I reckon if Binance tricked their users to withdraw in their own blockchain's token and it created a new model for other exchanges to copy and follow, was it not the most natural move for exchanges and it was only Binance did it first?
In a way, banks started it! Instead of withdrawing dollar bills, people accept a number in the bank's own computer system. Even further back you could argue goldsmits started it: instead of withdrawing gold, they gave people paper money.
One of the very sneaky things is this:
Lost coins only make everyone else's coins worth slightly more. Think of it as a donation to everyone.
But lost made-up tokens on Binance's own centralized chain are a donation to Binance! They keep the Bitcoin, you get nothing.
That's a lot more difficult to do for regulated banks than it is for Binance.
We actually have so many exchanges, hundreds of them. ~ Aside from many other exchanges being shady and of low quality
You've already mentioned the problem: I don't trust most exchanges. I don't trust banks either, but because of regulation I know they're not very likely to steal my money. With exchanges, it's still the Wild West out there. They can even use KYC as an argument to freeze your funds. With banks, at least I know who I'm dealing with.
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