Binance is a major success story in the cryptocurrency space. It continues to grow at a rapid pace. Binance, the world’s largest cryptocurrency exchange, has recently established a permanent base in Malta and launched Binance Jersey, a fiat-to-crypto platform.
DEX
The Decentralized Exchange (DEX), which allows users to trade cryptocurrencies and retain full custody of their funds, has been released by the team on testnet. Despite initial concerns about the exchange’s decentralization, Binance continues its dominance in the exchange market. The Binance ecosystem includes a token launch platform, incubator for blockchain projects and multiple education and research portals. It also includes the Trust Wallet mobile app, an OTC trading desk and a Trust Wallet mobile app.
Binance DEX Overview
Binance DEX, an extension of Binance.com’s main exchange, provides additional options for cryptocurrency traders after Binance Uganda and Binance Jersey were launched recently.
Binance announced on February 20, 2019 that their testnet for BinanceDEX was released. This testnet acts as a decentralized order-matching mechanism based on Binance Chain technology. The team behind Binance DEX created a new blockchain with peer-to-peer distributed systems. This allows for matching to take place within the blockchain nodes. All transactions are recorded on-chain. This allows users to exchange digital assets listed on the DEX.
Binance Chain will be the new native asset of the blockchain. Binance Coin (BNB), which was previously an ERC20 token will no longer be valid.
- Functionality – Binance DEX is a web-based trading platform that uses a similar UI as Binance.com. It also includes TradingView charts that include a wide range of technical indicators. Binance DEX is able to support similar trading volumes to Binance.com but uses a different matching engine. Binance DEX uses periodic bidding to match all available orders. Because the match occurs simultaneously for all orders with the identical price in each auction, it eliminates the notion of Makers or Takers. The platform also allows users to create wallets or hold their private keys. It integrates with the Trust Wallet as well as the Ledger NanoS.
- Technology – The exchange uses the core Binance Chain technology. It has one-second block times and near-instant transaction finality. Binance Chain employs a Byzantine Fault Tolerance and Proof of Stake (PoS), based consensus mechanism that includes a series of qualified validators and employs a variety of anti front running mechanisms in order to maintain treading integrity.
- Security – The platform does not take custody of funds. However, traders retain control over their private keys.
- Customer Support -Binance DEX is a decentralized exchange that allows traders to trade in many countries. The team provides a high level support compared with other DEXs. They have a Github page as well as an FAQ section which address many key issues. The Forum is available, as well as a Telegram group.
Binance DEX
Traders can create a wallet to begin exchanging tokens on Binance DEX testingnet, even though they are not yet on the testnet. Here’s how.
Create a wallet
Head to the official site https://testnet.binance.org/ and click on one of the “Create Wallet” icon.
You have three options for accessing your Binance wallet when you create a wallet.
- Keystore File + Password
- Mnemonic Phrase
- Private Key
Binance requires that all users use the Keystore password + password; and they can choose between the mnemonic phrase and private key as secondary methods.
To create and download your Keystore files, you will need a password that is at least eight characters long. This password must include an uppercase letter, a symbol and a number.
Here you will find your mnemonic phrase. It is a good idea to keep the 24-word sequence secret and safe by writing it down. You will be able to view your private keys and may also wish to write it down and keep it offline. Once you confirm that the Keystore and private keys have been recorded, you can unlock your wallet to trade on Binance DEX.
Unlock your wallet
Before you can place any trades, it is necessary to unlock your wallet. To do this, click on the appropriate tab.
You can choose from one of the three formats and upload your Keystore file. Next, enter your password, your 24 word mnemonic phrase or your private key. The last two methods can be used to restore a Keystore file or password that has been lost.
Binance DEX allows users to access funds that are protected by a Ledger Nano S hard wallet. To do this, connect to a Ledger and enter the PIN code. After downloading the Binance Chain app from the Ledger Live manager, you can open the Binance Chain App.
Testnet Account
Add funds to your Testnet account. To add testnet funds, you will need to access the testnet faucet. You can also log in to your Binance account to make this possible.
