It might be part of every job in cryptocurrency to anticipate and react to fast-moving developments that seemingly change the industry’s direction overnight. In favor of that, Binance sees future in decentralized finance or DeFi while Bitcoin volatility is decreasing.
Apparently not even Changpeng “CZ” Zhao, the high-profile leader of Binance, the world’s largest cryptocurrency exchange, is immune to the industry’s sudden shifts.
In a video interview with CoinDesk, Zhao said that the emerging blockchain sector of DeFi, could finally upend the business that Binance has grown to dominate: running a centralized cryptocurrency exchange.
“Our mission is not to build a CeFi exchange,” Zhao said, using a shorthand term for centralized finance. “Right now it is one of our larger businesses that support our growth. But over the long term, we want to push decentralization.”
The company’s new foray into DeFi, Binance Smart Chain, trys to replicate some of the features of the Ethereum blockchain that have proven fertile for developers building decentralized, blockchain-based trading and lending apps that theoretically could one day challenge traditional lenders and Wall Street trading companies.
Like rival cryptocurrency exchanges OKEx, Huobi and Coinbase, Binance is doing its best to hold on to its central role in digital-asset markets as upstart DeFi projects such as Uniswap, Curve, Balancer and SushiSwap attract a bigger share of industry trading volumes. Zhao says he’s open to the idea that Binance may have to adapt its business model to stay relevant, especially with total collateral locked into DeFi protocols surging 16-fold this year to $11 billion.
In designing Binance Smart Chain, the company needed to sacrifice elements of decentralization to compete against Ethereum and protect the firm’s brand. Binance Smart Chain is controlled by 21 node operators, which are elected by Binance Coin (BNB) owners. But since the company is one of the largest holders of the BNB tokens, it in charge of the project’s direction.
“There is a trade-off between more decentralization versus speed, so we thought that 21 nodes run by the community is probably enough,” Zhao said in the interview.