Binance, which more often than not makes the news has made yet another interesting announcement. It has created a 9001 BTC (about $80 million) reserve fund and designed a new cryptocurrency BTCB, pegged to the price of Bitcoin. Bitcoins can be exchanged for BTCB on Binance.com at less than 0.1% deviation from the actual price. According to the press release,
Pegged tokens such as BTCB, are 100% backed by the native coin in reserve, which is Bitcoin (BTC) in BTCB’s case. The reserve addresses are published for anyone to audit.
The ‘B’ after BTC presumably stands for Binance. Nevertheless, no abbreviations were cited by the Exchange source.
This is significantly similar to stablecoins which are backed by FIAT currencies. However, the novelty with this chain is that it is backed by a cryptocurrency itself. Hence, stability in price does not seem to be the aim here. Furthermore, the announcement also included that Binance will be introducing more pegs to several other leading cryptocurrencies.
This a strong move made by Binance to increase the volume of DEX while keeping Binance.com’s interests intact. Many cryptocurrencies pegged to the original price will be released on Binance Chain as a BEP2 token. BEP2 tokens are similar to ERC20 tokens which are released on Ethereum.
While this approach is more centralized than atomic swaps, we believe it provides a higher degree of ease-of-use to most traders.
Binance DEX currently does not support the tokens which are not native to the Binance Chain or a BEP2 token. Hence, pegged cryptocurrencies will now enable trading on Binance DEX as well. The new trading pair of BTCB/BTC “will follow in a day or so.”
Do you think that the approach would yield the required results Binance is expecting? Please share your views with us.
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Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com