced that she had obtained a court order against iFinex (the operator of crypto exchange Bitfinex) and Tether (the issuer of the stablecoin of the same name) to stop these two companies from any "further violations of New York law." This article summarizes the main highlights of the facts as presented by the NYAG, how the crypto markets have reacted, and early responses from some prominent members of the crypto community on Twitter. 

The “Facts” As Presented by Assistant Attorney General Whitehurst’s Affirmation

According to the affirmation filed (at the New York Supreme Court) on Thursday by Brian M. Whitehurst, who is an Assistant Attorney General ("AAG") in the office of NYAG James, here are the main "facts" of the case against Bitfinex and Tether, as beautifully summarized by highly-respected New York-based crypto trader/analyst Alex Krüger (@krugermacro on Twitter):

  • "Bitfinex has a $850M 'hole" since late 2018"
  • "The $850M are 'stuck' with Crypto Capital, a third party payments processor used by Bitfinex"
  • "Crypto Capital argues the $850M have been seized by govt authorities of various countries"
  • "Bitfinex mgmt believes Crypto Capital's principals may be engaged in fraud"
  • "USDT were seemingly fully backed by USD until Nov/2018"
  • "Between Nov/2018 and Mar/2019, Tether transferred $625M to Bitfinex => Tether ceased to be fully backed by USD"
  • "In Mar/2019 Bitfinex 'returned' the $625M to Bitfinex"
  • "Since Mar/2019 Bitfinex is covering the hole with a $900M line of credit from Tether"
  • "The line of credit (which pays 6.5% p.a.) is secured by iFinex shares"
  • "Bitfinex has accessed $700M from the line of credit"
  • "Per the NY AG, Bitfinex and Tether are engaged in fraud"

And here are some other interesting observations from Alex:

Bitfinex's Response 

A few hours after the NYAG's press release came out, Bitfinex issued its response in the form of an announcement posted to its website:

"Earlier today, the New York Attorney General’s office released an order it obtained – without notice or a hearing – in an attempt to compel Bitfinex and Tether to provide certain documents and seeking certain injunctive relief.

The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million “loss” at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released. Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers.

Bitfinex and Tether have been fully cooperative with the New York Attorney General’s office, as both companies are with all regulators. The New York Attorney General’s office should focus its efforts on trying to aid and support our recovery efforts.

Both Bitfinex and Tether are financially strong – full stop. And both Bitfinex and Tether are committed to fighting this gross overreach by the New York Attorney General’s office against companies that are good corporate citizens and strong supporters of law enforcement. Bitfinex and Tether will vigorously challenge this, and any and all other actions, by the New York Attorney General’s office."

Crypto Markets' Response

Naturally, this news has hurt the price of pretty much all cryptoassets with the main exception being stablecoins that are Tether's main competition, such as USD Coin (USDC) and TrueUSD (TUSD), which have gone up between 1 and 2 percent against USD. 

BTC - 24 Hour CC Chart - 26 Apr 2019.png

ETH - 24 Hour CC Chart - 26 Apr 2019.png

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What is most interesting about the crypto markets' reaction is that Tether's price has barely been affected this time, unlike in October, when the USDT price reached a low of $0.86. The fair value of Tether is $0.75 at a minimum since Tether seems to be backed 75% by "currency and cash equivalents" and 25% by a loan collateralized by iFinex shares, which used to be worth around $10, but worth around $2 a few hours ago:

This means that the collateral of 60,000,000 iFinex shares might only be worth around $120 million at the moment, whereas the line of credit is for $900 million.

This tweet sums up nicely what one can say about Tether's current fair value:

Crypto Community's Reaction

Here are some of the more interesting early reactions from the crypto community on Twitter:

 

Featured Image Credit: Photo via Pixabay.com