The new development comes just moments after Binance was criticized that it usually lists DeFi projects as soon as they are launched without giving projects time to prove their market credibility.
On Monday, the global crypto exchange announced this new measure regarding the acquisition of DeFi tokens that filters out viable users based on their risk appetite. The creation of the so-called Innovation Zone, as Binance CEO Changpeng Zhao explained, will act as protection that buffers the less suited users from exposure to the “risk” that emanates from high-risk trades. The zone gives select Binance users a safe place to trade new, innovative projects and access high volatile tokens. Zhao was quick also to say that the exchange will not have to contact the project founders of a particular coin in order to list it.
Highly price volatile newer DeFi projects are the ones that will be listed on the Innovation Zone. A DeFi token on the TRON blockchain, SUN, will be the first token to be listed.
Binance Innovation Zone Participation Criteria
For users to be admitted in the innovation zone, they will have to answer the following two “very explicit” questions:
- As a user, are you comfortable to incur a loss of 50% or more on the principal capital?
- In case of losses occur, is the user ready to take responsibility for those losses?
If users answer yes for all these questions, they will be allowed to trade on Innovation Zone projects, but if the answers to either or all of them are no, then the user would be prevented from trading on the new DeFi tokens. So the exchange needs more advanced traders who are good at risk management and possess the right mindset.
“In order for exchanges to stay competitive, we need to list popular coins. As always, DYOR (do your own research). Some of the projects may do incredibly well, but most will likely not,” said Zhao.
Centralized Exchanges Struggling to Maintain Pace as DeFi Boom Continues
The new development comes just moments after Binance was criticized that it usually lists DeFi projects as soon as they are launched without giving the projects time to prove their market credibility. For instance, as soon as Uniswap protocol launched the DeFi token UNI, it took less than 60 minutes for Binance to list it. Listing of the DeFi project Sushiswap’s native token SUSHI was another high-profile case. Just a few days after listing the token, its anonymous founder decided to dump SUSHI more than $14 million from the development fund, making it lose almost 100%.
On a daily basis, as the hyped-up digital assets continue to hit the markets, the DeFi boom appears to parallel the ICO (initial coin offering) craze – that occurred in 2017 – in many ways. Hence this places many centralized exchanges – even larger ones like Binance – in a bit of a conundrum, as they struggle to maintain and manage the demand for new tokens.