Bithumb Chain: Not Just Another Exchange Blockchain?
The Korean platform follows Binance's footsteps.
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Bithumb Global has confirmed it is developing its own blockchain. The Korean cryptocurrency exchange announced today that the Bithumb Chain will “aspire to connect many moving pieces in a finance ecosystem” using a decentralized open protocol.
Once up and running, the Bithumb chain will offer benefits including Exchange-as-a-Service (EaaS) and a profit-sharing protocol. Although the announcement is light on details, it appears that the former is decentralized white-label exchange in a similar vein to Huobi Cloud, which recently expanded its offering. The profit-sharing protocol could take the form of an exchange token similar to KuCoin Shares, which redistributes a portion of trading fees to holders.
Bithumb follows in the footsteps of Binance, which was the first crypto exchange to launch its own blockchain. Since launch, around 19 projects have migrated to the Binance Chain, which now also powers the Binance DEX. Given Bithumb already operates a DEX, it seems likely that the EaaS and profit-sharing protocol could be an attempt to differentiate from Binance Chain as the competition.
Furthermore, it seems that Bithumb is planning to use a different consensus method for its blockchain than the one used on the Binance chain. Binance uses delegated Byzantine Fault Tolerance (dBFT), developed by NEO co-founder Erik Zhang. In a similar way to delegated proof-of-stake (dPoS), which is used by EOS, a small number of elected representative nodes control the network. Due to this decision of putting power into the hands of the few, Binance, like EOS and NEO, has come under some criticism for not being sufficiently decentralized.
The problem is compounded by the fact that the token distribution for these projects is often uneven, meaning a few whales effectively control the blockchain.
A Unique Consensus Model?
Bithumb has confirmed it intends to use “an exclusive OBFT hybrid consensus model.” OBFT refers to obfuscated Byzantine Fault Tolerance, which appears to be untested among peer blockchains. A 2012 paper describes how standard BFT protocols rely on the assumption that bad operators within a network are independent of one another, while often requiring operators to store access information about one another. This opens up the possibility that an intruder could move between nodes.
Therefore, obfuscating the nodes from one another aims to overcome this risk. The paper further highlights that OBFT offers scalability potential. It’s worth pointing out that the Bithumb Chain announcement mentions a hybrid consensus protocol, which implies it will be using features of OBFT together with another method.
In a burgeoning DeFi market, it’s no surprise that Bithumb wants to get in on the action. However, even the mighty Binance hasn’t yet managed to snatch enough of the DeFi market from Ethereum to worry its supporters. With so many blockchains to choose from these days, Bithumb Chain will need to differentiate itself to successfully attract users and developers away from the competition.
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