Time: June29, 14:00 - 17:00 Beijing Time
Groups: Mars 3.0 wechat group
CZ Zhao: Founder and CEO of Binance, Blockchain and trading system expert, former Communities Research head of Bloomberg, former Blockchain.infor CTO
Fred Wang: Founder of Mars Finance, chairman of Linekong (HK. 8267), and founder of Consensus Lab, the founding partner of Geek Founders
Fred Wang:Hi, everyone. Welcome to MarsFinance at “10 Q with Fred Wang”.Today joining us is the founder and CEO of Binance ZHAO Changpeng.He is known as “CZ” to most.
The attention from Forbes made him quitefamous. He took only 180 days to get on the list of billionares of DigitalCurrency bigshots. But what we overlooked is that he built the trading systemwhen he graduated from college, and it has operated until today and Changpenghas been working in the business for 21 years. By the 10000 hours rule ofmastery, he is a “world class master”. So maybe it makes sense that he hasachieved such success.
CZ?Zhao:To be honest, I did the business for 20 years, and at least 20000 hours.
Fred Wang:CZ tends to fly under the radar. Hemay tweet some, but he seldom takes interviews, so today we thank him forjoining us on “10 questions with Fred Wang” of Mars Finance.
CZ?Zhao : To be honest, I did the business for 20 years, and at least 20000hours.
Actually,I am not quite as low key as you said. I am a tech guy by nature, and I do moretech work normally. I am not so good at talking, so I often stay at home.?
Fred Wang：Congratulations,Chang Peng. I heard some good news last night, that Binance finally took thefirst steps towards the fiat currency exchange business. Moreover, you alsoannounced that Binance will establish a cryptocurrency exchange in Uganda and anew platform called “Binance Uganda” to support the exchange business of UGXand other cryptocurrencies. The breaking news was released by Mars Finance.
However, compared with competitors, thepace of fiat currency exchange business of Binance is noticeably slow. What isthe reason for the business delay? Why did you choose Uganda as the “firststop” of the fiat currency exchange business? On the other hand, I also heardthat Binance will launch the fiat currency exchange business in an Asiancountry, is it true? Could you please disclose more details?
CZ?Zhao?:?I think many people are targeting advanced economies because it’seasy money, but I think in order to really develop the industry, we need tospread blockchain and cryptocurrency all over the world. Africa has a hugepopulation base. As a leader in this industry, we need to do this.
We have our own strategy and pace, and wedon’t follow others, so when others did fiat currency exchange, we did coin tocoin exchange. Then people asked why we didn’t support fiat, which has a biggermarket. I was skeptical back then but now is a good chance to open all thechannels of fiat currency. Players with large volumes can now access Binancedirectly.
Uganda is the 1st stop. I think it is goodfor our global strategy. Be it fiat currency or coin to coin, we do it with aglobal view.?
Fred Wang：Thefiat currency business allows more investors to purchase cryptocurrencies byusing fiat currencies. The exchange will therefore attract more users.Meanwhile, investors can easily cash-in digital assets. However, some peopleare not optimistic when it comes to the fiat currency exchange business. Theybelieve that the nature of cryptocurrency is a kind of scarce information code.Therefore, some people think if cryptocurrencies are able to be traded by usingfiat currencies on a public platform, it will definitely create an asset bubble.Moreover, it is not data innovation. I think that you must have had in-depthcommunication with the financial regulatory agencies of Uganda, so I would liketo know what you think about it.
CZ?Zhao?:This idea is not logical. The channel between fiat and BB should bevery wide, as wide as possible, so that more people can get in and out freely.Digital currency is good stuff. My experience is that it’s one-way, and peopleget in and normally will not get out so I don’t think there is much need toworry. What we need to do is to widen the bridge so more people can get ineasily.
We did have in-depth exchange with thefinancial regulators of Uganda. They are very supportive.?
Fred Wang: Binance took five months to become the world’s largestcryptocurrency exchange in transaction volume. However, FCoin has pioneered the“Trans-Fee Mining” model. It only took 15 days to become the No.1 exchange.FCoin said that its transaction volumes equal the sum of volumes of the secondbiggest exchange to the seventh biggest exchange. What was your initialreaction to FCoin’s market performance?
CZ?Zhao?:?I want to add something. As we step up our effort, more countriesand more regulators will come to support cryptocurrency. This is only way togrow the whole industry.
Ha. We need to know that we need to compareapples to apples. A falsified transaction volume can’t be compared with realones. It’s like comparing air with gold. Two accounts can just with each otherand it is easy to have 10 million or 100 million transactions a day.
