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Binance Releases Preview of Binance DEX, Launches Own Blockchain

Binance Releases Preview of Binance DEX, Launches Own Blockchain

Binance, the #1 spot cryptocurrency exchange in the world with USD 0.5-1 billion of daily trading volume, will launch the Binance decentralized exchange (DEX) in early 2019.

A video preview and the launch of its own blockchain has seen a major rally for its native token, BNB, with its market cap increasing USD 150 million, rocketing it to #13 on CoinMarketCap with a market cap of USD 800 million. This is likely because speculators expect that Binance DEX users will be buying up BNB in order to pay for trading fees and voting on the Binance DEX.

The Binance DEX will allow users to completely control their crypto assets in their own wallets, issue new assets, suggest trading pairs which will be voted on by the community and potentially added to the DEX, and trade for any cryptocurrency on the Binance DEX without having to hand over any identification information.

Its own blockchain, the Binance Chain, will be the backbone of the Binance DEX and all trades on the exchange will be recorded on the blockchain. It appears the Binance Chain has an extremely fast block time of 1 second or less, facilitating instant confirmation of trades. Binance Token (BNB) will be the native cryptocurrency of the Binance Chain and the Binance DEX, and will be used to pay trading fees.

Aside from issuing tokens, trading cryptocurrencies, and proposing new trading pairs, users on the Binance DEX will be able to send and receive tokens peer to peer, burn tokens, and freeze tokens. Binance DEX will be community run, and is intrinsically decentralized since it runs off of the Binance Chain. At this time, based on the video, it appears no know your customer (KYC) information is needed to create an account, preserving the anonymity of users.

The developer in the video says new features will be added to Binance DEX before launch. The true degree of decentralization and anonymity of the Binance DEX will only be known once it launches.


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IDEX Blocks New York Users, Proving Lack Of Decentralization

IDEX is perhaps the largest crypto exchange branded as a decentralized platform, based on a study in July 2018 by analytics firm Alethio which found it had 69,000 trades in a 2 week period versus 10,000 on the #2 decentralized exchange Bancor. IDEX has USD 1.94 million of daily trading volume per day according to CoinMarketCap, more than all the other decentralized exchanges. However, IDEX has announced that they are banning all New York users, proving that they lack decentralization.

***Notice: #IDEX will begin blocking new orders from users with New York State IP addresses on Thursday, October 25th (6pm UTC). Cancels and withdrawals will remain active.

— Aurora (IDEX) *Not Giving Away ETH* (@Aurora_dao) October 24, 2018

Specifically, IDEX is banning New York IP addresses, but allowing New York customers to cancel orders and withdraw funds. New York has been particularly harsh when it comes to regulations on crypto. All centralized crypto exchanges in New York either had to get the New York Bitlicense, which is difficult to obtain or leave the state.

The fact that IDEX has the ability to ban IP addresses proves they are centralized. Indeed, IDEX submits the signed trades to Ethereum, giving them the ability to block trades. Further, the fact that New York was able to contact and threaten IDEX proves that IDEX is a centralized organization.

IDEX is only decentralized in the sense that users do not deposit crypto on the exchange, rather users hold their private keys at all times, and trades are conducted with multisig Ethereum smart contract transactions.

A truly decentralized exchange is Bisq, where there is no central organization to attack, and therefore the government can not threaten or do anything to Bisq. Bisq is simply open source software that is nearly fully autonomous, besides an arbitrator for disputes over fiat payments. However, the Bisq arbitrator cannot block a trade if the buyer and seller sign it, unlike IDEX which can certainly block trades due to the centralized nature of the trade submissions. Therefore, Bisq can be used anywhere in the world regardless of the laws, although technically responsibility falls on the user to not break the law in places where crypto to fiat trading is banned.

Other crypto exchanges labeled as decentralized have proven to not be decentralized, such as Bancor which seized funds after a USD 13.5 million hack, and the only market maker is Bancor itself instead of a peer to peer system. 0x, whose token was recently added to Coinbase, is actually a protocol for building centralized exchanges on top of a decentralized network.

