Decentralized finance is in full swing, and one of its biggest supporters appears to be the exchange Binance. The platform's United States branch recently joined the Chicago DeFi Alliance, with the aim to further develop the U.S. DeFi industry. Additionally, Binance's support for new DeFi projects continues to grow. Most recently, the exchange has demonstrated close ties with BurgerSwap, a new decentralized exchange that aims to improve upon Uniswap.
While it's clear that Binance has taken a tremendous amount of interest in DeFi, it's notable to point out that Binance's CEO, Changpeng Zhao, has been bullish on DeFi for a while. Cointelegraph had the pleasure of sitting down with CZ to learn more about what DeFi actually means, why this sector has started taking off, and what we can expect moving forward.
Cointelegraph: First, I'd like you to explain what DeFi actually means.
Changpeng Zhao: There are a couple different interpretations of DeFi. Originally, the word meant anything related to decentralized finance — so, anything that's a decentralized version of financial offerings. Initially, the term related more to decentralized loans or loan platforms.
But then something happened early this year where people started staking coins in a liquidity pool. These coins are intended to be used by an automated market maker to provide liquidity for other people to trade against. This way, other users have much lower spreads and get a much better price when they trade."This type of DeFi is really hot right now. But the competition continues to intensify as people compete to get the highest interest to the liquidity providers. People are coming up with more aggressive ways to do that, including issuing new coins and having those coins act as rebates. That's the current situation. However, I do think that the incentive structures we are seeing now will probably not last."
CT: Why is DeFi gaining popularity now?
CZ: To be honest...