You can now enter your testnet address by clicking on the “+Add Address” button. You also have the option of sending testnet funds to multiple accounts. Finally, click “Submit” when you are done.
The 200 testnet BNB money funds will be sent shortly after. You can find them in Transactions on the DEX. You can also check the process on the Binance Chain Explorer by entering your testnet address. After receipt has been confirmed, these funds can be used on the Binance DEX.
To be eligible for the 200 BNB testnet funds you will need a Binance account with at least 1 BNB. After requesting testnet BNB for Binance Chain, the 1 BNB will be available in your account. It can be withdrawn from your account or traded. This is an anti-spam measure.
How to Trade?
How to trade on Binance DEX. You can now place trades on the DEX, and navigate around the interface. If you’ve used the main exchange before, you will be familiar with it. Start by finding your preferred trading pairs in the box at the top of the screen.
You can also track trading volume and trade history in the same section. After choosing your trading pair, you can place Limit orders. The DEX currently supports only these types of orders. The team recommends that new traders go through their tutorial on using limit orders.
The interface’s bottom left-hand side contains information about your Open Orders, Order and Trade history, and Balances. Once you are done trading, click on the user icon in the top right corner of the screen and hit the “Sign Out” button.
Binance DEX supports approximately 25 digital currency, but these are still testnet tokens. In addition, inter-chain transfers are not supported, so you won’t be able to transfer coins directly between Binance Chains and other chains after the mainnet launch. Binance.com will be able to act as a bridge and allow you to trade tokens between Binance Chain, other chains, such as Bitcoin and Ethereum “Pegged Tokens”. This facilitates the trading process.
BTC.B, for example, is a token on Binance DEX testnet that is tied to the value real BTC running on Bitcoin network. BTC.B is a cryptocurrency that runs on Binance Chain and cannot be transferred, deposited or withdrawn to Bitcoin network. The same applies to currencies such as ETH.B and XRP.B. LTC.B., NEO.B., and USDT.B.
Binance’s team outlined that there will be two main ways these tokens can be withdrawn or deposited after the mainnet launches. These are:
Interoperability between different chains using Atomic Swaps allows users to deposit onto or withdraw from Binance Chains to increase speeds.
Via Binance.com: When you withdraw Bitcoin (BTC.B) or Bitcoin (BTC.B) from a Binance.com Account, you have the option to withdraw it as real BTC.B or the Binance Chain BTC.B. This will also be true for other coins.
Binance Chain (BNB) will be a non-EC20 token. Instead, Binance Coin (BNB), will migrate to Binance Chain to become the mainnet’s native asset. Traders will have the ability to issue, send, and receive new tokens on blockchain. They can also propose trading pairs.
Binance DEX Fees
After a proposal-vote process, the validators have reached an agreement on the DEX fees. The fees are subject to periodic review and adjustment. Currently:
Trade fees are calculated based upon trade notional value. Fees for other transactions are fixed.
- You can cancel an incomplete order, send a new GTE or expire an existing order. If the address does not have enough BNB, the transaction will be rejected.
Non-Trade-related transactions will be subject to a fee. These fees can only be paid in BNB.
- Trade-related transactions are charged with a fee when an order is filled, or cancelled/expired/IOC-expired with no fills. If the balance is not sufficient, the BNB fee structure will be used. Otherwise, the non-BNB fees structure will be used.
We are not sure of the exact fees, but we do know that they are split among block producers/validators to help maintain the network, pay network usage, and prevent abuse and attacks.
- If the total order value and the free balance for the recipient asset are not sufficient to pay the fee, then the entire receiving asset and its remaining balance would be charged. To encourage usage, new orders are exempted from fees. However, larger trades will be charged more to take advantage of the liquidity offered by the network. If they do not provide liquidity, Order Expire or Cancel will be charged with a fee. Fees can be paid in any asset. However, the network will charge BNB first and then apply a discount if there is BNB balance.
Is Binance DEX safe?
