4 Notes on Why Bitcoin is Tokenized on Binance Chain

[Mercury]

There has never been a shortage of curious developments which put an interesting sin on cryptocurrency projects. Binance, the world’s leading trading platform, is issuing new tokens on its native blockchain. Said tokens will be pegged to leading cryptocurrencies and are all proposed for trading on the Binance DEX platform.

The Bitcoin-pegged BTCB Token

On paper, it would not necessarily make too much sense for anyone to create a new token pegged to popular cryptocurrencies. A new token linked to Bitcoin would not necessarily gain any real traction, although there seems to be a method to this madness. Binance will peg BTCB to Bitcoin through a 100% reserve. That reserve currently sits at 9,001 BTC, albeit those numbers will fluctuate over time.

This new token will also serve as another “stress test” for Binance Chain. It will seemingly become a lot more commonly used compared to the GBP-backed stablecoin which is still in the testing phase at this time. As such, it will be interesting to see if the native chain can effectively make a meaningful impact in the world of cryptocurrency.

The BTCB/BTC Trading Pair

What is perhaps even more interesting is how Binance will effectively create a trading pair between BTCB and the real Bitcoin. Anyone will be able to convert to and from pegged tokens to the native coin and vice versa.  The expected price spread between both assets will be 0.1%, which is somewhat to be expected. The company will also ensure the buy orders and reserve funds will be bigger than the total supply of the BTCB token in question.

Why is This Token Created?

It is a bit odd to see such a token pegged to Bitcoin when one can easily trade with BTC on Binance. The company sees merit in this venture, primarily as a way to bring the pegged token to Binance DEX traders. As such, there is an expected trading volume and liquidity increase, which will bring more attention to the platform as a whole.

Some users will eagerly point out this will lead to some degree of centralization. That is true up to a certain extent, albeit the convenience provided by this pegged token should not be overlooked. It will be very interesting to see how the overall community responds to this new token and whether or not there will be sufficient trading volume for it.

Will Other Coins Follow?

That question is somewhat difficult to answer right now. Binance’s team is seemingly eager to create more tokens pegged to an existing value on their own blockchain. Whether it is a stablecoin or a Bitcoin-pegged asset, both options are clearly on the table right now. As such, it is not unlikely further coins, tokens, and assets will be tokenized on Binance Chain moving forward.

What other coins one would come to expect, is a different matter altogether. It seems plausible to assume the most popular top value coins could receive a Binance Chain-based alternative in the near future. A version of Ethereum or Litecoin on Binance Chain would not be out of the question. For now, all one can do is speculate in this regard, as nothing has been officially confirmed just yet.

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