Binance Launches its own Centralized Automated Market Maker(AMM)September 4, 2020
Binance Launches ‘Binance Liquid Swap’
After the listing of the DeFi tokens, Binance becomes the first centralized exchange to launch an Automated Market Maker (AMM) called Binance Liquid Pool. Similar to the other DEX, Binance liquid pool also would provide liquidity by depositing tokens. The users can earn interest with a deduction of the transaction fees.
The AMM pool would be integrated into binance.com exchange and the users can pool tokens in their wallets and earn rewards. The AMM pool will use a pricing module instead of the usual order book. This would provide more stability with lower fees.
Binance CEO, Changpeng Zhao, said that the liquidity pool intends to attract more users and add up more volume.
“We hope to further the growth of the DeFi marketplace and empower our users with more earning power and easier liquidity through a centralized AMM pool with the credibility, safety and security provided by Binance,” he said.
Competition for Ethereum’s Defi?
Binance enables USDT/BUSD, BUSD/DAI and USDT/DAI trading pairs with 0.04 percent transaction fees. Binance Liquid Pool just like other pools like Uniswap or Curve allows users to deposit two tokens or coins for each pool and earn a reward. However, the automated mechanism of Binance pool will provide a more stable and lower transaction price.
Considering the Ethereum’s pool, the risk is high due to the large price fluctuations on the market. And hence, the centralized approach could probably minimize the risk of losing money with a big margin.
Collectively, the announcement received a mixed response and some of the users pointed out that Binance AMM does not indicate which AMM formula it uses. On the other hand, the gains with Binance Liquidity pool could be quite low compared to the DeFi pool.
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