Today Changelly has “Crypto Talk” with a very special guest. Please welcome Changpeng Zhao, best known as CZ Binance, CEO at Binance cryptocurrency exchange and a true crypto pioneer. He launched Binance almost two years ago, and at that time his ICO raised $15 million. To date, the company net worth is around 2 billion US dollars and keeps going up. Changelly CEO Eric Benz discussed with CZ the topical crypto issues, namely: key differences between stock and crypto exchanges, Binance DEX launch, AML/KYC issue, BSV delisting, living on crypto, advice for crypto entrepreneurs, and many more. Have a nice read!
Eric: Hello, CZ! Nice to have you at “Crypto Talks” with Changelly. You started your professional journey at Bloomberg. Taking into account your knowledge of both stock and crypto exchanges working and trading principles, could you please conclude what features of traditional exchanges that crypto exchanges are lacking, and, on the contrary, what advantages do crypto exchanges have over their “older brothers” stock exchanges?
CZ: Hello, Eric. Pleasure, thanks for having me. There are a number of great differences, and I don’t think I can list them all here, but on top of my head, here are a few:
- From the system perspective, traditional exchanges only operates a few hours a day, you can do a lot of processing, upgrades, etc during the non-trading hours. With crypto, even when exchanges stop for a few minutes, it’s a big issue.
- Traditional exchanges only allow a few hundred brokers to connect, usually using dedicated lines. In effect, the exchange system is only servicing a couple hundred large clients. With crypto, we have 10,000,000+ users connecting from 180 different countries, using the unreliable internet, or cell networks. Crypto is much more demanding from a system perspective.
- From the business perspective, in traditional markets, you have brokers and many layers of middle man, and easy asset is only tradable on a small number of exchanges, with specialist (or market makers) providing liquidity. With crypto, each asset is often traded on hundreds or even thousands of exchanges, price is much more fair and much harder to manipulate on crypto exchanges.
- In terms of fancy features or order types, the traditional exchanges are more evolved than the crypto exchanges. This also matches the user segment where traditional exchanges are mostly dominated by a small number of large institutional traders, whereas crypto is still predominantly retail traders.
Eric: What is your attitude towards Bitcoin futures? Do you believe the Bitcoin ETF approval may play for or against BTC price in the future?
CZ: I believe ETFs and derivatives in general should not affect the price of the underlying asset. The price of the underlying asset should be determined by the value of it, either utility value (such as bitcoin) or representational value (such as stocks). Having derivatives may increase the liquidity, and/or increase or decrease the volatility of it (for example futures), but will not fundamentally change the price over the long term.
In general, having more liquidity is better than not, so I think it will be a good thing if approved. But BTC’s price does not fundamentally depend on ETFs.
Eric: So, we cannot help but wonder about the recent sensational case with BSV delisting from Binance exchange. We want to figure out this situation with a cool head. Could you please decrypt which actions and words of Craig S Wright provoked the delisting situation? Also, was it the case with Craig’s hunt on a Bitcoin maximalist Holdonaut that became the last straw in this whole story?
CZ: Firstly, I have shared my perspectives on Twitter over this issue. CSW claimed himself Satoshi Namakoto and constantly caused wars within the Bitcoin community instead of contributing real value for the industry. I personally have had zero interactions with CSW. But pretending to be someone you are not is fraud, which we don’t tolerate.
Secondly, BSV delisting is not because of Craig Wright himself. Our listing review team decided the delisting depending on Binance delisting standard.
Eric: Recently Binance launched Decentralized Exchange Testnet and the new Binance Chain to power the platform. Could you tell us a bit about this project?
CZ: We first announced the Binance Chain and DEX plan last year (March 2018), as part of the efforts to grow the blockchain ecosystem. We managed to launch the product this April. Binance Chain is a blockchain developed by our community, with some initial directions from us; Binance DEX is a decentralized exchange developed on top of Binance Chain, with low latency, high throughput, low fees and UX similar to current centralized exchanges. Oh, and you hold your keys or funds yourself. No need to deposit your funds at an exchange. The purpose of Binance Chain and DEX is to create an alternative marketplace for issuing and trading digital assets, and grow the blockchain token economy.
Eric: Does DEX launch mean that shortly it will fully replace Binance exchange and Binance token will be transferred from ERC-20 to mainnet?
CZ: I don’t know, haha. Frankly speaking, I don’t think DEX will fully replace Binance.com in a short time. Centralized and decentralized exchange have different advantages and meet different demands. Taking Binance exchange for example, we offer 24/7 customer services, hundreds of trading pairs and high market liquidity, and today it is popular with the majority of users. Binance DEX is preferred by those who would like to have full control of their private keys and funds; users at DEX are responsible for their funds security, and have greater freedom of issuing assets, developing tools, etc.
We believe that DEX is a growing trend in the long run, although it doesn’t contradict with a centralized exchange at the current stage. We offer both options and let our users choose.
All BNB token that is stored at Binance exchange and some wallets that we partner with has been automatically transformed into BEP-2 format on the mainet.
Eric: There is an opinion that the IСO format has long outlived itself. However, projects such as Binance LaunchPad restore people’s hope in ICO launch that can work for both crypto entrepreneurs and investors? Could you please tell us briefly what characteristics does the Binance Research team take into account when selecting projects for Binance LaunchPad?
