The decentralized finance (DeFi) movement, after simmering for two years, exploded into the mainstream in late June. This surge was ignited by the "liquidity mining" model introduced by the lending protocol Compound. Its governance token, COMP, generated massive wealth effects, skyrocketing nearly 20 times at its peak.
This innovative model spurred numerous projects to adopt similar mechanisms, driving a wave of user participation in质押借贷 (staking and lending) and a sharp increase in total value locked on-chain. According to DefiPulse, the total value of locked crypto assets more than doubled in less than a month from June 16, reaching $2.15 billion.
As DeFi gained traction, centralized exchanges were quick to respond, racing to list DeFi tokens and launch related derivative products. Some exchanges even listed multiple DeFi tokens in a single day, eager to capitalize on the trend. This raises a critical question: are these exchanges genuinely committed to DeFi, or are they merely skimming the surface for short-term gains?
This approach, while common, has low barriers to entry and offers limited potential for capturing sustained user interest or creating a true competitive advantage. The more strategic players in the exchange space are exploring deeper integration, envisioning a future where CeFi and DeFi converge. Some have been planning this for years.
"Centralized exchanges will ultimately be the major players in the future of DeFi," predicted one DeFi project developer.
Common Strategies: Listing DeFi Tokens and Contracts
The most straightforward way for exchanges to engage with the DeFi boom is by listing popular DeFi tokens and offering related perpetual contracts or futures. For trending projects, this can create a win-win-win scenario for investors, the projects, and the exchanges themselves.
For Investors: Meeting Demand and Ensuring Safety
Take COMP as an example. After its launch on June 16, its price soared from an initial $18.5 to a high of $381.89, an increase of nearly 20 times. This immense wealth effect attracted significant investor attention. However, COMP was initially only available on decentralized exchanges (DEXs) like Uniswap, which are unfamiliar to the majority of investors.
Listing on major centralized exchanges significantly lowered the barrier to entry for these investors. It provided a familiar, user-friendly platform for trading and, crucially, offered a layer of protection against counterfeit tokens—a common problem on permissionless DEXs where anyone can create a fake token for any project. Centralized exchanges, through direct dialogue with projects and their communities, help users avoid these pitfalls.
For Exchanges: Capturing New Traffic and Revenue
Listing hot DeFi tokens allows exchanges to meet user demand, capture new traffic, and generate additional trading fee revenue. For a project like COMP, being listed on over 40 exchanges including Coinbase, Binance, and OKEx became a necessity. Some, like Binance and FTX, went further by offering derivatives, allowing users to long or short the entire sector through perpetual contracts or index products.
For less mainstream DeFi projects, being a first-mover with a listing can be a significant advantage. It can help an exchange capture an entire project’s community. A prime example is the oracle project NEST. After its listing on exchanges like Huobi BTC (HBC), MXC, and BiKi in May, the首发 (first listing) exchange, HBC, actively promoted the project, engaged with its community, and established user education groups. This effort successfully attracted the NEST community to its platform.
For Projects & Communities: Liquidity, Pricing, and Exposure
For early project holders and communities, getting listed on an exchange is a critical step. It provides a transparent pricing mechanism and a secure venue for trading, moving beyond opaque and risky over-the-counter (OTC) deals. Furthermore, the exchange's resources can help the project gain exposure to a wider audience. HBC, for instance, helped NEST establish international Telegram communities, growing its member count significantly.
This creates a deep, symbiotic relationship between a project and its primary listing exchange.
Potential Pitfalls
However, the rush to list every new DeFi token comes with risks. The primary challenge is ensuring liquidity, as many DeFi projects are community-governed and lack formal market makers. Some exchanges, like HBC, have innovated by crowdsourcing liquidity from a project's large token holders.
A more severe risk is the potential for low-quality or outright fraudulent projects to exploit the DeFi hype. Some projects might use Uniswap to generate artificial buzz before moving to less-scrupulous centralized exchanges that perform minimal due diligence. This could lead to a situation reminiscent of the ICO craze, ultimately harming investors and the ecosystem's reputation.
Finally, the practice of exchanges "forcibly listing" tokens without the project team's consent can disrupt development roadmaps. When a token is traded on the open market, its price volatility can distract developers from their core work of building the product.
Advanced Play: The Convergence of CeFi and DeFi
"Exchanges should fundamentally focus on integrating DeFi projects at a functional and product level, not just through listings. This is beneficial for both the exchanges and the overall development of DeFi," remarked Yang Mindao, founder of dForce.
Simply listing tokens is a low-barrier strategy. The more sophisticated approach involves weaving DeFi functionality directly into the CeFi user experience, creating a seamless hybrid model.
Exchanges as the Gateway to DeFi
The first fusion model involves using the exchange as a traffic gateway to DeFi services, dramatically lowering the user门槛 (threshold). Current DeFi protocols often require using browser wallets like MetaMask, involve complex multi-step transactions, and can have poor user experiences.
By integrating DeFi services directly into their platforms, exchanges can abstract away this complexity. Users can access DeFi yield opportunities, such as "liquidity mining," without ever leaving the exchange's custodial wallet. The exchange can pool user assets (like USDT or ETH) and deploy them into DeFi protocols on their behalf, earning a fee for providing this service.
OKEx exemplified this early on. In December 2019, it integrated MakerDAO's DSR (Dai Savings Rate), allowing users to earn interest on Dai directly from their OKEx accounts. This provided a seamless user experience and served as a new流量入口 (traffic entry point) for MakerDAO. Similarly, Binance and HBC have integrated Staking and mining rewards for various DeFi assets, significantly improving the user experience.
Exchanges as Providers of Quality Assets
The second fusion model sees exchanges providing high-quality assets to the DeFi ecosystem. The DeFi space, particularly lending protocols, was initially conservative, accepting only native crypto assets like ETH as collateral. This is changing rapidly.
Stablecoins issued by exchanges are now widely used in DeFi. Coinbase's USDC is a cornerstone collateral asset across major lending protocols. Binance's BUSD is also integrated into platforms like Kyber and Aave, with collaborations for Compound and MakerDAO underway.
Perhaps more significantly, exchange platform tokens are emerging as new collateral options. In June, the Kava CDP lending platform officially went live, and through community voting, BNB was selected as its first supported collateral asset. This partnership between Kava and BNB charts a course for other platform tokens to expand their utility deep into the DeFi landscape. OKB is also rumored to be soon available as collateral on Compound.
This creates a powerful flywheel: DeFi projects get listed on exchanges, exchanges provide them with users and liquidity, and the exchange's native assets become integral components within those same DeFi ecosystems.
Heavy Investment: Building and Funding the DeFi Future
The final, most resource-intensive strategy involves exchanges making significant investments—both financial and technical—into the DeFi space.
Strategic Investments
Exchanges can directly invest in promising DeFi projects through their venture arms, such as Binance Labs and OKEx's investment department. Beyond capital, they provide strategic support on token economics, product-market fit, and technical architecture, helping early-stage projects mature.
Developing Exchange-Owned DeFi Infrastructure
The most significant "arms race" among top exchanges is the development of their own public blockchains. A primary focus of these chains is DeFi, with DEXs being the centerpiece.
The growth potential is substantial. Dune Analytics data shows that DEX volume on Ethereum reached nearly $3 billion in the first half of 2020, already surpassing the $2.4 billion volume for all of 2019.
- Binance led the charge with the launch of the Binance Chain mainnet and its DEX in April 2019. In 2020, it further unveiled the Binance Smart Chain (BSC), an Ethereum Virtual Machine (EVM)-compatible chain designed to foster a vibrant DeFi ecosystem by leveraging the billions of dollars in assets already on the Binance Chain.
- OKEx is developing OKChain, which positions DeFi applications and OKEx DEX as core components of its ecosystem. It is actively engaging developers through hackathons to build out this vision.
- HBTC is building the HBTC Chain, focused on being a decentralized清算托管链 (clearing and custody chain). Its OpenDex protocol will allow users to launch their own DEXs, and it will also support decentralized lending and derivatives.
While these exchange chains aim to challenge Ethereum's dominance in DeFi by offering higher throughput and lower fees, their ability to attract a comparable level of developer mindshare and composability remains a key question.
Conclusion: DeFi is a Strategic Imperative for Exchanges
It is evident that major exchanges are making significant, strategic bets on the DeFi sector. While capturing short-term流量 (traffic) is a benefit, the "high-level players" are focused on long-term positioning.
In this roaring DeFi wave, retail investors may ride the swells, but it is the well-resourced, strategically-minded "CeFi team" of centralized exchanges that is most likely to emerge as the ultimate victor. They possess the users, the capital, the technical resources, and the strategic imperative to deeply integrate and ultimately shape the future of decentralized finance.
Frequently Asked Questions
What is liquidity mining?
Liquidity mining is a process where users provide crypto assets to a DeFi protocol's liquidity pool. In return, they earn fees from the protocol and often receive newly minted governance tokens as a reward for their participation. This model incentivizes users to supply liquidity, bootstrapping the protocol's ecosystem.
Why are centralized exchanges getting involved in DeFi?
Exchanges see DeFi as a major growth area. By listing tokens, they meet user demand and capture trading fees. More strategically, they are integrating DeFi services to improve user experience, leveraging their massive user bases to become the primary gateway for millions to access decentralized finance, and expanding the utility of their own native assets.
What are the risks of investing in DeFi tokens on exchanges?
Risks include high volatility, potential smart contract vulnerabilities in the underlying projects, and the listing of low-quality or fraudulent tokens by exchanges that perform inadequate due diligence. It's crucial to research the project thoroughly before investing and to understand the risks involved in providing liquidity.
How does an exchange's public blockchain help DeFi?
Exchange-built blockchains often offer higher transaction throughput and lower fees compared to Ethereum. This can improve the user experience for DeFi applications by making transactions faster and cheaper. They also provide a native environment for building DeFi apps that can easily leverage the exchange's existing user base and asset inventory. Explore more strategies for navigating this evolving landscape.
What is the difference between CeFi and DeFi?
CeFi (Centralized Finance) offers services through a centralized company that controls user funds, often providing easier use and customer support. DeFi (Decentralized Finance) operates through decentralized protocols and smart contracts, giving users full control of their assets but often with a steeper learning curve and technical complexity. The future likely involves a hybrid of both models.
Can exchange platform tokens be used in DeFi?
Yes, this is a growing trend. Major exchange platform tokens like BNB and OKB are beginning to be accepted as collateral on various DeFi lending platforms. This integration expands their utility beyond just paying for trading fees on their native exchanges and deepens their integration into the broader crypto economy. Get advanced methods for utilizing platform tokens.