A falsified transaction makes the parametermeaningless. I think we should look at user accounts and other parameters.However, other parameters are not public and not so straightforward.
Exchange and fee models have taken manyexperiments. From zero fee subsidies to maker/taker, there are many models. Idon’t worry about them. In the end, the most important battle to fight is aboutproduct and service.
My concern about this model is that it ishurting the users, and they are being taken advantage of.
Fred Wang: On the other hand, you are not optimistic about the “Trans-FeeMining” model. Moreover, you even depart from your normal behavior this time. Youmade quite a few Weibo posts attacking FCoin. In your opinion, it is a kind ofhigh price ICO. It is not only a covert ICO, but a high-price ICO. Why have youhad such a strong reaction to this? Some people think that Binance has reliedon high-frequency trading. FCoin is likely to be a huge threat to Binance. Doyou think that the “Trans-Fee Mining” model will impact the DAU (Daily ActiveUser) model of Binance??
CZ?Zhao :We analyzed the data. Our user numbers in the past were so little,and they are all very sophisticated and smart. They could easily see throughthe loophole of this model.
I would like to share with you myobservations and doubts about this model.
For any business model to work, it needs tobe sustainable. Think about it, a few weeks after blocks can no longer beproduced, how can this business model sustain itself? Who would pay a 1%transaction fee? Is it not a total waste? Why not just hold the coinsthemselves to receive a dividend? However, when no one is trading through theplatform, the platform would have no income to pay the dividend. When return islow, who would hold the coin??
Say Binance now has nearly 10 millionusers, and 1000BTC transaction fee, so 0.0001BTC per miner. You can even pay anonline bank transaction fee with 10 days’ dividend. Who would put their moneythere? Then everyone would start to sell off. What would happen to the price ofthis platform?
Great. There is one solution. We canattract trading by lowering the transaction cost but then the revenue anddividend will be lower as well. Who would hold this platform coin? What wouldhappen to the price of this platform?
There is another solution. We can asklisted project owners not to sell their coins in order to reduce liquidity andstabilize the price. This is like fighting a jet fighter with a bow and arrow.A good project can go to any exchange they want because they can bring exchangeusers and traffic. They would not agree to it. There are also other issuesconcerned but I am not going to go so far as to tell other exchanges what to dohere.
If it can’t sustain itself for a longterm, we know this model is doomed to fail sooner or later. There is no need tostudy it further. There are other issues even if we just look at the shortterm.
We can take a look at the business model atthe mining stage. Someone pays a transaction fee, which will be distributed toall platform coin-holders as dividend. The platform has no revenue. Theplatform will issue 100% platform coin equivalence to the fee at zero cost andpay the transaction maker as commission and charge 20% of the platform coin ascommission at zero cost. In the meantime, the team can unlock 100% at zero costagain.
Now, 100% of the fee is given to thedividend beneficiaries. Even if they all transfer the dividend to platformcoins, the additional issuance will reach 220% of the value. With thissupply-demand relationship, what do you think of the coin value?
Then coin price drops. Less people buy.And a vicious cycle is started.?
So I think it’s almost a miracle that themodel has survived until now.
Such a miraculous survival should be forthe following reasons: One, some media whose interest is bound with it keepsaying good words. Second, some players who got locked up in early stage haveno choice but to take others in to free themselves.
The biggest reason is he changed theconcept smartly. Very good camouflage. 1. 100% fee refund. 2. 20% additionalbonus for recommendation. 3. Dividend. These are the words sheepshearers likethe most. It is actually a zero-cost platform to cheat others out of theirprecious digital currency.
Fred Wang: On Jun 19, OKEx announced that they would support 100 exchanges thatare implementing “Trans-Fee Mining” model.? Shortly afterwards, Binancealso announced that they would launch the “Digital Asset Exchange Open AlliancePlan” and support 1000 exchanges that are implementing “Trans-Fee Mining”models. I remember that you mentioned that the “water” of funds must be muddy.Now, is the “water” muddy?
CZ?Zhao?:It is a significant phase for the industry. Now hasthe water blurred?
It’s actually simple. If it’s a good model,we will learn. We are modest and we can copy. Copying is easy. Many copied bnb.You may not understand that we did take off by ICO financing but afterfinancing all we can rely on is just to make a good platform.
