In a recent interview with Jon Evans at TechCrunch Sessions: Blockchain, Ethereum co-creator Vitalik Buterin made a remark that shook the crypto world. Specifically, he said that he hopes all centralized exchanges “burn in hell as much as possible”. Binance CEO Changpeng Zhao, better known as “cz”, responded to the comment on his Twitter account.
Buterin Vs. Centralized Exchanges
This begs the question, what does Vitalik Buterin have against centralized exchanges?
Generally speaking, the main arguments in general against centralized exchanges are that they introduce a single point of failure and an easy target for hackers to go after, and that they act as gatekeepers in deciding what projects to list and which ones to ignore.
This situation has only gotten worse in recent months as major exchanges such as Binance require massive upfront listing fees. Some reports suggest that listing on Binance can cost a project more than $1 million. According to TechCrunch, listing fees can even be as high as $10 million to $15 million.
With such steep listing fees, this means that only extremely hyped and high-profile ICO’s ever stand a chance of getting listed on a major exchange. Projects that don’t hold ICOs could be left out in the dark as they will not have the necessary start up funds to get listed.
It appears that it is this gatekeeper aspect that bothers Buterin the most. Cryptocurrencies are supposed to be a democratizing force that allows for anyone to start an innovative project without the need for a central authority to give them approval to do so. That’s why anyone can create a token or a Dapp on Ethereum without the need for the Ethereum Foundation’s approval.
Binance CEO: Be Nice, Please
Got asked a few times, re: “Vitalik’s burn in hell”.
Let’s not wish others to "burn in hell". Let’s have a bigger heart, and appreciate the fact that we are part of an eco-system… pic.twitter.com/4QYGKus0Gk
— CZ Binance (@cz_binance) July 10, 2018
After much prompting, Binance CEO Changpeng Zhao released an even-tempered response on his Twitter account to Buterin’s claims. According to him, we shouldn’t “wish others to ‘burn in hell'”, and we should all “have a bigger heart”.
His main argument went something like this. If it weren’t for centralized exchanges, “all coins will have far less liquidity”, and the industry itself would be smaller and developer slower. He also added in a second section that in his opinion, “Decentralization is a means, not an end.” and that there is “no absolute decentralization” due to projects still having core teams.
He closed his comments by saying that he is “all for blockchain/decentralization/freedom”, but that he would “not wish ‘burn in hell’ on anyone or anything”.
What’s the Best Solution?
The unfortunate truth is that both Buterin and Zhao have valid points. However, it’s hard to defend a 10 million-dollar plus listing fee for essentially doing nothing. It’s doubtful that it takes Binance more than a few hours of man power to add an ERC-20 token, and not much more than that still to add in a cryptocurrency that is a fork of something that is already supported like bitcoin or Dash.
On the same note, decentralized exchanges are also not without their flaws.
Ethereum-powered decentralized exchanges can be cumbersome and uninviting for new users. Every action made on a decentralized exchange requires payment of gas fees, whether it be placing an order, or canceling an order. But the advantage with a decentralized exchange is that they never require listing fees, and any Ethereum assets large or small can be traded on the the moment they are created. They are also essentially immune to hacking of a central account.
Wait for Something Better
Perhaps in the future, atomic swap based exchanges that require no middleman and no gas fees as well as supporting multiple different blockchain types and not just Ethereum will become the standard.
But until that day comes (if it ever does) we still need solutions today to provide liquidity. Perhaps the answer today is that we the traders should not choose to centralize ourselves around exchanges that charge massive listing fees and instead look to options that are more democratic and user-friendly at the same time until something better comes along.