CZ: Firstly, I believe strongly that fundraising on the blockchain is a killer app, and one that will reshape the future of entrepreneurial growth path, the blockchain landscape, and economies around the world. It is such a powerful tool that if used badly, will hurt people. But if used properly, can be tremendously beneficial for us.
Binance LaunchPad has a few key differences from ICOs. We vet projects very carefully, and go to great lengths on due diligence, and also have the power to negotiate good terms. We also help the projects by raising awareness, lending brand credibility, provide liquidity and introduce them to a big user base. Binance LaunchPad is established to help promising blockchain startups to raise funds from crypto investors. We’re glad to receive positive market responses to the LaunchPad projects so far.
Every time we announce a new project, Binance Research produces a report on the project accordingly to give the token sales participants a clear overview of the project. We have the obligation to research on the selected projects and disclose our study to investors.
Eric: Today it seems that representatives of centralized institutions unilaterally set their rules towards crypto businesses, and are not inclined to any negotiation. What’s your attitude towards such a one-sided binding position? Also, what ways do you see can help in reaching a compromise between regulators, governments and blockchain entrepreneurs?
CZ: I wrote an article on decentralization vs. centralization earlier this year, where I mentioned that people increasingly demand decentralization because power and resources are too centralized at the current society. I’m a proponent of decentralization. When it comes to decision making, we listen to the community and try to make the most benefits and transparency for the community.
Unilateral rules made without the support of the community will hurt the community, the economy and also hurt the rule makers. It’s not wise to make rules without community support.
Many regulators need to understand more about cryptocurrency and blockchain, and how this new industry is different from traditional industries. Being one of the most experienced players in this industry, we are willing to help regulators to learn more about the technology, its adoption and work mechanism.
Eric: Talking about AML and KYC, in which cases do you think such policy implementation pays off? In your opinion, what parties should be responsible and take actions if a significant amount of suspicious liquidity goes through a crypto exchange?
CZ: We have a rather large experienced team of professionals doing compliance work. Binance has the most stringent KYC/AML practices in the industry. Quoting from the recent Bitwise report:
“In fact, they have been aggressive in adopting internal tools to address these issues through technology.
For example, on October 17, 2018, Binance completed the roll-out of Chainalysis’ compliance software suite, which uses “pattern recognition, proprietary algorithms and millions of open source references to identify and categorize thousands of cryptocurrency services to raise live alerts on transactions involved in suspicious activity.”142 In November 2018, it partnered with Refinitiv (formerly the Finance & Risk division of Thomson Reuters) to implement an automated Know Your Customer (KYC) platform on its exchange.143 The firm augmented this in March 2019 by partnering with IdentityMind, a reg-tech firm that bills itself as “the only real-time onboarding, transaction monitoring, and case management solution built for digital currency exchanges.” IdentityMind says it offers comprehensive KYC and AML services built exclusively for the blockchain.”
Eric: Now let’s talk about living on crypto. Do you believe if it is possible in nowadays reality? Or to live a fulfilling life a person still needs to have some fiat currency in his/her pocket?
CZ: I believe many people have been living in a “crypto-based lifestyle”, and Binance is trying hard to facilitate mass crypto adoption in all areas. Admittedly, there are still many places that only accept fiat, and you will still need fiat at the last mile, but there are plenty of fiat exchanges that do facilitate the exchange into fiat. Personally, I keep most of my equity in crypto and try to use crypto as much as possible, and only convert to fiat the bare minimum that I know I will spend in the next 2 weeks or so.
Eric: Binance is known for doing various charity work. Can you tell us more about how you decide to initiate such projects and which direction to work in?
CZ: In early 2018, when Binance started to achieve exponential growth, I started to realize that running a start-up is not just about business but also about influence. We want to make a difference to the world and use crypto to do the good things. It’s also about spreading crypto, or the freedom of money. I talked about it with an old friend, Helen Hai, who’s the UNIDO Goodwill Ambassador with years of development experience in Africa, and we decided to start Blockchain Charity Foundation (BCF).
BCF is a nonprofit organization dedicated to achieving global sustainable development by using blockchain technology. We have a crypto charity fund and a blockchain-based donation platform to track the flow and usage of donation, ensuring the donation transparency. We’ve started several projects, most of them targeting at Africa because that’s where most of the bottom billion are based and we see the huge potential of crypto adoption. One example is the “Binance Lunch for Children” projects, which are to provide healthy food for kids in schools across Uganda. So far we’ve managed to help over 200 kids and still continue to drive this initiatives to help thousands.
If anyone wants to donate money to BCF, here is the link: https://www.binance.charity/
Eric: Which advice would you give to those entrepreneurs who are just starting their way in crypto in 2019?
CZ: For traders: before you invest in any coin, please do some research on the whitepaper, team background, community feedback etc; just hold the cryptocurrency that you believe.
For entrepreneurs: please stay transparent and interactive with your community and the public. Hold the cryptocurrency that you believe in, and keep building to create more value.
Eric: How will crypto mass adoption look like to you?
CZ: I believe there will be thousands of blockchains and millions of tokens. I know one day I can pay for metro tickets or street food everywhere in crypto, I mean BNB. 🙂
That’s it, crypto fellow! If you found this crypto talk useful and wish to read more interviews like this with particular crypto entrepreneurs, leave your feedback in a comment. Also, below you can read Changelly forecast on BNB further price behavior:
Nice swaps, Changellions!