Fred Wang: Many people, including Jian Zhang, said that the traditionalcryptocurrency exchanges are not able to implement the “Trans-Fee Mining” modelbecause the rules and the gameplay of the platform cryptocurrencies havealready been established. Yi He said that the “Digital Asset Exchange OpenAlliance Plan” actually did not think much of it. But Bit-Z, one of thetraditional cryptocurrency exchanges, started using the “Trans-Fee Mining”model on June 25. According to an official release, Bit-Z completed 1 millionBZ mining in 25 minutes after launching the “Trans-Fee Mining” model. Thetransaction volumes, which reached 6.18 billion Yuan in 3 hours and 27 billionYuan in 12 hours, ranked No.1 in the world. Do you have any coping strategy forthe completion? Or are you considering another plan?
CZ?Zhao?:It’s difficult to answer in public. If need be there will be afollow-up, but we can’t say what it is. A feature of Binance is we often have abackup. It’s a sufficient backup plan and very quick to execute.
We normally don’t announce news or hold apress conference to say we have a plan. We will announce when we have it done.
Fred Wang: Last year, Binance expanded to the overseas markets and establishedmany new marketing strategies, such as the fees refund and commissions refund.However, recently the development speed of Binance seems a little bit slow. Forexample, Binance announced a platform cryptocurrency plan similar to OK afterit had been implemented by many other exchanges. Do you think that thedevelopment of Binance has slowed down as the company has grown bigger?
CZ?Zhao?:?What? No, we are not very conservative. The conservative ones shouldstill hold fiat currency. Haha.
I have explained the model. According to myanalysis, he cheated the users very much. He doesn’t have any long-term value.
We didn’t slow down. Look atUganda and our international move. How many presidents have we met? There is alot more we can’t say. Are we slowing down??
Fred Wang:Compared with the traditional financial market, a cryptocurrencyexchange is like a “super financial center” because it integrates two corefunctions——the audit function of the Securities and Exchanges Commission andthe circulation function of the exchange. The exchange has sat on the top of theentire cryptocurrency ecosystem. As I know, listing a cryptocurrency on Binanceis extremely difficult. Many traders believe that the quality ofcryptocurrencies listed on Binance is very good. Meanwhile, Binance is moretrustworthy than other exchanges. In statement, Yi He said that Binance is themost rigorous exchange in the world for trading cryptocurrencies. Thepercentages by which cryptocurrency price fell on its first day of trading ontwo competitors were 81.25% and 77.94%, but the percentages by which thecryptocurrency price fell on its first day of trading on Binance was 11.76%. Afew numbers of cryptocurrencies were listed on Binance from April to May. Howcan you achieve such low percentage? Is it because of your strict listingpolicy for cryptocurrencies?
CZ?Zhao?:Wewill ignore some of the questions inserted before, not because we are stingy,but because I respect others. We want to be respectful to everyone in thegroup. After other questions they can be answered separately. One thing is donefirst, and the second thing is done. Otherwise it will be chaotic.
Why is the rate of breakage so low? Infact, this may not be understood by everyone. I think strict review is thesecond link.
The most important thing in the first linkis that you want to attract good coins onto the trading platform. First, youneed a brand effect, a reputable brand.
So what we do with brand must be accurate.
Once this happens, it’s possible to get apositive energy cycle going.
Of course, the review ability of our listingteam is also very strong.
Some of them often start work at 9:00 inthe morning and go home at one or two AM.
I read white papers and study projects allday, every day.
But even then, sometimes we cannot estimatethe future development of the project, so there will be pits that we fall intoat times. However, the number of pits we fall into should be very small.
On the other hand, we never list a currencysimply because of a good relationship with the issuer. There are many peoplewho have a good relationship with me or a veteran in the industry come to me,but we use the same reviewing standard for all of them. This also tends tooffend many people. But our principle is always the same, we protect the userfirst!
Fred Wang:Yi He said that there is only one channel for listing cryptocurrencyon Binance. The application should be submitted to the website of Binance, thenthe review team will retrieve information and assess in different dimensions bydifferent groups in Binance. Would you please share the rules of cryptocurrencylisting here? Have you made any adjustments or improvements to the rules?
CZ?Zhao?:In fact, the principle of our review project is also very simple.There must be a good team, an experienced team, a good product, and users ofthe product.
However, we generally do not set hardindicators, say how many there must be, or that there must be 10,000 users intg.
Because if we set such a goal, others willmanipulate it.
Therefore, the specific rule of ourcurrency review is a black box, but it is very simple. As long as you havecompleted your own projects, we will list it.
