Exclusive interview with Binance Changpeng Zhao: I never do derivatives trading because it is very good
Text | Qin Xiaofeng Editor | Mandy
Produced | Odaily (ID: o-daily)
2019 is over, and Binance has been busy this year.
At the beginning of the year, Binance took the lead in launching IEO (Initial Exchange Offering), which attracted the industry to imitate, and opened the first model of exchange-issued assets; after that, Binance launched contracts, OTC (over-the-counter trading) at a very fast speed. At the same time, Binance established Binance US with its partners to provide services to American users; in addition, Binance also bought and bought frequently, and successively acquired dozens of companies such as options platform JEX, data analysis platform DappReview, and investment derivatives trading platform FTX.
At the same time, due to the restart of the battle for the Chinese market in the second half of the year, Binance also repeatedly rubbed against its competitors and fell into the whirlpool of public opinion many times.
In 2019, what is the significance of quickly testing new businesses and acquiring companies at high frequency? How will Binance face the competition and take the next step in 2020?
Recently, Binance founder and CEO Changpeng Zhao accepted an exclusive interview with Odaily, explaining to us the change of Binance’s business focus, the development trend of exchanges and even the cryptocurrency industry, and disclosed some exclusive information and data.
Zhao Changpeng revealed that in 2019, Binance announced the news of the wholly-owned acquisitions of 3 companies (JEX, DappReview, WazirX), but in fact there are still 6 unannounced, and Binance has also invested in 21 companies including FTX.
For the coming 2020, Changpeng Zhao told Odaily that Binance will focus on opening up the global fiat currency deposit channel and improving existing products and services. It will not stop IEO but will slow down the speed.
He also revealed that Binance, which has never been involved in the mining industry, is likely to launch its own mining pool this year, and bluntly said: 2020 will be a very interesting year.
secondary title
Binance’s 2019: 9 Whole-Owned Acquisitions, 21 Investments, Funding 59 Developers
Odaily: As the CEO of Binance, which businesses are you devoting more energy to at this stage?
Changpeng Zhao: At present, there are specific people in charge of various businesses of Binance. Generally speaking, there are very few businesses that I have direct contact with. My energy is also mainly invested in the company's overall strategic planning level, such as expansion speed, acquisitions, etc. In addition, since I have a technical background, I will have more contact with the product team.
It should be noted that I generally don't have much contact with the business of investing in currency listings.
Odaily: Since the beginning of this year, Binance has invested in fewer blockchain projects, but more mergers and acquisitions. It has successively acquired the options platform JEX, the decentralized application analysis platform DappReview, the investment derivatives trading platform FTX, etc. (there may be unknown ones), could you please explain the deep meaning behind the relevant acquisitions?
Changpeng Zhao: Let me tell you about Binance’s performance in 2019: a total of 9 wholly-owned acquisitions were made throughout the year, and only three have been announced so far (JEX, DappReview, WazirX); including FTX, a total of 21 companies have been invested; Funded 59 developers and supported them to develop some new concept products.
The motivation behind the relevant actions is also very simple, mainly three points:
One is to enrich the products and business for the development of Binance. For the business that Binance lacks, the outside world already has complete products, a mature team, and a relatively large number of users. Why not acquire them? This is actually a kind of "recruitment" in a broad sense.
Second, the acquisition "cost" is lower. If we rehire people to do new business, the growth rate of the company will be very slow, and the right people may not be found. In addition, there is a high probability that the teams we are going to acquire are doing better than us (doing these new businesses ourselves). Since you can't beat it, it's better to buy it.
The third is to support the development of the industry. As the leading exchange in the early stage of the industry, Binance is relatively profitable and has the ability to support some developments in the industry. If the developer's project is doing well, we can first give sponsorship to let you develop the product. As for the shares or tokens, it is not our first consideration.
Odaily: You just mentioned that you have funded 59 developers. What are the funding criteria? What is the maximum funding amount?
Changpeng Zhao: The amount of funding varies from country to country: in the United States, it will generally provide three months of funding, with US$5,000 per month; one year. In underdeveloped areas, most young developers do not have high requirements for the quality of life, and the amount of funding is still enough for them to live.
Regarding the funding criteria, we generally fund some interesting projects that can help the industry or Binance itself develop. Currently, 80% of funded projects are related to Binance Chain.
