Binance announced the release of a Bitcoin-pegged token BTCB that will be backed by a reserve of actual BTC permitting users to use the new coin on Binance DEX.
Why? Though this piece of news might seem a little puzzling for many people, we have to remind traders that Binance DEX – the crypto company’s decentralized exchange – has been built on top of Binance Chain blockchain.
Ok, so what does this mean? This simply means that only tokens that comply with the BEP2 format imposed by Binance Chain can be used on Binance DEX. So, Bitcoin’s “ancient” proof-of-work protocol cannot work on Binance Chain, therefore the necessity of BTCB.
But technical demands aside, this is not the only reason Binance is looking to bring the power of Bitcoin on its decentralized platform. BTCB can be used on Binance DEX just like Bitcoin on the main Binance platform to create a large variety of trading pairs and options for users.
As the principal Binance site will soon become unavailable to American users, the need for a solution to address the requests of these traders emerged and, until the new crypto exchange for American users goes live, they can continue to take advantage of Binance DEX where they can trade BTCB with all its pairs.
BTCB is important not only for American traders who are still looking to use Binance services but also for the health of Binance DEX, which though offering a higher level of security, it’s difficult for us to ignore its main downside represented by low trading volume and liquidity.
For newcomers into the crypto space a lack of liquidity and trading volume might not mean much, but for experienced traders this translates into a shortage of choices which influences final revenues.
Let us explain.
As a trader you should always look for a variety of buying and selling choices in order to obtain the best price. If you are on an exchange where there aren’t so many traders, you won’t find the best price in the market. For this reason, most people prefer to use a large crypto exchange such as Binance which – though centralized – assures the necessary level of liquidity for trading.