Fred Wang:At present, there are three common types of cryptocurrency listing:
1.??? Auditing by platforms
2.??? Voting for listing
3.??? Ranking by therecharge amount.?
What do you think which is most responsibleto investors?
CZ?Zhao?:Whenwe go listing, we do look into details, including the technology, code, etc.
I think all three models when managed wellcan work well. It’s not a problem of the model. It’s the parameter-setting, balancingand how to deal with malicious participants.
How to guard against the influence ofinterests, etc.
For instance, community voting. If one hasto hold platform coin to vote then our angel investors haven’t sold any coinsso they would have a high share of holdings. If they continue to invest onother projects, their voting power would be enormous. Is it a good thing ornot? Do we need to set a voting power cap? It’s hard to answer these questions.You need to set the parameters right when it comes to the operation of aspecific area. It takes a long time.
Fred Wang:From an objective point of view, I think the cryptocurrency listingmodel of Binace uses a centralized assessment system. Although the centralizedsystem may be more efficient and professional, it is still a black box for theoutside world. Moreover, it is still prone to misunderstandings, such as theextremely high cryptocurrency listing prices. It is difficult to clarifybecause of the centralized system. Many cryptocurrency exchanges began to trythe auditing model for cryptocurrency listing, such as Huobi HADAX’s “SuperVoting Node”. FCoin has a voting committee for cryptocurrency listing. Itconsists of three organizations: community committee members, communitypartners, and expert review teams. Is Does this model combine assessmenteffectiveness and transparency? Will there be any reference to Binance?
CZ?Zhao?:Community voting on listing is a Binance invention.
There are many different listing models,but none of them matters. What matters is the result and protection of users.
I think Binance have done a pretty good jobon this. When our public chain comes out, listing will be easy.
The more complicated the listing system,the more stakeholders, the more corrupted. It can be quite problematic in theend.
Fred Wang:According to media statistics, as of May 2018, Binance has supported120 cryptocurrencies, more than 100 wallets, and 240 transaction combinations.There are mainly three ways to commercialize an exchange: cryptocurrency listingfees, transaction fees, and the platform currency. Which one is Binance focusedon, and why?
CZ?Zhao?:?We will certainly go for transaction fee, which is the lion share ofour revenue. It will be very transparent and very fair. I like simple models.
Our team hasn’t sold a single coin. Thevalue of their holding should be really high now but we haven’t cashed in anycoins. We focus on the long term.
Fred Wang:As far as we know, Binance does not charge listing fees on allprojects. What are the criteria for charging? With regards to the listing fees,it may have been reasonable to charge it last year because the market is verygood. However, now the market is not good. Have you ever considered getting ridof the cryptocurrency listing fees?
CZ?Zhao?:The coins will be unlocked in 5 years. The unlocked part remainsintact so far.
Our principle is asking the project ownerto tell us how much they are willing to pay. Then we will take it into account.They can say zero. It’s a free market.
You will see in our listing applicationform, there is a blank for you to name your price. It can be zero. We willcollect all information all at once and review them. If you truly believe inyour project, feel free to write down zero.
Fred Wang: Binance was launched in July 2017. Due to its initial globalpositioning, all servers were located overseas. And Binance is a purecryptocurrency exchange, and does not support any fiat-to-cryptocurrencytrading. China’s ban on ICO on September 4th last year did not have a big impacton Binance. Since then, Binance started to shift its focus to overseas markets,and you left Shanghai for Japan. How did you feel about this at the time? Didyou think about when Binance would be able to return to China? What challengeshave you faced from Shanghai to Tokyo for you personally and for Binance?
CZ?Zhao?:This is the core strength of our team. Our team is a veryinternational team. In fact, when we were in China, we also had teams in othercountries. I have lived in many countries since childhood, so I have no problemwith changing places. I personally have a very strong advantage, that is, if Ihave to eat a burger for a week, I have no problem, if I have a week of pasta,I have no problem either.
We had a small team overseas, about 20people, a customer service team, but they could speak 30 different languages.
It doesn't really matter where people are.
You changed one week to one year, I have noproblem.
What I think is more important to me isthat we have to understand the international user habits and their culture.This is very important. This is the most important part of our ability to gointernational.
Fred Wang:However, Japan’s Financial Services Agency ordered Binance to stopproviding solutions to Japanese users by April 6th on the grounds that Binancewas not registered in Japan and was causing losses for Japanese investors. Thisis basically asking Binance to leave Japan. You later said that Binance has noplan to become a Japanese exchange. “Since the rules are too strict, it doesn’tsuit Binance.” You gave up on the Japanese market just because of its strictregulation? What’s your rationale behind that?
