Binance CEO Changpeng Zhao believes the merger of centralized and decentralized finance (DeFi) will accelerate the development of the cryptocurrency industry.
In speaking of this, Zhao was referring to the possibility of developing decentralized applications (dApps) and product creation for the DeFi industry using the centralized Binance Smart Chain, launched in early September. Some in the cryptocurrency community believe that such aggressive attempts by Binance to enter the booming DeFi space could negatively impact the Ethereum ecosystem. However, Zhao argues that this will not kill DeFi, but rather promote the massive adoption of the industry.
“Today 99.9% of all money is in fiat currencies. In order to attract more funds to the cryptocurrency industry, we still need fiat gateways. Cryptocurrencies are at an early stage of development, so competition with those who have the remaining 0.1% of money circulating is not serious. We believe it is pointless to view other projects as rivals, ”Zhao said.
In his opinion, in theory, most Ethereum-based DeFi projects can "take over" the traditional financial market. But as the decentralized finance sector develops, many developers will start creating alternatives to Ethereum in order to become part of this market. Zhao noted that due to the Proof of Staked Authority (PoSA) consensus mechanism, the Binance Smart Chain is less decentralized than Ethereum. But despite this, it "mitigates" the scalability problem of Ethereum, which greatly slows down the growth of DeFi. Ethereum 1.0 is already completely overloaded, and Binance Smart Chain is taking some of the load off it. Zhao also expressed the hope that the upcoming ETH 2.0 update will address the network scalability issue.
The Binance chief noted that despite certain advantages, DeFi projects target a narrow audience, while centralized exchanges like Binance interact even with novice cryptocurrency users. Binance Smart Chain will be able to attract more people to the cryptocurrency industry, and they will have the opportunity to take advantage of the functions of both centralized and decentralized exchanges. While developing Binance Smart Chain, the exchange had to sacrifice elements of decentralization, but Zhao believes that this can be viewed from different angles. Binance Smart Chain is controlled by 21 node operators that are selected by the BNB coin holders. If an organization is one of the largest BNB holders, it can still have significant control over the blockchain. This suggests that there are many levels of decentralization.
Last month, Zhao announced the launch of a $ 100 million investment fund to attract developers to build DeFi projects based on the Binance Smart Chain blockchain.