The World’s Largest Crypto Exchange Has Launched Its Own Blockchain

(Bloomberg) -- Binance, the world’s largest cryptocurrency exchange, launched its own digital ledger as the fast-growing company seeks to leverage its clout to get developers to switch projects from rival platforms such as Ethereum to its own native blockchain.

The distributed ledger, called Binance Chain, will allow crypto startups to issue coins directly on the company’s platform. It will also serve as the basis of Binance’s planned decentralized exchange, which will let customers trade more directly than on centralized exchanges. The Malta-based exchange’s native coin, known as BNB, will move off the Ethereum network to the new blockchain.

"The launch of Binance Chain is one of the most important crypto events of the year," Kyle Samani, co-founder of crypto hedge fund Multicoin Capital Management in Austin, Texas, said in an email.

Raising funding through Initial Coin Offerings conducted directly on the Binance Chain is seen as a big attraction for token issuers and investors because of the liquidity and exposure of the Binance exchange. In the past, startups that issued coins on the Ethereum network often found it difficult to get their tokens listed on exchanges even if they were willing to pay listing fees.

"Binance Chain is competing with one of the primary use cases that helped catapult Ethereum into what it is today: issuing and trading tokens," Samani said. "And because Binance Chain is designed with that specific purpose in mind, it does a much better job (speed, transaction fees, etc) than Ethereum can. I expect all of the regulated token offerings and ICOs moving forward to take place on Binance Chain as it simply provides a much better platform for these use cases."

The effort could also boost usage of decentralized exchanges, known as Dexes, which until now have accounted for only a sliver of trading volume. Binance expects that over time trading will shift from its centralized exchange to its Dex, so software located on Binance Chain would largely govern transactions.

The Dex will extensively use BNB. People who currently hold BNB issued on Ethereum will be able to swap it for the same coin listed on Binance Chain shortly.

"Users and fanatics will now be able to directly participate in the economics of the platform without any barriers," Jeff Dorman, a partner and portfolio manager at Los Angeles-based Arca Funds, said in an email. "The biggest question mark is will the Binance Chain be able to offer the same speed and functionality as the Binance Exchange? We think so.”

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Randall Jensen

©2019 Bloomberg L.P.