Therefore, just because a crypto exchange is branded as decentralized does not mean it truly is. It is actually difficult for any crypto exchange to achieve true decentralization, and the reality is most supposedly decentralized exchanges have varying degrees of centralization.

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Exclusive Interview With the Founder of Bisq, a Decentralized Crypto Exchange

Listen to the exclusive interview with the Founder of Bisq, on 6 October 2018 edition of the Daily Podcast below did an exclusive interview with Manfred, the Founder of Bisq, which is a decentralized crypto exchange that is available worldwide. Bisq is so decentralized that it can not be stopped, regardless of government regulations, much like Bitcoin.

Decentralized exchanges are necessary for the crypto space since centralized exchanges are often hacked, lose funds in other ways, or get shutdown due to government regulations. With a fully decentralized exchange like Bisq, these problems simply do not occur since the users themselves hold the key to their cryptocurrency at all times.

Manfred says “With Bisq you can trade Bitcoin against any fiat currency, as well as against any altcoin listed on Bisq. The focus of Bisq is to exchange in a privacy protecting way and in a secure way, where you don’t have to expose your Bitcoin keys to any other trusted 3rd parties. You are always holding your Bitcoin keys in your wallet, and you are not sharing any personal information with any company or any central server”. The only data shared during a Bisq trade is between peers who are directly trading with each other, but Bisq does not see or collect any of this data.

Bisq is built in a fully decentralized way and is integrated with the Tor network, making it highly anonymous and secure. The peer to peer trading aspect of Bisq is similar to LocalBitcoins, but Bisq is fully decentralized, so there is no central company or website. This allows Bisq to be freely used throughout the world, whereas LocalBitcoins is banned in Germany and perhaps some other countries. Each user of the Bisq network acts as a node, and all of these nodes make up the decentralized Bisq network. Manfred says “Bitcoin is basically the blueprint for Bisq”; Bitcoin is similar to Bisq since both are decentralized and have no single point of failure.

Sellers post a trade on Bisq, and every Bisq node can see the trade. If someone is interested in the trade they open up communication with the seller. Both traders make a relatively small security deposit, and the seller deposits the amount of crypto to be sold. This creates an escrow system, like on LocalBitcoins. The buyer then sends the fiat with the information provided by the seller, and then the buyer confirms that the payment is complete by signing the transaction. The seller confirms the payment and signs the transaction. After both traders sign the multisig transaction the crypto is sent. A 3rd key is held by Bisq itself, since in case of a trading dispute there is a Bisq arbitrator that can sign the transaction and release the crypto to the buyer, or not sign the transaction and then the crypto goes back to the seller.

The major difference between LocalBitcoins and Bisq is that crypto is held in LocalBitcoin’s wallet during a transaction, and with Bisq the crypto is put into a multisig transaction in an address not controlled by Bisq. The Bisq arbitrator cannot stop a trade if the buyer and seller are in agreement. Only 1-2% of trades end up in Bisq arbitration, and this is mostly due to problems with fiat networks. Bisq has banned most reversible payment methods, like PayPal, Venmo, and Square Cash. Apparently, Bisq allowed Square Cash for a time, but it caused a surge of arbitration disputes due to payment reversals, forcing them to ban that payment method. Bisq allows in-person cash transactions, as well as all other fiat payment methods that are relatively safe and not easy to reverse.

Bisq is planning on launching a decentralized autonomous organization (DAO), which will be a decentralized governance system to raise funds for development. Manfred says “We have the need to have a funding model to find more developers, to be able to pay them”. There is a fine line to walk with creating a DAO, since centralization would put Bisq at risk of getting attacked by regulators. A Bisq token will be launched by the end of 2018, which will play a pivotal role in funding the DAO and voting. The Bisq token will be a color coin that runs on the Bitcoin blockchain. Beyond this, Bisq is planning on integrating lightning network technology to accelerate transactions. Additionally, there is the possibility of launching a decentralized foreign exchange, where users can directly trade USD for EUR, or any other fiat currency.