Odaily: Binance Chain has been online for 8 months now, and over a hundred assets have been issued. We have also seen some technical progress and scenario cooperation cases of Binance Chain. But there is a saying that people who go to Binance DEX are always trying to sprint to the main board. How do you plan the future development and application of Binance Chain?
Changpeng Zhao: From the Binance main site, we definitely give priority to projects on the Binance Chain and projects that already have trading volume on Binance DEX. Moreover, we must also be the main promoter of Binance Chain, because the more people use it, the higher the value of BNB will be.
However, Binance Chain, Binance DEX and Binance Main Station are completely separate and relatively independent. At present, the development of the two has been very community-based, and the teams have been very scattered.
At the data level, Binance Chain currently has more than 160 assets, Binance DEX has more than 110 trading pairs, and the number of user-created addresses is close to 300,000, which is developing rapidly.
secondary title
Binance's 2020: to open up fiat currency channels around the world
Odaily: Binance has acquired some businesses (JEX options, altcoin contracts), does it mean that these businesses will no longer be available on the main site?
Changpeng Zhao: Binance’s various businesses are relatively independent, and internal products can compete with each other without exclusivity. Even if there is no internal competition, the external will also compete with us. Therefore, JEX has options, but it does not mean that the main station will not have options.
Odaily: This year, Binance also launched various businesses that were not very promising: OTC (over-the-counter trading), contracts, lending, etc. Why is there such a layout?
Changpeng Zhao: It should not be "I was not optimistic about it before", it should be "We were not able to do it in the past" or "It was not suitable for us to do it in the past".
In the past two years, Binance has been focusing on currency trading. The idea at that time was very simple: first make the best currency trading services, and then develop other businesses. With the improvement of the currency business, especially the fact that there is no major growth and fluctuation in currency transactions this year, we have started to launch OTC, derivative contracts, lending and other services. Other platforms have already carried out these services, with a better user base and a relatively complete market. As Binance is a full financial service platform, these businesses are also indispensable. If Binance has the ability, we will do our best to provide it.
In addition, when all financial products are placed on one platform, its network effect will be greater. Users can conduct various transactions such as currency, OTC, etc. in one exchange, without having to go to several exchanges to transfer, which not only improves efficiency, but also enhances security.
Odaily: You just mentioned security issues. In fact, Binance also suffered a theft this year, losing more than 7,000 BTC. Exchange theft incidents have also occurred frequently in the industry. What do you think of the security of centralized exchanges for so long?
Changpeng Zhao: First of all, losing coins is very common in the field of cryptocurrency. Not only centralized exchanges, but ordinary individuals also happen from time to time. It’s just that the amount of coins lost by individuals is small, and no one pays attention to it. Exchanges are more likely to become the target of hackers because of the large amount of deposits, but they also pay more attention to security protection and are willing to invest a lot of money. The security protection capabilities of most top exchanges have always been better than retail investors, especially exchanges that survive hackers every day.
Secondly, as far as I know, more than 99.9% of the centralized exchanges have lost coins, including several relatively large exchanges in China. It’s just that most exchanges can bear the loss after losing coins, so they didn’t announce it to the public. Binance is relatively transparent. After the coin loss incident occurred this year, it was directly disclosed, and users did not suffer any losses.
Furthermore, in the long run, this incident has also prompted us to improve our security performance by several notches. And, we also set up a SAFU fund to cover the loss of theft, and 10% of all transaction fees received will be allocated to SAFU to provide protection for users and their funds in extreme cases.
I think Binance is doing much better than most exchanges in the industry, and it is also safer than before.
Odaily: You just mentioned that the safety performance has been improved several levels. Can you give some specific examples?
Changpeng Zhao: Now Binance has achieved a zero-trust foundation, and no one's computer can break through our security system. Any operation requires the cooperation of several people to obtain all permissions. This design concept is somewhat similar to "multi-signature". In this way, if any one person goes wrong, there will be no loss, and many people need to make mistakes at the same time.
Many people may misunderstand that as the CEO of Binance, I control the cold wallet. In fact, my authority is less than one-fifth. Recently, my management authority in the Binance background has also been deleted. Because I usually have fewer and fewer opportunities to operate directly in the background, I often don't log in for a month or two. That being the case, it is better to delete the permissions to reduce the risk, which is also one of our risk mechanism designs.
Odaily: What is the biggest goal of Binance in 2020?
Changpeng Zhao: In 2020, we will focus on opening up fiat currency channels around the world.