Nature designed decentralized exchanges to be more resilient than central exchanges. Binance has a good reputation for its safety protocols and track record in resisting hacks. Because the DEX is not custodial, there is no central authority to store funds. This means that malicious actors cannot be attracted to it. Hackers have been known to attack DEXs using DNS attacks that redirect users to phishing websites they control. These look-alike websites allow users to unlock their wallets and give the hackers access to their private keys and passwords.
The team behind the DEX provides a lot of information about best practices and also details on trading and match spec, as well as anti-front running mechanisms.
- Trading Species
- Match Logic
- Anti-front-running
They will also outline their Disaster Recovery and Emergency Protocols for various emergency situations. Users are advised to return to the link frequently as the team is expected to update the page.
Binance Chain uses a Byzantine Fault Tolerance and Proof of Stake (PoS-based consensus mechanism to produce blocks among a number of qualified Validators. This is similar to platforms like EOS and NEO. This has caused some criticism from blockchain purists, who see EOS and NEO both as highly centralised and state Binance’s new offering is not a DEX because it only has a small number of nodes. Changpeng Zhao, Binance CEO, tweeted that the exchange was more of a non-custodial operation.
There are currently 11 nodes that are believed to be securing the network, with Binance maintaining full control. The Github doesn’t contain any source codes, which may prove to be problematic for blockchain purists. However, this won’t pose any problems with regard to the safety and security of users’ funds and will allow for faster processing and increased speed of the exchange.
For Beginners
Is Binance DEX suitable for beginners? One, decentralized exchanges can be more difficult to use and understand than their centralized counterparts. Binance DEX will therefore have a steeper learning curve for new market participants. Binance offers a variety of resources to educate the community and maintains an Academy and Forum to help users keep up with new developments.
Binance DEX is currently on testnet and may be the perfect platform for new traders to learn how to create wallets and safely store their personal data. Test fund faucet allows traders to receive 200 testnet BNB to play with different trading strategies.
It is important to note that the Binance Chain testnet can only be used for testing purposes and that users can use the many features that come with Binance DEX. The testnet tokens are strictly for testing purposes and do not offer any monetary or other benefits. Binance Chain testnet funds cannot be used to purchase Binance.com account funds or Binance Chain mainnet fund funds.
Users are reminded to not send any real mainnet tokens via Binance testnet. Any BTC, ETH or BNB that is transferred at this stage will be irrecoverable and lost forever. The DEX can only ever be used by acquiring testnet BNB, and using these funds for trading the tokens on the DEX, such as BTC.B or ETH.B.
Users are reminded that if they lose or misplace their private keys for their address, they cannot be recovered by any other party. Binance Chain and its supported wallets don’t record, transfer out, or record your private keys. Each user is responsible for their private key, Keystore file and password protection.
Binance DEX Pros & Cons
Pros:
- Good Reputation
- Familiar Interface and UI
- Users Retain Complete Control Over Their Funds
- Users can test trading strategies
- Low Fees
Cons:
- No Live Trading
- Higher Learning Curve
- Not Fully decentralized
- No Direct Cross Chain Transfer Solution on Mainnet
Conclusion
Binance has kept their word and created a decentralized version their exchange, as promised. This allows more experienced traders to use a familiar platform and keep control of their funds. TradingView charts and the UI allow traders to create more complex strategies based upon a wide range of technical indicators. The DEX is still in the testnet stage and the jury is still out on whether the team has been able to fix the liquidity issues and speed issues that plague other DEXs.
This launch offers new users an opportunity to learn more about DEXs. Anyone can use the testnet faucet and receive 200 testnet tokens to create a wallet. Once the wallet is created, they can start trading on the DEX. They will also learn how to place limit orders as well as follow technical indicators. This is a great opportunity to test the DEX before it goes live and allows you to trade real mainnet tokens.
Once this is achieved, the community will be more focused on performance capabilities and how the team resolves cross-chain transfer issues. Safety will be a priority as users are responsible for their own security. The community will also monitor the progress made in decentralizing node networks. Despite these concerns, Binance DEX is a non-custodial platform that is being offered by a well-established name in the space. It offers traders of all levels an opportunity to get used to the platform while it’s still on testnet.