Binance's CZ Views 'CeDeFi' as a Complement, Not a Competitor, to DeFi

Oct 14, 2020 at 17:30 UTC.Cryptocurrency exchange Binance's latest experiment to integrate decentralized finance with its centralized platform, Binance Smart Chain, is not here to beat DeFi, said the company's CEO, Changpeng "CZ" Zhao.

Binance announced the launch of Binance Smart Chain, its version of a decentralized public blockchain, in early September.

Some argued the biggest centralized exchange's aggressive moves into the rapidly growing DeFi space was its attempt to become an Ethereum killer.

As of now, the majority of so-called DeFi projects - decentralized, blockchain-based trading and lending applications that theoretically could one day take over the traditional financial market - have been built on the Ethereum blockchain, the second-largest blockchain by market capitalization.

Zhao claims Binance Smart Chain, although much less decentralized than Ethereum due to its Proof-Of-Staked-Authority consensus, mitigates the scalability problem of Ethereum, which has significantly slowed down the growth of the DeFi sector.

"Even if we don't do anything, even if there is no competition, there is not going to be a lot more traffic on the blockchain. So we view that Binance Smart Chain is taking some load off Ethereum, the volumes that were supposed to get on that but couldn't get on there."

Zhao praised the innovation of DeFi projects but said they only target certain users, making it still "a niche thing," while centralized exchanges like Binance appeal to novice crypto users who are not comfortable with holding their own crypto keys.

Zhao said he hopes Binance Smart Chain could attract more people into the crypto space by taking advantage of features centralized and decentralized exchanges can offer.

In developing Binance Smart Chain, Binance had to sacrifice elements of decentralization, which is one of the major criticisms of the public blockchain, yet Zhao argued that decentralization is not always "Black and white."

Binance Smart Chain is controlled by 21 node operators, which are elected by Binance Coin holders.