Cryptocurrency exchange Binance announced today the launch of its “centralized” Automated Market Maker (AMM) pool called Binance Liquid Swap, which will have different liquidity pools that will allow liquidity providers to earn interest and income from trading fees. Founder and CEO of Binance, Changpeng Zhao said that he was taking cues from the DeFi trend and published a tweet that stated:
Rough day for all markets today, but we keep building.
— CZ Binance (@cz_binance) September 4, 2020
However, in the case of AMM paired exchanges, such platforms use fixed algorithms that help in the creation of liquidity pools and trade (or swaps) instead of using order books. But according to the release, the pricing policies of the Binance AMM model help provide “more stable prices and lower fees” as compared to the order book model, making it the first AMM exchange to be launched on a centralized platform.
Binance also operates its own decentralized exchange, called Binance DEX which uses a peer to peer protocol to fulfill orders on that platform. The Liquid Swap protocol, however, has not been launched on Binance DEX.
The release further mentioned BUSD, DAI, USDT will be the initial assets available to be traded on Binance Liquid Swap which will support USDT/BUSD, BUSD/DAI and USDT/DAI pairs. The release did not mention the interest rates and trading fee income.
In recent news, the exchange was much talked about on crypto-twitter when Binance faced temporary network lags on its platform. While one user claimed compensation for the lag, another drew comparisons with Binance Liquid Swap and Ethereum’s Uniswap. The user mentioned how traders can use most tokens on Uniswap but Binance was still not a real alternative as users could only trade a few tokens.
Uniswap is a decentralized exchange which is an on-chain market maker that allows the swapping of ERC20 tokens. Whether this move by Binance is a way of attracting Uniswap users, is something to watch for.