Changpeng Zhao, known as CZ — the man behind Binance, one of the largest cryptocurrency exchanges in the world — took part in Cointelegraph China HUB, an online interview column started by Cointelegraph China.
Cointelegraph：The markets are currently seeing high volatility, which has challenged Bitcoin’s role as a safe haven and sparked a crisis of faith in the industry. But you tweeted: ”Still worried about #BTC going to 0? Don’t! So long as I have a penny left, it won't happen.” What three words would you use to describe 2020?
Changpeng Zhao: It’s hard to define the year 2020 with three words. If I must pick three words, I would say: challenge, opportunity and decentralization. The year ahead will be a mix of challenges and opportunities as the industry takes one step further toward the future of decentralization.
The global outbreak of coronavirus does affect certain industries and has caused many countries to lock down. Industries like traveling, tourism and hotels are greatly affected in the short term. However, it also creates opportunities for industries like medicine, health care, online education, etc. Among market activities, great attention has been given to the circuit breaker incidents of the United States stock market. As part of the global financial market, the crypto market has also been volatile for the past couple of days.
There are a lot of people asking if Bitcoin is a safe haven, and we see a lot of confusion around the topic. When we talk about safe havens or the storage of value of a certain asset, we should take the context into consideration. There are a lot of factors affecting the value of an asset, and it also varies during different times. We cannot say an asset is always a safe haven. Bitcoin’s price drop is not the result of a single factor. We need to consider the overall crypto market and even the macro economic conditions. There are different dynamics in play.
In the crypto market, we do have diehard OGs who don’t even hold fiat, intermediary users who have 20%–80% of their wealth in crypto and newcomers who have less than 20% — or even 1% — of their wealth in crypto. Different users will make different decisions. The beginners who have entered the space less than five months ago tend to sell crypto in fear, uncertainty or doubt because they don’t have confidence or a deep understanding of crypto.
Some people do need money to sustain life, like paying rent in the context of a global financial turmoil. They also decide to sell off. As a result, the price has been brought down. Even if the diehard OGs hold crypto and hold the price up to some level, there are still too many people impacting the market.
Compared to the overall financial market, the market capitalization of the crypto market is much smaller, maybe around 1/1000 of that of the overall financial market. It’s inevitable that the crypto market will be affected by activities in the global financial market. When the financial market has lost trillions of dollars, it will affect the crypto market. If fiat crashes, the crypto market cannot solve the issue. But as far as Bitcoin is concerned, it has limited supply, which stays unchangeable in any scenario. So, I would say Bitcoin is a relatively safe haven.
But if we look at this from the other way, we will find it’s a good opportunity to weed out the low-quality projects and keep growing the good ones. There isn’t a shortcut for any industry to prosper. We have had good news from the past two weeks. The Supreme Court of India overturned the Reserve Bank of India's ban on banks dealing with crypto businesses. Shortly after that, Korea legalized cryptocurrencies. A lot of regulatory works in various countries are in progress. I believe all of these will positively impact the industry.
“What’s more, blockchain is much fairer in solving the fundamental problems of the old system, which means the fiat-based system. It’s unfair to use tax incomes to help inefficient organizations. The inefficient organizations should be left there. If the Federal Reserve prints more money to bring up the stock price, it gives CEOs and institutions a chance to cash out instead of helping the retail users.”
A bailout may solve the problems temporarily, but it creates long-term problems. In fact, if the government decides to print more money, it will lead to the depreciation of fiat currencies. Then, if the users have two options — fiat vs. crypto — how will they choose? They will probably opt for Bitcoin and other crypto, which is a great opportunity for the industry to scale.
So, to speak of decentralization, we need to see through the surface. Bitcoin is the first application powered by blockchain technology, and cryptocurrencies only represent a part of the blockchain. The underlying blockchain technology is what truly matters to us. The other example is the public blockchain teams, who work from different countries and are flexible in the time of uncertainties like the coronavirus pandemic. The Binance team has been working remotely from the very start.
CT：You topped our inaugural “Cointelegraph Top 100” list, meaning you’re the most important and influential leader in crypto and blockchain. But, you said in 2019, “I haven’t done so much except building up and leading the excellent Binance team. The real backbreaker is our team.” Can you outline the efforts that the Binance team has undertaken?
CZ: Thank you for the nomination. I’m honored to be in the Cointelegraph Top 100. I hope to lead the Binance team to keep up the pace and contribute to the industry, bringing blockchain and crypto to a wider population and boosting adoption toward the mission of driving freedom of money.
“The past year can be summarized with the phrase #KeepBuidl. The year 2019 has witnessed many new breakthroughs through the efforts of the team.”
In 2019, we launched Binance Chain and Binance DEX. Initially, Binance Chain will focus on token issuance, blockchain financing, etc. So far, there are about 180 tokens issued on Binance Chain. About 100 of them have been listed on Binance DEX, offering more than 120 trading pairs. Binance DEX has been able to overtake its predecessors on the strength of high speed, good depth and high liquidity. The block confirmation time is one second.
To introduce more talented developers to Binance Chain, we launched Binance X, a developer-focused initiative to identify the most talented developers, support them through the fellowship program and encourage them to build on Binance Chain.
Meanwhile, we have launched margin trading — Binance Futures — fiat gateways that support more than 170 countries. Our fiat-to-crypto solutions include peer-to-peer trading platforms, fiat on-ramps and fiat exchanges that Binance co-founded with local partners, such as Binance.US and Binance Singapore.
