Binance

Binance’s Coding Competition Aimed At Developing Efficient Decentralized Exchange

Japan-based Binance, one of the largest cryptocurrency exchanges in the world, handles huge volumes of digital currency transactions. Now, the company plans to start a decentralized exchange and switch from being a privately operated business to a broader, community-driven organization. Notably, Binance has also announced a new coding competition to build and implement their upcoming decentralized exchange and the underlying native blockchain. So, let’s briefly go over how Binance first started, in order to put things into perspective, and then take a look at these new developments.

Binance’s Origins & General Background

Binance is a Chinese cryptocurrency exchange that was launched in 2017. The exchange was started in China, but moved their base to Japan a week before the Chinese government announced the ban on exchanges. The exchange handles  $1.2 billion of trading volume on a daily basis and was founded by self-made billionaire Changpeng Zhao, a former CTO of OKCoin (another major exchange based in China).

Binance also launched its own ERC20 token called BNB, which is based on the Ethereum blockchain. The initial coin offering raised $5 million, and those who own the token get a 15% discount on transaction fees. Moreover, many new coins and airdrops compete with each other to get a listing on Binance.  When a coin manages to get listed on this exchange, its trading volume usually goes up quite a bit, along with a significant increase in its price.

Centralized Vs Decentralized Exchanges

Centralized exchanges are those in which the orders are recorded off-chain in a private database. These exchanges can be a single point of failure, and they are quite often attacked by hackers. They also face frequent downtime due to the failure of their system, forcing them to go into maintenance mode for several hours and making the traders wait to buy/sell coins.

These outages lead to frustration among cryptocurrency traders, and they often express their anger on social media outlets such as Twitter and Reddit. Sometimes, the price of all the crypto coins also takes a beating when major exchanges go down for extended periods of time.

When faced with these types of issues, crypto traders start looking toward  decentralized exchanges for better service. A decentralized exchange matches the buy/sell on its platform and executes the transaction on a decentralized ledger. Many decentralized crypto-exchanges have already popped up in 2018, and they do not require any central authority to monitor their trading activity. There are a number of decentralized exchanges currently in the market, namely Komodo‘s decentralized exchange “BarterDEX“, Bisq, CryptoBridge Dex etc.

Around one-third of the millennials are expected to enter the crypto space in the next two years, so there will be a need for safer and more reliable exchange to handle the growing traffic. Last but not the least, cryptocurrencies are based on the concept of a decentralized monetary system, so it might even make more sense to have a decentralized exchange as well.

Binance Hacker Bounty

On March 7th, rumors spread across the community that the exchange was hacked and the trading was halted for a while. A day later, Binance came up with the blogpost stating that the hackers have been phishing and collecting users’ private data over a period of time. After hacking into users’ accounts, the cyber criminals attempted to move the coins belonging to those accounts to theirs. However, the risk management team of Binance acted swiftly and locked their accounts, thus freezing their withdrawals.

So, none of the coins were stolen from the exchange. In fact, the hackers ended up losing their own funds in this attempt. Furthermore, even though no user lost any coins, the exchange was still concerned about the continuous attacks from hackers and the threat of even more to follow. In order to prevent this abuse, Binance even announced a bounty of  250k USD to anyone who supplies information leading to the whereabouts of the hackers involved in the March 7th attempted hacking incident.

Binance’s Decentralized Exchange

Binance came to the conclusion that running a centralized exchange is not viable in the long run, primarily due to the continuous hacking attempts. It would also be difficult for its system to handle even larger trading volume in future. Therefore, the company is now working on a new decentralized exchange project called “Binance Chain“, and it will reportedly trade digital assets on a public blockchain.

Notably, Binance is powered by its own coin “BNB coin“, and the coin’s value increased by 25% when this new project was announced by the exchange. Due to its decentralized model, the Binance team will have less control over its operations, and users will have the option to list just about any coin they wish on the exchange. The decentralized crypto-trading platform is expected to be launched this year, and its founder Zhao mentioned that it needs a better infrastructure with more computational power for many computers to verify the trade.

Shortfalls of Decentralized Exchanges

While decentralized exchanges offer several advantages over centralized ones, they still come with their own share of problems. For instance, their network can be quite slow at times, since all the trading occurs on a blockchain.  Additionally, because all transactions are recorded on a blockchain, the time it takes for validation is significantly more than that of the centralized exchanges. Network usage fees can also be quite high.

Furthermore, these exchanges also have very low trading activity compared to that of centralized exchanges, due to the inconvenience faced by traders and lack of popular coins listed on these exchanges.

Binance announces Dexathon

Binance, knowing that the decentralized exchanges are slow and cumbersome, decided to try and build a more efficient peer-to-peer exchange, keeping the huge trading volume in mind. So, to build a better exchange, it would obviously need the support of its internal team as well as the community. To achieve this objective, Binance announced a coding competition called “Dexathon” with prize money set to $1 Million USD for those who develop and implement the “Binance Chain” in the best way possible.

The contest was announced in a Medium post on March 16th. The post mentions that the current decentralized exchanges are inefficient, with low liquidity. So, with the help of their internal team and the community. they want to build next generation blockchain. To achieve this, they think it is a good idea to hold a coding competition for implementing the blockchain. The winner will not only win $1 million, but also get the chance to join the Binance team for future development.

Dexathon Project Details

The Medium post also mentions details about the goal and objective of the project, so that any developer who wants to enter the competition will get a clear picture of what is expected from them. The Binance team spefically wants the following to be implemented on the new blockchain:

  • Sending and receiving of native coin
  • New token creation
  • Ability to trade one token with the other
  • Native on-chain ICO
  • Order and trades
  • Matching engine
  • Wallets

Medium’s post contains the detailed requirement for this programming task, so that the developers are able to implement exactly what the Binance team wants. They have also given developers the choice of building right from  scratch (a completely new implementation). Or, they can also fork from an existing blockchain and improve upon them. Finally, there is information on the prize, schedule of the competition, and the procedure for the candidates to apply.

CryptoCoreMedia wishes the candidates who are participating in the Dexathon the best of luck. Hopefully, these efforts will help to build a better decentralized exchange for future users.

2 Comments

  1. Usefull info

  2. Good info

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