After the introduction of Binance’s Smart Chain, an Ethereum-compatible blockchain with an emphasis on decentralized financing, The exchange now doubles its strategy of attracting DeFi projects.
At the company’s World of DeFi summit on Thursday Changpeng Zhao, CEO of Binance, announced the launch of a $ 100 million mutual fund for projects based on the smart chain.
The fund will be used for a variety of purposes, including start-up funding for projects based on the smart chain. The company says the maximum investment will be $ 100,000, which is certainly quite low in the world of seed fundraising, especially in cryptocurrencies.
A Binance spokesperson told Cointelegraph that the fund is specifically geared towards early-stage startups and that more funds can be delivered through existing investment channels such as Binance X, Binance Labs, and others.
A portion of the fund’s money is used to generate liquidity for projects that pass reviews and due diligence. A collaboration with the security company Certik entitles Binance portfolio companies to “a low exam fee and quick options for the exam process”. said the speaker.
One of the fund’s goals is to unite the world of finance and centralized exchange (CeFi) with the DeFi movement. Building on the Smart Chain, projects can benefit from Binance’s existing broad user base, according to the company. Binance users can use Smart Chain with their existing Exchange accounts, which should significantly lower the barrier to entry for users looking to delve into this space.
The exchange also plans to deliver a “DeFi experience” within the confines of its centralized platform through initiatives such as Launchpool. The system is similar to the concept of income farming, where users wager assets to receive part of the distribution of a new token. Other DeFi-inspired programs include Liquid Swap and DeFi Staking, with the former being a centralized automated market maker while the latter is an automated performance management tool similar to Yearn.finance or Rari Capital.
In addition, the exchange plans to create a central bridge to the Binance Smart Chain, through which many other tokens in Ethereum or currencies such as Bitcoin (BTC) and Litecoin (LTC) can be transferred to the DeFi environment. Similar to solutions like Wrapped BTC, the Bridge is custodian and is fully managed by Binance.
The combination of these solutions could make Binance-sponsored DeFi a daunting challenge for the current Ethereum ecosystem.. While many competing blockchains are trying to recreate the vibrant DeFi community on their own turf, they generally lack the powerful network effects that Ethereum enjoys.
Binance’s user base, on the other hand, is comparable, if not larger, than that of Ethereum. The bridge would also allow the transfer of capital from other blockchains to the chain if necessary.
The downside is of course the centralization. Binance would have power over the projects it invested in, and Smart Chain, with its BNB-centric design, would of course encourage exchanges due to the fees it charges.
While Binance doesn’t hide the fact that its alternative is more central, it remains to be seen whether the community will accept it.