We even went one step further in that regard. Last year, we launched the Venus project. Binance intends to cooperate with governments, businesses and organizations in the issuance of a series of fiat-backed stablecoins, with the target of offering financial services to people who don’t even have a bank account. In the process, Binance plays the role of tech, risk-control and compliance provider.
As part of the project, we’ve issued Binance USD, the stablecoin backed by the U.S. dollar, in partnership with Paxos. The stablecoin has been approved by New York Department of Financial Services and is fully compliant. Recently, we issued Binance KRW, the stablecoin backed by the South Korean won, with BXB. There are more projects in progress. Stay tuned.
CT: Binance has grown sharply from the initial trading platform built up in 2017 to a whole ecosystem. What is your vision and consideration?
CZ: We have introduced multiple trading services, built the Binance ecosystem and launched the Open Platform initiative. By opening the technology and resources of Binance, we endeavor to create more and more fiat–crypto gateways and dramatically reduce the barriers of entry for users.
Under the Open Platform initiative, we offer the Binance Broker Program and Binance Cloud program. We launched the Broker Program and announced a big upgrade recently, allowing other exchanges, platforms and institutions to bring trading services to their users through an application programming interface by leveraging Binance’s liquidity and market depth.
Binance provides order matching services, account management and settlement systems for brokers so that they can fully focus on business development and receive profit-sharing on trading fees. So far, more than 100 institutions have applied to participate as a Binance Broker, with around 50 already onboarded.
The other approach we’re pursuing is the introduction of Binance Cloud. Binance KR, the first digital asset exchange fully powered by Binance Cloud, launched today. Binance Cloud is an infrastructure solution for partners to launch digital asset exchanges by leveraging Binance’s technology, security and liquidity. In five years going forward, Binance Cloud exchanges will overtake Binance.com and contribute the majority of trading volume.
In the future, the Open Platform initiative may also encompass the Binance P2P platform and Binance Chain. Binance’s P2P platform serves as an open marketplace, facilitating direct trades between users and merchants. The Binance Chain is a public blockchain initiated by Binance and built through joint efforts of the community. So far, a lot of projects have migrated to Binance Chain. The quality of the projects is pretty high. Hopefully, more projects and developers will build on Binance Chain.
CT: In the past you said Blitzscaling, the book by Reid Hoffman, had inspired you a lot. Are there any management strategies for enterprise expansion that you learned from it and used with Binance?
CZ: I’m a big fan of Blitzscaling and advise all Binancians to read the book. It’s a great guide book for entrepreneurs. If you look back on how Binance has evolved in less than three years, you might say it’s a typical example of blitzscaling. As a startup, we feel the impetus to launch new products in a fast manner in order to meet the demands of the community.
“The Binance team is used to rolling out new products within a tight time frame, outpacing its counterparts by several times. It’s good if there’s a product/market fit. If not, we will pivot quickly and focus resources on products that really matter.”
While business development is vital to us, it’s only part of what makes Binance. At Binance, we devote a lot of resources to build and nurture the industry. Together with the community, we spent about a year building the Binance Chain and launched it in April 2019. We also acquired or invested in a few projects and supported the development of transformative projects through Binance Launchpad in an effort to grow the blockchain ecosystem and the crypto industry.
CT: While the transformation from a centralized exchange to a decentralized platform is the overall strategy of Binance, the decentralization of Binance DEX once was questioned. How does Binance approach such issues and what are the biggest challenges at this stage?
CZ: It’s very interesting to discuss centralization versus decentralization. Firstly, decentralization is where we are heading. But in the short term, centralized and decentralized exchanges will coexist.
For those who have a solid technology background and strong sense of security — and who also long for 100% control over their assets — they can opt for decentralized exchanges and wallets. But if you don’t want to manage the assets, prefer to use the custodial services of a trusted provider, and hope to get handy help when you come across a problem, a centralized exchange is there for you.
It holds true that the centralized exchanges are the main targets of cybercrimes, especially the major crypto exchanges that hold a great number of digital assets. Cyberattacks are getting more sophisticated and organized. So, a centralized exchange must continue to enhance its tech infrastructure and iterate its security system to provide better protection to users.
With increasing demands, both centralized and decentralized exchanges have come along with some issues. To take Binance DEX for example, even though it has become the top decentralized exchange in a very short time, it still has much room for improvement in terms of depth and liquidity.
CT: If you could travel back in time, where would you like to go?
CZ: If there’s a time machine, I think I will go to the future and see how blockchain has impacted humankind, and how crypto is as widely accepted as fiat is today and has refined the way of transferring value.
In the future, people will have better knowledge of the origin, setbacks and developments of blockchain and will use blockchain technology in every aspect of their lives. We don’t have to say how much we believe in crypto, we act on it.
Cointelegraph Spain: Bitcoin’s halving is approaching and everybody is talking about it. What do you expect from it?
CZ: The speed of new supply will decrease, and demand is increasing. So, I think the logic is quite simple.
“I don't comment on price. I will let everyone make their own judgments. Especially now with the Fed printing so much money, the effect will be real. Some people say I am the counter signal, haha. So they should sell every day, as I am bullish everyday. Probably won't work out too well.”
The interview has been shortened and slightly edited for clarity.