CZ?Zhao?:In fact, his warning is self-explanatory. How can they write theaddress? There is no exact address, only a word.
It should be the day of this announcementwhen the president of Malta, over Twitter, welcomed us to Malta. I believe thisis the first president of the world to invite a digital currency company totheir country.
Fred Wang:Binance announced its Malta operations on March 23nd, 2018. A monthlater, Binance met with the premier of The Republic of Togo, the president ofUganda and the premier of Bermuda and agreed on terms of cooperation. Binanceannounced that a compliance base and cryptocurrency exchange will be built onJersey Island in June. Your picture with the Premier, wearing a suit andshorts, went viral online. Well, to my knowledge, those countries are eithersmall in size (Malta’s territory is only 316 square km) or in population(JerseyIsland’s population is is only 76,000). You once said that cryptocurrency willunite the world, yet countries and regions that embrace Binance are poor andwith limited resources. Or is it because underdeveloped countries have moreurgent needs for cryptocurrencies for that very reason?
Fred Wang: “I never identify myself with one nationality”, “Earth is my home”You said these in an interview. What country does Binance call home?
CZ?Zhao?:The earth is my home, and when Eron sends humanity into space, ourscope can be a little bigger.
I think that most Chinese people may onlylook at China. In fact, the world is quite big. If you go around the world andtalk to people, you will find that most countries now want to attractblockchain companies and digital currency exchanges.
I have always respected the local rules. Iam also very familiar with the local community. This is a manifestation ofrespect for laws and regulations and respect for local rules.
In fact, it is not that these smallcountries have relatively few resources, but that small countries respond morequickly.
Their internal departmental coordination isrelatively small, and everyone knows everyone. The action is faster. In thisround of change, they have a very strong advantage.
Fred Wang:In the period of Spring-Autumn, Confucius travelled through allstates to promote Confucianism. Now you travel as well, to make legal digitalcurrency exchange a reality. I think you know all the different regulationpolicies better than just about anyone else. Are you optimistic or pessimisticabout the global regulation environment? Which countries or regions are themost active?
CZ?Zhao?:?From the national point of view, the countries we have announcedshould be the friendliest, including Malta, Uganda, Bermuda, and Jersey.
There are many other countries in Europe,and the support for digital currency is also very high, but we have limitedenergy and can't connect all of them one by one.
In fact, I don’t know any country thatopposes the digital currency and blockchain industries.
Fred Wang: before the establishment of Binance, you joined OKCoin as aco-founder and CTO, managing OKCoin's technical team and internationalmarketing team. At that time, Yi He, Mingxing Xu and Changpeng Zhao wereregarded as the "Three Musketeers of OKCoin". Your group’s photostook in front of the company's Logo are still circulating on the internet. Itis said that Yi He visited you at least 3 times to persuade you to join OKCoin.Is that true? After your departure from OKCoin, Mingxing Xu accused you of"not contributing even one line of code to OKCoin and not solving anytechnical problems". Attacked by such statements, what are your feelings?You have never given a response to Xu's accusations. Today, are you willing tosay something?
CZ?Zhao?:?Do I really need to answer this? I don’t think so given mycapability. haha
I was being too cocky there. Sorry aboutthat.
Fred Wang: What did you learn from Mingxing Xu when you worked together forOKCoin? Why did you leave OKCoin? Is there anything that makes you disappointedot dissatisfied? Have you ever thought about the moment that Xu and you couldsit together and drink a glass of wine to let bygones be bygones?
CZ?Zhao?:I don’t like arguing. I likegetting my things done, execution and creating things of value.
Everyone has something or someone great tolearn from. Some taught me what not to do. Haha. It’s all meaningless. Peoplelove to hear stories. It’s a shame that I don’t like to tell stories. I preferdoing rather than talking.
Fred Wang: Soon after you left, He Yi also left quietly and joined short videocompany Yixia Tech. Even more surprising is that two years later, In August2017, He Yi released a letter on social media to announce that she resignedfrom Yixia Tech and officially joined Binance, serving as co-founder anddirector of CMO. How did you persuade your old partner, He Yi, to join Binance?Who is the "Queen of the Chinese cryptocurrency community" in youreyes?
