At this point, pretty much everyone who knows anything about cryptocurrencies knows that they are based on the concept of decentralization. The same is true for the blockchain technology. While there are some exceptions, such as certain stablecoins, most digital coins follow this principle.
This means that these coins, as well as their network, have no central authority, no single entity that would make choices and decisions that would impact others. However, while most coins managed to achieve this through different complex mechanisms and algorithms — one aspect of crypto trading still remains heavily centralized. We are, of course, talking about crypto exchanges.
Centralization of crypto exchanges
Most of the largest crypto exchanges out there are designed as companies, rather than community-operated platforms. The exchanges have their employees who designed them and developed special tools. They act as customer support, developers, innovators, and alike.
They also get to decide which coins will be listed and which are too weak, uncertain, or not fit to be found on the list. Exchanges are also responsible for keeping the traders’ and investors’ funds safe, which is why they typically develop their own wallets. As such, they are often targeted by hackers, as the coins are stored in an exchange wallet, waiting to be withdrawn, sold, or converted into different currencies.
This makes them extremely unsafe, and investors and traders are always advised against holding their funds in an exchange-operated wallet for longer than absolutely necessary. Another thing to consider is that the exchange, centralized as they are, are actually those who have full control of the wallets, as well as your coins. If an exchange decides to freeze the wallets, you would not be able to retrieve your tokens until the wallet is unfrozen.
Obviously, this goes against the idea of decentralization, where each person is the sole owner of their own funds, which is why decentralized exchanges, or DEXes, were developed. DEXes are still mostly in an experimental stage, and it is difficult to regulate them, but they fit the crypto community’s idea of decentralization, which is why they boomed as a trend.
So much so, in fact, that some of the centralized exchanges started developing their own decentralized versions. Binance is one of the biggest and best examples of this.
Binance’s road towards decentralization
Binance is the largest crypto exchange in the world in terms of trading volume. It offers numerous coins, trading pairs, and even its own native cryptocurrency — Binance Coin.
The exchange’s management has recognized the crypto world’s need to achieve full decentralization, which is why they are currently developing Binance DEX. The exchange would run on Binance’s own blockchain, which is currently also in development, but the blockchain itself would not be operated solely by Binance.
Because of this, the Binance DEX would be a fully-decentralized exchange, where Binance would be only one of the entities operating it. Eventually, it would have no more control over the blockchain than anyone else, and it would all come down to the decisions made by the community, as it should be.
The DEX would utilize BNB, just like the centralized version does so that the coin would remain useful and beneficial to traders, while it would still help the exchange pay for development costs. Someday, if Binance DEX proves to be what the crypto world needs, the centralized version of the exchange might even become obsolete. That day is still far into the future, however, and for now, the DEX is still being developed.
But, Binance has proven that it is willing to listen to its customers and provide them with what they need and want. It is currently gaining valuable feedback which will make its ecosystem better, faster, and more decentralized. These are all very smart moves which will likely ensure the exchange’s future, no matter what path the crypto space ends up traveling. In addition, the exchange’s efforts to bring a proper, fully-operational DEX will likely make it one of the first, if not THE first centralized company to travel down the path of total decentralization.
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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency and read our full disclaimer.
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