At this time it would be impractical and not cost effective for governments to attack Bisq, even in countries where trading crypto for fiat is illegal. Bisq is anonymous thanks to its Tor integration, and there is no personal information submitted or collected when opening an account. Further, Bisq has relatively low transaction volume with less than USD 500,000 traded per day, as opposed to Bitcoin’s global volume of USD 5-10 billion per day, making it nonsensical for any government to attack Bisq. Perhaps the only point of weakness is when exchanging personal information to send or receive fiat payments, and it is up to users to shield their personal information properly when talking to other Bisq users.

Even if the entire Bisq development team disappeared due to a government crackdown, the software is open source, and another development team could fork Bisq if this worse case scenario ever happened. Basically, it is impossible to get rid of decentralized open source software like Bisq, making it likely that Bisq will be operational long term.

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Binance Demos Decentralized Exchange

Changpeng Zhao has published a video showing a demo of the early stages of the Binance decentralized exchange (DEX), which will be hosted on the Binance Chain. Changpeng Zhao says “As you guys saw, that’s a very casual early demo for the Binance Chain, there’s still a ton of work to be done to turn it into a final product. The team is working on it very aggressively. Nevertheless, I think this is a major milestone for Binance chain”.

The video demo shows how a cryptocurrency based off the Binance Chain can easily be created from the command line, and by the time this technology is released perhaps, it will just be a click of a button to create a cryptocurrency. This looks like it’s even easier than creating a cryptocurrency with the Ethereum ERC-20 protocol, and Binance Chain has the potential to be better than Ethereum for creating new cryptocurrencies in the future.

Another major benefit of creating cryptocurrencies with Binance Chain rather than ERC-20 is the tokens can easily be listed on the Binance DEX, as the video demonstrates. Users can launch trading pairs for their newly created cryptocurrencies, or even for other cryptocurrencies. Since the Binance DEX will intrinsically be decentralized, users will have all the power instead of a central organization deciding which coins get listed.

Further, users will have full control of their cryptocurrency at all times, rather than the way it is now where they have to trust Binance and deposit cryptocurrency on the platform to be able to trade. Users can start trades, cancel trades, deposit, and withdraw at will, and there will be no centralized organization to stop them.

There are some decentralized exchanges based on Ethereum, like IDEX and 0x, but Binance DEX has the potential to be far more popular due to Binance’s well-respected and widely used brand, and the fact that it has tremendous amounts of money to make the perfect DEX.

When cryptocurrency and Bitcoin trading was effectively banned in China in September 2017, Binance left the country along with other top crypto exchanges Huobi and OKCoin. This is motivation for becoming decentralized, since once Binance is decentralized it can’t be stopped and will be available everywhere in the world regardless of government regulations.

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Jon Matonis – "Until physical paper cash is outlawed …"

Jon Matonis – “Until physical paper cash is outlawed …”:

Bitcoin Foundation board member Jon Matonis (@JonMatonis) describes the growing trade of bitcoins in face-to-face, in-person transactions.  Excerpts:

“In-person bitcoin transactions allow you to meet interesting new people in your area – and discuss bitcoin.”

“For the casual traders seeking more privacy, I recommend in-person trading through”

“LocalBitcoins has steadily added new cities and market depth. ‘We currently have 142 countries and 1700 cities,’ [founder Jeremias Kangas] recently told Bitcoin Magazine, ‘but that most definitely isn’t enough. We want to expand to at least 170,000 cities’”.

“LocalBitcoins offers an escrow facility and a rating system both of which can be extremely valuable for the first-time trader.”

The bitcoin provider sets the price markup and types of payment that will be accepted. […] Given the robustness of trade in some large urban areas, it is entirely possible to earn a living from buying and selling bitcoin using the LocalBitcoins matching platform.”

“In the general classification of commodity, bitcoin’s trade is similar to any other collectible item, such as antique diamonds, celebrity autographs, moon rocks, Buddha figurines, and baseball cards.”

“Ultimately, until physical paper cash is outlawed, bitcoin will still be bought and sold in person just li