At present, there are more than 180 fiat currencies in the world, and Binance supports 21. There is still a lot of room for improvement. In addition, each legal currency also has different payment channels, such as credit card, bank transfer, mobile payment, etc. We still hope to realize multi-channel payment for each legal currency. In this way, a competitive relationship will be formed between channels, thereby reducing transaction fees and allowing users to obtain greater benefits.
In addition, improve existing business products. At present, the layout of the business sector is very complete. In the next year, we need to deepen each business, continue to optimize products, and provide high-quality services.
secondary title
Exchange Competition: We Won't Stop IEOs, But Slow It Down
Odaily: Summarize the development of exchanges in 2019 with one key word, what can you think of?
Changpeng Zhao: I think it is "survival of the fittest".
In 2018, we saw some alternative models launched by exchanges, such as "trading is mining". In 2019, some bad exchanges were completely shuffled, and the head effect was more obvious. In addition, although the industry did not develop rapidly in 2019, I think it is not as bad as some people say. After all, the highest increase of Bitcoin has also increased by more than 250%, which is not easy in other industries.
Odaily: We can see that the "function" of issuing assets and endorsing assets this year no longer belongs to the public chain, but has been transferred to the exchange that owns the right to speak and flow. What do you think of this phenomenon?
Changpeng Zhao: Many people criticize the exchange's IEO because they think it is too centralized, and they tend to be more decentralized, the better, but this is not the case. When anyone can issue IXO, scammers will increase, and the probability of investors being deceived will also increase.
Taking the IEO (Initial Exchange Offering) model as an example, exchanges will take on brand risks when issuing assets, which also requires them to conduct more stringent reviews of projects to protect the rights and interests of investors.
However, the IEO model is still broken by some exchanges. They didn't understand the logic behind it at all. They just thought that this model was very popular and copied it. They just pulled a project and didn't do the review. Some exchanges even conspired with the project to commit fraud. In the end, it not only violated the original intention of protecting investors, but also damaged the brand of the exchange.
From the perspective of Binance, we are not opposing the public chain by issuing IEO, and competing with the public chain for business. It’s just that we also see that there are many problems when public chains issue assets, so why not take a step back and turn to centralization or semi-centralization? At least from the current point of view, the effect of Binance is still good.
Odaily: Binance is currently reducing the frequency of launching IEO projects, and many exchanges have already stopped IEO. Does Binance plan to stop?
Changpeng Zhao: The reason for the decrease in frequency is that there are fewer good projects. At present, there are still many projects looking for us to conduct IEOs, but few projects can pass our assessment in the end. In addition, the communication period between us and the projects is relatively long, so everyone feels that our frequency is decreasing.
However, I think Binance will not stop IEO, and we will slow down when there are fewer projects. Because, IEO is actually a rigid need: the project needs global financing to increase popularity, and it can also bring users to the exchange, which is very valuable.
Odaily: The rise of mainstream platform coins this year has surpassed that of BTC. As the inventor of platform coins, what do you think of the long-term value of platform coins?
Changpeng Zhao: I think a coin can start from a platform, but if it is only useful on one platform, its value is still limited. So my suggestion is to increase the application scenarios of platform currency. If the platform currency is only valuable on one platform, it is very close to securities. It only reflects the income capability of this platform, but does not reflect its usability.
secondary title
Exchange business expansion: Binance may also launch a mining pool, but there is no need to issue coins
Odaily: This year, the business of many exchanges has also changed from a single direction to a comprehensive trading platform integrating spot, OTC, leverage, lending, futures and even options. There are still players entering the contract exchange track. Some people say that this is "drinking poison to quench thirst" and speeding up the draining of stock and flow. What do you think?
Changpeng Zhao: I don’t think so. In fact, the number of users is increasing, and there is no such thing as draining the existing traffic.
Trading is always a user's demand, and it will not be squeezed out because of the increase in products. After all, there is no business that forces users to use it. Only when the product is valuable, there is a market, and the user needs it, can it be used. Of course, it is not ruled out that some users follow suit, but the value of the product cannot be negated.
Overall, a comprehensive trading platform is actually good for users. However, it is also difficult to provide a comprehensive service platform, which requires a very high level of technology and operation. Binance has been working for more than two years before it gradually developed these capabilities.