CZ?Zhao?:With ambition. haha
Fred Wang: According to my observations for so many years, it is easier tosucceed when partnering with a person with whom you have successfully partneredbefore, even achieving a degree of perfection. When Binance encounters anemergency, He Yi madly forwarded clarification articles to various WeChatgroups. She is not a partner, but customer service! He Yi is really amazing!When you contact He Yi the first time, could you imagine she would be such atrump card?
CZ?Zhao?:In my eyes, The first lady ofthe cryptocurrency community “ can make a nice living by her looks but she choosesto fight the good fight!” And she is not fighting for her personal ambition butfor the greater good.
I knew from the very first day that ourcollaboration would be fine. I don’t know how to do what she does and viceversa so I will not pretend that I can.
Always find someone better than you to workwith. Give them space, responsibility and power.
We see eye to eye on things so it’s easy.
Fred Wang: according to your background information on the Internet, it issaid that you went to Canada with your father at the age of 10, and lived inCanada until you were 20. After graduating, you entered the financial tradingmarket and tried to start your own business a few years later. In 2013, youfully devoted yourself to the Bitcoin industry. As a co-founder, you joinedOKCoin and served as CTO in 2014. Then a year later, you left OKCoin, which washighly controversial at that time. In 2017, you established Binance.
I find it very interesting that you havenever left the trading field. Similarly, I have been in the gaming industry formore than a decade. Many people say that I am "born for games”. I thinkyou are "born for trades." After graduating from the University, yourfirst job was related to system development of financial exchanges. Currently, youare now operating a digital currency exchange. One could conclude that you’vebeen in the trading industry for more than 20 years! Have you ever experienceda trading failure? Or have you always been a big winner?
CZ?Zhao?:There are three parts in it. The first part is my experience. Ijust said it, and it is very contributing to our internationalization.
The second part is, in fact, when I leftOK, it was very peaceful. Later, he disputed with Roger Ver. It was threemonths later, I was inexplicably pulled in.
People who do platforms cannot trade. So, Iactually am inexperienced about trading.
I am good at platform-building.
Fred Wang: Most people think that handling trades is rather complicated and itrequires massive mental effort. Why are you so interested in trading? Where didyour trading gene come from? Does it come from your growth experiences? I’vealso heard that you love to play Texas Hold’Em, which is favored by many in thefinancial investment community. Does it have any relationship with your tradinggenes?
CZ?Zhao?:?I was actually quite lucky. When I was in college, I was engaged inthe education system. So I was following the financial and technology industry.I think this is the blood and heart of an economic system. The exchange shouldbe more like a heart. You can directly see its impact on the entire economy, soI have always liked this.
I think playing cards is not the same astrading. I play poker and I want to start a business more. Then I play poker.One goodness is that you need to make some decisions when you don't havecomplete information. But I haven’t touched cards for several years, I have notime at all, I can’t imagine it.
Fred Wang: I once read the book "Principles" by Ray Dalio, thefounder of the world's largest hedge fund. There is a sentence that gave me adeep impression: "Interpersonal relations are my main goal. Everything Ido is to accomplish two goals. Making money is just a side effect." So, asthe head of the world's largest cryptocurrency exchange with more than 20 yearsof trading experience, what is your principle? From your perspective, doestrading need a moral bottom line? If so, what is the bottom line?
CZ?Zhao?:My principle is very simple. After one takes care of yourself, youshould take care of other people. This is the most basic principle for us to.If we don't think so, our kind will disappear. Then we must think about how todo some good things for human beings. If you have great ability, do more. Ifyou have less ability, do less. Everyone will try their best. We will do mybest to do our own parts.
The trading platform must have an ethicalbottom line. It does not participate in the transaction and does not manipulatethe market, only to provide users with a fair trading environment. This is whatwe have been doing, but our values are to protect users, users are members ofour community.
What I can do is exchanges. I know how tobuild a very fair exchange. We must make this industry positive.
Fred Wang: From the moment you left OKCoin to the day you established Binance,you seem to have been unknown to the outside world. During this period, yousuddenly left the blockchain industry and the magic digital currency market.Why would you do that? Did you get any new insights during this gap period? Andthen why did you come back two years later?
CZ?Zhao?:?Close the door and practice. Haha
In fact, the Binance trading system hasbeen developing since 2015. The system was not developed until June of the17th, and the system could not be developed in one month.
I was honored that the Shanghai CulturalProperty Exchange bought our system. It is one of our customers. I believethere are only two cultural property rights exchanges directly owned by theState Councils in China.
