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Why the Market Dominance of Binance is a Big Risk

When cryptocurrencies first appeared in 2009 with the release of Bitcoin, the ideals of this new generation of digital currencies were clear: empower individuals to manage their own finances without reliance on a centralized force.

Despite these ideals, Binance has risen up to become the de facto emperor of the cryptocurrency industry with the power the sent the entire industry tumbling into a tailspin — should another Mt. Gox-esque breach occur again. 

The Binance Problem

Since Binance launched in 2017, its growth has been nothing short of meteoric, quickly rising to become the number one cryptocurrency spot exchange by trading volume.

Binance took just months to secure its position as the largest and therefore most popular cryptocurrency spot exchange platform, and it can be argued that much of this success is a result of its rapidly-expanding feature set. 

After all, in the last year alone, Binance has introduced cryptocurrency derivatives, staking support, savings products, fiat gateways, and more, massively expanding on the initial offerings it launched with. Although this sounds appealing, it’s important to remember that Binance isn’t actually innovating in most cases, and is simply adding features that have already existed on separate dedicated platforms for quite some time. 

Because of this, while Binance can be considered a jack of all trades, it is also the master of none, since dedicated platforms frequently offer better service, improved security, and a more feature-complete solution compared to Binance. Still, Binance remains a rapidly growing entity, hoovering up users from other small platforms, while providing an arguably worse service in many cases. 

This rapid growth has led to a concerning stage of affairs, where a single platform controls or manages a large chunk of all cryptocurrencies in circulation — exactly the opposite of the decentralized maxims the industry was initially launched under. Cryptocurrencies are supposed to be about removing centralized failure points and empowering users to be their own bank, not handing over power to a select few industry titans.  

When One Hack Could Cripple the Industry

The risks posed by the over-aggregation of assets under a single platform was made clear back in May 2019, when an unknown attacker was able to exfiltrate $40 million worth of Bitcoin (BTC) from its hot wallet — equivalent to around 2% of its Bitcoin holdings at the time. 

Although Binance was able to cover the loss using its ‘SAFU’ fund, it never did reveal exactly how attackers were able to pull off the hack in the first place. 

This begs the obvious question — what would happen if Binance were to experience a more significant breach, potentially risking the billions of dollars in digital assets held in its coffers?

If the events that followed the infamous 2014 Mt. Gox hack are anything to go by, then such a breach would almost certainly send the entire cryptocurrency industry into an extended bear market, and could significantly hamper adoption for several years.

This is particularly worrying when you consider that Binance isn’t regulated or licensed anywhere. This essentially means the platform is operating with little to no regulatory oversight, and may not be held accountable should another breach exhaust its SAFU fund and cripple the market.  

Promising Alternatives

Upon entering the cryptocurrency space for the first time, Binance is inevitably one of the first names people come across, making it one of the first port-of-calls for many new investors. 

However, Binance is far from the only reputable name in the industry, while many of its smaller competitors boast features that even the juggernaut that is Binance still struggles to match.

For those looking for a regulated alternative, Bityard stands out as arguably the most impressive. The platform is one of the simplest cryptocurrency derivatives trading platforms, allowing users to trade with up to 100x leverage to multiply their profits, while its daily mining game adds an interesting incentive for new traders. Bityard is currently licensed in four jurisdictions and offers a full refund warranty for deposits — an extremely rare feature in the cryptocurrency exchange space. 

If absolute variety is your preference, then FTX might be more of what you are looking for. As a derivatives exchange, FTX allows users to trade a variety of cryptocurrency futures contracts, but its real stand out feature is its forex, stock index, and commodity contracts, which can be bought and settled in cryptocurrency. 

PrimeXBT’s ultra-fast turbo platform, StormGain’s 10% APR on deposits offer, and EXMO’s wide fiat support also stand out as promising features that are yet to be equaled by Binance, and are certainly worth a look. 


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