In a follow-up to our previous interview with OKcoin, this time we got the chance to talk with the CTO of the Beijing-based exchange, Changpeng Zhao, who shared his thoughts on his company’s recent audit, the NY state BitLicense and a whole lot more.
Cointelegraph: OKcoin has revealed it has 104% reserves when it underwent an audit last month. Why did you decide to do this audit and are you looking to set a new standard for transparency among exchanges?
Changpeng Zhao: This is a slightly long story. Honestly, we did the proof of reserves in response to user demand. We always wanted to do it, but it was lower priority than the International site or Futures. Around mid August, there seems to be an "organized effort” in the Chinese community to complain about Margin Trading and Futures, saying these features were causing the Bitcoin price to drop.
We suspect these complains were organized by smaller exchanges which didn’t have these features, but we will never know. Their logic made no sense and it was relatively easy to clear up. But then, the complaints shifted towards lack of proof of reserves, which affected all exchanges in China.
OKCoin responded quickly. With the help of Stefan Thomas, OKCoin is the first one to conduct the audit (on Aug 22nd) and release the upgrade for users to verify their account on Aug 23rd. I wouldn’t say we set a new standard in this case. I believe Greg Maxwell first proposed the Merkle Tree idea and Stefan Thomas has done a lot of work with other exchanges. We simply followed their footsteps.
CT: Some have expressed skepticism to the style of audit carried out by Ripple CTO Stefan Thomas. Notably, LakeBTC raised questions stating who were the people invited to look at their partially opened ‘database’? How would you address these concerns and are you planning do conduct future audits in a similar manner?
CZ: Saying “partially” opened the database is incorrect. It shows a lack of understanding of the mathematics behind the audit. If a user is omitted from the audit, it is very easy for the user to find out. That would be very bad.
The Merkle Tree proof-of-reserve is not perfect. Like anything else, it has flaws, which are clearly explained on our audit page. But it is far better than nothing. We do plan to conduct future audit regularly.
Stefan Thomas is extremely knowledgeable, professional and rigorous. He made sure every detail is covered. We had to jump through a few loops to get a couple minor details completely inline. He also did the audit at no reward, just to help the Bitcoin community grow.
During the audit, Stefan said: “if we’d had started doing these kinds of audits years ago, the whole MtGox debacle could have been avoided”, which I thought was pretty classic.
CT: Your company is obviously trying to expand its global presence with OKcoin introducing USD deposits back in July and recently becoming a partner with Cointelegraph’s Media Group. How have these moves panned out so far and where do you see you company in the future as a result?
CZ: The international site is doing well and growing at a rapid pace. The global presence is strategic for us. OKCoin always wanted to be, will be, or is an international company. As the largest Bitcoin exchange in China, OKCoin has no Chinese name. It’s simply called “OKCoin”, even in China. This simple detail shows our international approach and ambition. A name can show a lot sometimes.
CT: You also launched your futures trading platform in the beginning of August. How has the beta stage been going and have you experienced a lot of demand?
CZ: The demand for futures is growing rapidly. A key feature of futures is that it allows you to lock in a future price today. As the market has been on a down trend lately, we are seeing high demand as a result. This is a feature in high demand from the miners or merchants accepting bitcoins. I think we got lucky launching it at the right time.
CT: Back in August, the ‘big three’ Chinese exchanges which includes OKcoin, BTC China and Huobi submitted joint comments on the controversial NY BitLicense proposal. What was the reasoning for this move and do you think this played a role in getting the comment period extended for an additional 45 days?
CZ: As OKCoin want to be an international player, we thought the NY BitLicense proposal could have wide implications. We felt it was our responsibility to comment. We also felt it would be stronger to respond together with other exchanges.
As much as we compete, when it makes sense to cooperate, we do. In our response, we did not ask for an extension on the commenting period as others have asked for it. We wanted our message to be focused.
CT: Chinese authorities have been quiet in regards to Bitcoin in recent months. Do the exchanges have a better idea of the boundaries within which they operate now?
CZ: Since the December 5, 2013 memo, there has been no other official announcement. The December 5 memo clearly states it is perfectly legal for individuals to own and buy bitcoins. We are still operating by those parameters.
CT: Some Chinese exchanges are beginning to enter the lucrative mining business with Huobi recently unveiling a Bitcoin mining services platform Digcoin, which sold out in one hour. Is your company planning to enter the mining space as well?
CZ: It’s not clear to me how lucrative the mining business is. It’s a very competitive space, just like the exchanges. You need to be very good to be lucrative. For the time being, OKCoin is focused on making our exchange products better and maintaining our lead there.
OKCoin is similar in the number of employees to Huobi at the moment, just over 100. For bitcoin companies, it’s probably on the bigger side, but it is still a very small team. It’s great that Huobi is doing all these businesses. I sincerely wish them success in those other areas. We like to focus our energy on one thing and do that thing well first.
CT: What do you hope to see at Shanghai’s Bitcoin Expo on 19th-21st September?
CZ: A lot of laowai (foreigners) mixing with Chinese people. Bitcoin is an international currency. Let’s make the world smaller, and better!