CEXs expanding into on-chain services isn’t just a defensive strategy—it reflects an active bet on the future of the crypto ecosystem.
Authors: Chi Anh and Ryan Yoon, Tiger Research
Compiled by: Deep Tide TechFlow

Summary

• Strategic Differentiation: Binance offers retail-focused on-chain services to lower barriers to Web3 entry. Bybit launched ByReal, an independent platform providing CEX-grade liquidity on-chain. Coinbase adopts a dual-track approach targeting both retail and institutional users.

• Why CEXs Are Moving On-Chain: With early-stage tokens increasingly debuting on decentralized exchanges (DEXs), CEXs face listing delays due to regulatory scrutiny—losing trading volume and revenue. On-chain services let them tap into early token liquidity and retain users without formal listings.

• The Future of CeDeFi: Platform boundaries are blurring. Exchange tokens are evolving from fee-discount tools into core assets bridging centralized and decentralized ecosystems. Some DeFi protocols may be absorbed into larger CEX-led networks, accelerating a hybrid market.

Binance’s recent initiative, Binance Alpha, has taken center stage. Operated by Binance’s team, Alpha is a DeFi-based listing platform that lets retail users access early-stage tokens faster than traditional exchange channels. Mechanisms like Alpha Points facilitate targeted airdrops, boosting engagement.

Yet, the model isn’t without controversy. Several tokens listed via Alpha saw sharp price drops post-launch, sparking debates about its structure. Despite mixed reviews, one trend is clear: CEXs are no longer bystanders in DeFi—they’re now active participants.

This shift isn’t limited to Binance. Bybit recently announced ByReal, a Solana-based DeFi platform, while Coinbase plans to integrate on-chain services directly into its app. These moves signal a structural transformation across the exchange industry.

The key question: Why are CEXs, with their stable revenue models, diving into volatile DeFi? This report unpacks the strategic rationale and market dynamics behind this shift.

While often lumped under "CeDeFi," implementations vary significantly across platforms. Bybit, Coinbase, and Binance each take distinct approaches—differing in architecture, asset custody, and user experience.

Launched on June 14, ByReal extends Bybit’s exchange infrastructure on-chain. Its hybrid design combines a Request-for-Quote (RFQ) system with a Concentrated Liquidity Market Maker (CLMM) model to replicate CEX liquidity.

• RFQ: Users request quotes from brokers for optimized pricing.

• CLMM: Liquidity is concentrated around active price ranges, reducing slippage.

Assets remain self-custodied via wallets like Phantom, and the platform includes a token launchpad and yield products (e.g., Solana staking via Revive Vault). ByReal targets early-stage tokens that may not meet CEX listing criteria but thrive in community-driven environments.

Coinbase plans to integrate DeFi trading directly into its main app, bypassing standalone wallets. Key features:

• Seamless UX: Trade thousands of tokens upon minting, all within the app.

• Verified Pools: KYC-gated liquidity pools for compliant institutional participation.

This dual approach balances accessibility with regulatory safeguards.

Binance Alpha prioritizes ease of use:

• Accessed via the Binance app—no separate wallet setup.

• Abstracts gas fees and smart contract interactions for beginners.

The Takeaway: Bybit targets DeFi natives, Coinbase serves both retail and institutions, and Binance focuses on mass adoption. Each explores unique trade-offs in custody, curation, and integration depth.

New tokens now debut on DEXs, where permissionless listings drive rapid volume. CEXs, hampered by compliance delays, miss out on fees and user attention. On-chain platforms like ByReal and Binance Alpha let CEXs monetize early activity while maintaining regulatory distance.

Despite DeFi’s innovation, mainstream users struggle with wallets, gas fees, and cross-chain transfers. CEXs bridge this gap by embedding DeFi into familiar interfaces:

• Users stay within the CEX ecosystem.

• Platforms control the access layer, building network effects beyond spot trading.

Over time, this fosters lock-in—users explore DeFi without leaving the CEX’s revenue loop.

The distinction between "exchange" and "protocol" is fading. Users may not realize they’re interacting with DeFi when trading via CEXs. Institutional adoption will be gradual, led by hedge funds testing small allocations.

Exchange tokens (e.g., BNB) are transitioning from fee discounts to ecosystem linchpins, enabling:

• Staking rewards.

• Early access to launches (on-chain and off-chain).

• Cross-platform capital flows.

CEXs aren’t just defending against DeFi—they’re absorbing it. The likely outcome:

• Semi-decentralized CEX-led networks dominate.

• Independent DeFi protocols integrate into these ecosystems.

The Bottom Line: Bybit’s ByReal exemplifies this hybrid future, where liquidity flows freely between centralized and decentralized worlds. The race to own this convergence is on.

CEXs’ on-chain push isn’t a zero-sum game—it’s the next phase of crypto’s evolution.