Fred Wang: this question might be a little bit sensitive. Some have said thatChangpeng Zhao has no friends. Compared with other exchange bosses like Lin Liof Huobi pro and Mingxing Xu of OkEx, who often share opinions over publicmedia with their social circle, you seldom show up in public media. Thus, yourpublic image is relatively mysterious and alienated. Last year, you suddenlyappeared on the cover of Forbes magazine, which makes you even more mysterious.Speaking of this interview, I have been inviting you to join us as our guest forabout three months. Do you deliberately maintain your mysterious image? I havenoticed that superstars in the entertainment industry often do not want to domedia interviews, but they could make audiences cry out when they finally showup. I feel you are same to them. ?
CZ?Zhao?:Actually I don’t agree. I think I am more active than them.
But we cover a wider range globally, whilethey are more active and do more promotion in China.
It’s so slow to browse Weibo outside ofChina and I never get used to Weibo’s UI. I use Twitter more. Probably it’sbecause Twitter is not accessible in China so people in China hear about mesecond-hand.
What’s more, I am technically-focused, somy plate is full and have very little free time.
I do an explosive interview but it’s notbecause me, it’s because of the fame of our brand.
Another reason is that there are lots ofarguments and conflicts on the media, which I don’t like to be involved in. Iprefer taking part in technical and constructive discussions.
Fred Wang: In addition, the affair between Binance and Sequoias has causedlots of attention in early May. You said on Twitter, "we may soon requireall projects applying to list on Binance to disclose if they have any direct orindirect relationship with Sequoia." The sentence was rewritten by someblockchain-focused media that you said "Binance will completely clear outall projects related to Sequoia Capital". Those medias even used the word“break”. Thus, some media concludes that Changpeng Zhao has no friends.
CZ?Zhao?:?I’d rather not comment on someone or some companies specifically, so Ihave no comments on Hongshan(紅山)
Traditional institutional investors allinvest in certain old-fashioned ways, which usually are not start-up friendly.
Unfortunately, the era is over. Nowstart-ups have the say.
Currently good projects and teams have noshortage of funding.
So, I hope everyone can work hard anddeliver their projects well.
Fred Wang:Binance has in a short period of time rapidly developed from astart-up company to become an exchange giant. Currently, it has also evolved toinclude a labs incubator and other ecological developments, such as media. Whydo exchanges have to do their own media? I've seen your BABI Finance and it’srather good.
CZ?Zhao?:?We invested on BABI and weren’t very hands-on. I don’t know thisindustry well. They complained that we never replied to their messages. I don’tremember very well.
I think Mars Finance is doing well.
In addition, investment in media isextremely rare for us. All other exchanges invested heavily in media. We investmore in infrastructure-related projects.
Fred Wang:What do you think of Mars Finance? Mars Finance has obtainedinvestment from exchanges like OKEx and Huobi pro. Would you like to join us inthe next B round? LOL
CZ?Zhao?:I hope we can work togetherin the future.
Haha.Are you ready?
Wecan talk about this in private. I don’t want to drive up theprice before I even decide to invest.
DidI just fall into your trap? haha
Fred Wang:On May 31th, you tweeted an image of Alexa traffic ranking, andquestioned why this Alexa traffic analysis differed from trading volumeranking, which alluded to suspicion of fraud. However, early this year, inMarch, tech blog Medium published Sylvain Ribes’s article: Chasing fake volume:a crypto-plague, that caused a hot debate in the cryptocurrency community. Theauthor pointed out that 70%-90% of the trading volume from Chinesecryptocurrency exchanges that include Huobi pro, Binance, are doctored. On onehand, you accuse competitors for falsifying; on the other hand, you aresuspected by the technology media for fraud. Who is standing on the side of thetruth? Is it because different research tools or models lead to falseconclusions about volume fraud?
CZ?Zhao?:When the article was translated into Chinese, there were somedeviations. In fact, the article stated that there is no false trading volumeonly in Binance Exchange, because we did not do false trading.
The article mentioned other people's faketrading volume. I will not repeat the figures, because the numbers are high.
But I think users are all smart. Whosetrading volume is true, or whose trading volume is fake or washed, users know,they are not stupid.
I think that there are a lot of manipulatednumbers, and a lot of fake trading volume. It is not good for our industry.Makes our industry look very fake.
Fred Wang:I also notice once you said you want Binance to be able to reportlower transaction volumes, so Binance may not always be in first place. Itseems that you mentioned “do not be first” on many occasions. Why do you havesuch an idea of not being first?