Odaily: This year, we also found that the business of the exchange has become more and more widely covered and connected up and down. One fish eats more (making a mining pool and a node). What do you think of this phenomenon?
Changpeng Zhao: At present, Binance does relatively little related to mining. We are also planning, and it is very likely to launch Binance’s own mining pool in 2020, but it has not been 100% finalized yet.
In my opinion, exchanges have a great advantage in being a mining pool. They can use the existing transaction fee business to support the development of the mining pool. Some exchange mining pools are fee-free, which is very attractive to users. The coins mined by the user are directly stored in the exchange, and a handling fee can be charged for future transactions.
However, at present, it can also be seen that the POS mining pool of the exchange is more brilliant than the POW mining pool. This is mainly because POS is still relatively new, and it is easier to pledge through exchanges; while POW mining pools have undergone long-term development and optimization, and the pattern has been formed, and it is indeed difficult for new mining pools to compete. But with the development of time, I believe that the gap between POW mining pools will gradually shorten.
My judgment is: in the future, the head exchange mining pool will lead other mining pools.
Odaily: Many exchange mining pools have also issued mining pool coins. What do you think of this phenomenon?
Changpeng Zhao: To issue coins, an exchange mining pool must first consider its own business volume. It is logically reasonable for mining pools to issue coins as user incentives. However, whether the coins issued by the mining pool have sufficient liquidity and usage to support their prices is a big question. If the business volume of the mining pool is not large, the pressure to maintain the currency price will be great.
Secondly, I think there is no need for exchange mining pools to issue coins. It is best for an ecosystem to share one coin. Let's take the problem to the extreme. Suppose the exchange has 100 sub-businesses. Is it better to issue 100 coins or share one coin? I think it is definitely better to have only one coin. Because the circulation of this currency will be very good, the number of users will be more, and the network effect will double. The value of this one coin far exceeds the value of 100 coins. Issuing a new coin, although it sounds like there are many new ways to play, in fact, the total value of the ecosystem is that big.
secondary title
CZ: I never do derivatives trading, because the level is not good
Odaily: In 2020, what changes do you think will take place in the form of exchanges or in the competitive landscape?
Changpeng Zhao: First, the government’s regulatory policies will be clearer, which will have a greater impact on some localized exchanges. Although the attitudes of different countries are still unclear, overall there should be more positives. Because all countries are now competing on how to use blockchain technology and accommodate blockchain business, most countries are working hard to attract blockchain startups, including trading platforms, which is relatively favorable.
Second, a “regulatory sandbox” may be born. There will be many new exchanges born and regulated in the sandbox. For exchanges, in order to develop, they must be very compliant in 2020 and must respect regulations.
The third is that the competition of top exchanges will become more intense. Binance is becoming more and more internationalized and globalized, and some exchanges may become more and more localized. It is still unknown which model is better and grows faster.
Odaily: In 2020, what changes do you think will take place in the entire blockchain industry?
Changpeng Zhao: First, the government’s acceptance of blockchain will increase, and it will embrace blockchain technology more actively and introduce relevant supporting policies. The second is that the blockchain industry will have some new attempts, such as game coins in some cross-server games, which can be changed to circulate on the chain. Third, the payment field, especially cross-border payment, will achieve considerable development in 2020. Fourth, some financially underdeveloped countries, such as Africa, may be more likely to accept digital currencies.
Overall, 2020 will be a very interesting year, and we look forward to seeing some new things in the blockchain industry.
Odaily: At the end of the interview, can you disclose your holdings? Which trading method would you prefer, spot, futures or options?
Changpeng Zhao: I only hold BTC and BNB, of which BNB accounts for more than 97%. Although the heavy position in BNB, the price will fluctuate in the short term, but it is still affordable. One is that my personal risk tolerance is relatively high, and the other is that I know 100% what the BNB ecosystem is doing, and Binance’s cash flow has never been a problem.
By the way, I bought Bitcoin after selling my house 5 years ago, and it has never been touched. Regarding the Bitcoin halving market, it is definitely positive in general, but it is impossible to predict how much Bitcoin will rise to. In contrast, I pay more attention to the usage rate of Bitcoin. How many people have entered the industry and how many people are using Bitcoin? This question may be more core.
In daily life, basically holding currency does not trade. There may be occasional over-the-counter transactions to exchange some local legal currency, but the amount is relatively small, usually hundreds or thousands of dollars.
Recommended reading:
Recommended reading:
