Tranchess, an asset tracking decentralized finance (DeFi) protocol that prioritizes risk-managed solutions, has launched a BNB token fund as a Binance Smart Chain (BSC) validator. The move is intended to shift the protocol away from purely generating revenue from the creation and sale of new tokens.
- This BNB fund complements the existing bitcoin (BTC) and ether (ETH) tracker funds, which offers moderate leverage for yield farming.
- Danny Chong, the co-founder of Tranchess, told CoinDesk the BNB fund marks version 2 of Tranchess because of the new income streams available. Acting as a validator means rewards from the network for processing and verifying transactions on a Proof-of-Stake network.
- In an interview, Chong cited the stringent validator requirements of BSC as a reason why Tranchess picked it over over PoS protocols for its expansion. One example is the higher threshold of staking to validate: While the Ethereum network requires a minimum of 32 staked ether, BSC requires nearly 10,000 staked BNB (worth $4.6 million) though many have upwards of 800,000 staked BNB (worth approximately $384 million). Using BSC also brings the possibility of opening up cross-chain compatibility, he said.
- “The complexities involved in being a validator currently excludes many protocols from transforming their pure token emission model into a more diverse revenue model that generates consistent alpha returns for users,” he said, noting that inactive validators or ones the community deems aren't pulling their weight are banned from BSC.
- Tranchess acting as a validator helps BSC become more decentralized. With a relatively small number of validators, BSC has been criticized for its centralization.
- Another example of a similar model can be found with Band Protocol, a data oracle. It runs a validator protocol on the Fantom network. Band Protocol earns income from being a validator, which in turn adds to the token's value.
- In a tweet from April 2021, Messari's Wilson Withiam pointed out that many of the existing validators on BSC have close ties to Binance.
- In August, Tranchess closed a $1.5 million round led by Three Arrows Capital and Spartan Group.
- Tranchess’ Chess token is up 8.6% on the day according to CoinGecko, and is set to open the US session at $1.86. BNB was up 4.5% during the Asia business day.
CORRECTION (Jan. 14, 10:47 UTC): Corrects to say BNB fund in first bullet point, original said BSC. Corrects minimum number of BNB staked to 10,000 from 1,000 in third bullet.
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