Binance – founded in 2017 by entrepreneur and Bitcoin enthusiast Chengpeng Zhao – is the no.1 crypto exchange in the world by market cap, volume, and users. It was originally based in China, but due to harsh crypto regulations (and even an outright crypto ban) the company went remote shortly after. Binance is a huge force in the crypto space. They have:
Three exchanges: Binance.US as well as the main Binance exchange – a centralized exchange – and Binance DEX – a decentralized exchange.
BNB Token.
Two blockchains. Binance Smart Chain (BSC, also referred to as BNB Smart Chain) and Beacon Chain.
Exchanges
The Binance exchange is the main exchange. It operates as a third-party liquidity provider for its users. There are no purchase fees on this centralized exchange, although withdrawal fees can occur depending on the cryptocurrency being sold. Binance has a strict KYC requirement when signing up for their main exchange. This is because Binance provides all funds and requires a legal guarantee to protect their assets.
There are four order options on Binance exchange:
Limit order – This trade is executed when at only a set minimum sell price or higher, or a set maximum buy price or lower.
Market order – This guarantees the crypto purchase or sale is executed immediately, but it does not guarantee the price, rather it selects the best available market price at the precise time of transaction.
Stop-limit – This order is set to execute when a pre-selected price point is reached. On the upside, it protects against the risk of an unfavorable trade, but on the downside, when the price point is not reached then the crypto order is not executed.
OCO – A one-cancels-the-other order is an order that combines both a stop and a limit order. Whichever order executes first, the second is automatically cancelled.
The Binance DEX is different in several ways from the main Binance exchange. First of all, there are no exchange funds: all liquidity is provided through peer-to-peer transactions. It is decentralized and entirely automated through smart contracts on the blockchain. There is also no in-built wallet feature, rather users have to connect their Ledger, Exodus, or Trust Wallet. Binance DEX features enhanced TradingView charts to help with navigating the market, making it optimal for day trading.
Interestingly, the main Binance exchange does NOT allow USD deposits despite including 27 other fiat currencies. This is because Binance.US is specifically catered towards American users in an effort to offer crypto services under the US restrictive financial laws. In 2019, the global Binance exchange was banned by the US Government citing regulatory issues as the reason. This is the reason for Binance.US, a compromize for the 45 million crypto users based in the States.
Binance also withdrew its services from Canada this week after an onslaught of anti-crypto regulation over the past 2 years. Binance issued the following statement:
“Unfortunately, new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time. We put off this decision as long as we could to explore other reasonable avenues to protect our Canadian users, but it has become apparent that there are none.“
It seems Binance cannot go to the measures they did to keep US customers, as their customer base was far smaller in Canada and the regulation incongruent with the direction of Binance.
BNB Token
Binance’s BNB Token was originally created off Ethereum’s ERC-20 token standard but was later converted to Binance’s very own BEP20 standard. Binance currently offers a 25% discount on Spot Trading fees and Margin Trading fees, as well as 10% on Futures Trading fees when using the native token.
THE TWO BLOCKCHAINS
1. Beacon Chain
This Chain’s primary role is to handle Binance DEX transactions, as well as the governance and staking on in the BNB system. Beacon Chain is optimized for fast transactions, with an entire block taking less than a second to finalize/execute. All transactions are irreversible after they’re executed and published on the blockchain.
Beacon puts a lot of its focus on security. It’s consensus uses the Byzantine Fault-Tolerant engine (BFT), which is a consensus that requires validators to take turns to propose and vote on each block of transactions. The process is tolerant up to a ⅓ breach or failure. If this happens, the block of transactions is passed on to a set of new validators for voting. If a block receives ⅔ of a confirmed consensus vote, the block is committed and then executed.
2. What is Structurally different about BSC (Binance Smart Chain)?
Binance Smart Chain (or BNB Smart Chain) is a blockchain fork of the Layer-0 Cosmos Network. It also utilizes Cosmos’ blockchain security protocol, giving it a safety net in case a major attack manages to infiltrate its validation process. BSC’s main goal is to bring programmability and interoperability with Beacon Chain.
A useful resource when using Binance Smart Chain is BscScan. It can be used to check all transaction data, live price, live gas fees, pool information, and voting power.
BSC has a Proof-of-Staked-Authority (PoSA) consensus mechanism with a team of 50 validators (29 active at all times) maintaining the network. This system enables short block time and low fees. An elected validator system is in place where candidates who produce more blocks and consequently gas fees will have the opportunity to become one of the main 29 validators. Staking more BNB significantly increases the chance to be elected as a validator.
One of the best things about BSC is that it is compatible with Ethereum’s Virtual Machine (EVM). It can therefore interact with any EVM-compatible smart contracts and protocols while offering far cheaper gas fees than Ethereum right now.
Lastly, BSC’s interoperability – especially with local dApps – is extremely reliable and consistent. It’s simple and convenient to connect to any other dApp, even within the Cosmos network or EVM dApps.
Unique Features
DEX wallet – Using the Binance DEX allows you to find any cryptocurrency by manually programming them and using BNB (or another BEP20 token such as CAKE) as currency to swap.
Smart Pools – Ideal for crypto miners to swap currency or mine multiple at the same time.
Binance Pay – Use crypto for purchases and incur zero fees.
Binance Labs & LaunchPad – Somewhat like a startup investor, Labs helps with funding, development, resources, and guidance for pre-ICO dApps and projects.
ZkBNB – This is a Rollup used to build the biggest projects on BSC, it adapts high throughput without the cost of expensive gas fees.
BNB Greenfield – A Protocol incentivizing the ownership and monetization of usable data.
Exchanges Under fire
Binance is one of the few centralized exchanges that hasn’t run into sketchy fund, liquidity issues, or been outright liquidated. Rightly so as the industry giant, Binance has been under intense scrutiny the entire bear market, yet there is not much to show for it.
Aside from arrogant antics and tweets from the CEO CZ, here’s what we’ve found on Binance that is worthy of note:
Beacon Chain isn’t all that safe, as it requires a ⅔ breach of the network to falsify or execute fraudulent blocks of transactions. While that sounds like an unrealistic breach, there are currently only 11 validators overseeing the Beacon Chain mainnet.
A Chinese bank used to pay Binance employees until late 2019, despite claims the exchange cut all ties with the nation in 2017 when crypto was banned.
Despite advocating for Proof-of-Reserves, Binance has only gone so far as to provide an audit snapshot every so often that showcases the total assets. It’s a significant lag compared to live data. As far as we can see, there is also no data as to what the 1:1 backed assets in crypto actually are.