CZ?Zhao?:The real strong people will not call themselves the top player everyday. In the context of non-trading, the more correct expression is that we donot care about the first, and we care more about how much infrastructure wehave done for this industry, Instead of sheepshearing.
In fact, our priority is not to be first.It is to do things well. The first is not important.
Fred Wang:With supervision not yet in place, there seems to be no better wayto solve the problem of fraudulent trading of centralized exchange data. In theblockchain ecology which promotes a consensus mechanism, exchanges, one of thecore links, cannot allow people to reach a consensus on it. This is really afrustrating thing. Do you think any solution should be enacted before thesupervision is in place?
CZ?Zhao?:?By the way, now all the rankings are somewhat imperfect, it is alsovery difficult for ranking systems to be very fair and very accurate, so itreally does not matter.
Now that the technology is developing sofast, I think that if the supervision is in place, this state may never reach.Because the technology is constantly moving forward.
In addition, it is very difficult to supervisean industry. You have to be able to estimate all the situations that can happenin this industry. This is really no way, not that regulators don’t want to doit.
I think there are actually three parts to agood regulatory framework. The supervisory department needs to have arelatively large framework and a general direction. Then the practitioners needto do their own things well. They can't do bad things. The most important partis actually users. Users shouldn’t support bad projects and bad platforms.
This requires everyone to work together tomake a great industry.
Fred Wang:On March 13th, Binance announced the launch of the public chainBinanceChain, which focuses on the transaction and conversion of blockchainassets. Through the development of BinanceChain, Binance will transition froman "enterprise" to a "community", and BinanceChain willalso be used to transfer or trade different blockchain assets. It is worthmentioning that Binance also announced that it will move BNB to BinanceChain. Afterthe release of the information, BNB rose to 11 US dollars, which is more than25% in a single day. The public chain Binance previously used for developmentwas ERC20 token-based. Why is Binance developing a public chain instead ofusing the resources and technologies already in the industry? You saidBinanceChain is one of the highest-priority matters. So, how much energy do youallocate to the business of BinanceChain? Can you disclose its latest progress?
CZ?Zhao?:Our public chain project is in progress. I would like to spend 20%of my time on the public chain but right now I spend less than that. I willspend more going forward. Our team is excellent.
In the next 5, 10 or 20 years, publicchains will no doubt be the trend. Therefore, we will not give up on trulygreat models. We embrace changes and innovation.?
Fred Wang:You mentioned in early March that “a decentralized exchange will belaunched in the coming months.” In my opinion, the launch of BinanceChain is tobuild circulation channels for BNB, and it provides important technical supportfor decentralized exchanges. However, decentralized exchanges are currentlyonly in the "something beautiful" phase. According to mediastatistics, there are currently more than 1,000 global digital currency exchangesand less than 5% are decentralized, which amounts to just a handful of marketshare. Some people say that decentralized exchanges will not become mainstreamin the next two or three years, and the process of replacing centralizedexchanges will take a long time. Do you agree with this? With ever-increasingexchange wars, will the community exchange become the future direction ofexchanges?
CZ?Zhao?:?I agree. So far the public chain is not fast enough.
It will take a few years beforedecentralized trading platforms become the mainstream.?
Fred Wang:Mining machines and exchanges are undoubtedly the two giants of theblockchain industry. The world’s No. 1 manufacturer of the mining machineryindustry, Wu Jinhan’s BITMAIN, reported that will submit its listingapplication in the end of September to the HKEx, and its valuation is up to $40billion. The second largest miner manufacturer, Canaan-Creative, also submittedan application to the HKEx in May.
CZ?Zhao?:We do not have an IPO plan. IPO in the traditional financialindustry has become a tool for financing, or a way out for the early investors.I don't want to do that.
It’s often an exit for a VC.
We don’t have VC investors.
Blockchain has taken us to the next era.
Fred Wang:Considering that you worked for traditional financial exchangesbefore OKCoin, and given that the current cryptocurrency market capitalizationis far below the traditional global markets’, do you think that cryptocurrencyexchanges will eventually replace the traditional financial exchanges in thefuture? Or will they integrate to some extent?
CZ?Zhao?:I think the two will be parallel for some time. Our volume is stillmuch smaller than theirs. It is still a bit early to talk about replacement. Itwill be difficult to predict what will happen later. We focus on doing a goodjob in the new industry.
I am used to TG. You can send it out andchange later.
Binance is still a very young platform andthere is great room for improvement. I’d like to thank everyone for theirsupport over the past year! We will continue to need your support in thefuture.
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