The Innovation of Cryptocurrency Zhao Changpeng, a Pioneer of the Era, and His Binance.
Zhao Changpeng, a pioneer of the cryptocurrency era, and his Binance.
Author: ZHU Weisha https://chainless.hk
Email: [email protected]; [email protected]
Word Count: 3262
Satoshi Nakamoto opened Pandora’s box and released hope and demons. What is hope? What are demons? Graham once said, “In the short term, the stock market is a voting machine, but in the long term, it is a weighing machine.” Since the birth of Bitcoin fourteen years ago, the top projects in the cryptocurrency market have withstood the test of time, and their prices certainly reflect the value of the projects. Analyzing the gains and losses of these projects can inspire those who are still on the road.
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2. Zhao Changpeng, the Tide Rider of the Era, and his Binance
Binance ranks fourth in terms of market capitalization on the website Coinmarketcap. Due to a series of legal issues, it has just been surpassed by the stablecoin USDT. The price of BNB has fallen, reflecting the market’s pessimistic sentiment. How many users does the cryptocurrency have? There is no accurate statistical method. Binance has 120 million users, accounting for slightly more than half of the cryptocurrency users, so it is roughly reliable to say that there are 200 million cryptocurrency users. Binance has a market capitalization of 33 billion, and if converted to $275 per user based on customer value, this is also an underestimate. The market has already considered its risk. Zhao Changpeng is a dark horse who entered the cryptocurrency field with internet means and thinking, and he is also a legend. He is currently deeply embroiled in legal disputes and hiding in various parts of the world. He and Binance reflect the ups and downs and charm of the cryptocurrency world.
Idol or Demon
On November 30, 2021, it was reported by the media that Zhao Changpeng’s wealth reached 90 billion US dollars (about 573.3 billion RMB), surpassing the chairman of Nongfu Spring, Zhong Shanshan. He became the richest Chinese in just four years. Although cryptocurrency is a hot spot, who else in the industry has achieved this? Zhao Changpeng has over 8 million followers on Twitter, while Vitalik Buterin, the creator of Ethereum, has just over 4 million. Vitalik is called V God, so what should Zhao Changpeng be called? In the world where business success is measured by money, Zhao Changpeng’s success inspires young people from the bottom to strive, and it is natural for him to become an idol.
The development of cryptocurrency is disorderly, just like the early years of China’s reform and opening up. The bold ones survive, and the timid ones starve. He is both a beneficiary and a victim of disorder. At least one of Zhao Changpeng’s children was born in the United States. Although the child is American, Zhao Changpeng dare not set foot in the United States anymore. At the same time, although Zhao Changpeng was born in China, he probably cannot return to China now. No one knows where he lives. He is a “vagabond” without a fixed abode, controlling a highly centralized empire through a team of about 7,000 people distributed in more than 50 countries or regions around the world. Binance is a mystery, and Zhao Changpeng is also a mystery.
Basic Elements for Successful Entrepreneurship
1. A unique skill or expertise that leads in the industry;
2. The ability to seize opportunities;
3. Having good assistants.
Zhao Changpeng, with a background in computer science, founded Fuxun Company in Shanghai in 2005, specializing in building high-frequency trading systems for securities brokers. In 2013, Zhao Changpeng joined the cryptocurrency wallet team at Blockchain.info, becoming the third member of the group. Zhao Changpeng previously served as the Chief Technology Officer of the cryptocurrency exchange OKCoin for less than a year. After leaving, he started his second company, Bijie Technology, which produces cloud-based exchange software. During its peak, Bijie provided cloud-based exchange software for 30 exchanges.
Zhao Changpeng possesses skills in wallets, trading, cloud technology, and cryptocurrency technology. His technical strength leads in the industry. The only thing he lacks is an opportunity.
The ICO in 2017 was the opportunity given to Zhao Changpeng. In late June 2017, he launched the company “Binance” by merging the terms “binary” and “finance.” He announced his whitepaper and token issuance plan. On July 2nd, the project raised $15 million using the token BNB. However, after being listed for trading on July 25th, the value of BNB quickly dropped by 20%, and Binance’s ICO failed to meet expectations. Zhao Changpeng’s team tried various means to save the market, but the effect was minimal. Zhao Changpeng fell into despair and pain.
On August 8th, 2017, his acquaintance from OKCoin, the 33-year-old He Yi, left “Yi Xia Technology” and joined Binance as a co-founder and Chief Marketing Officer. The beautiful He Yi was a host and internet celebrity. The fact that she was willing to follow him shows that Binance is extraordinary. On the day He Yi joined, the price of BNB skyrocketed, increasing 18 times in just two weeks, from $0.13 to $2.45. With Binance’s rapid growth, He Yi was also given the title of “Sister of the Coin Circle.” With money and talent, He Yi became Zhao Changpeng’s good assistant.
Zhao Changpeng possesses all three points mentioned above. How big Binance can grow depends on the winds of the market.
Pioneers of the Era
Zhao Changpeng did not start early. He had competitors such as Huobi, OKCoin, and Yunbi. No wonder people were not optimistic about Binance. But who seized the opportunity of the era? Zhao Changpeng began moving his team to Japan a month before the Chinese ban. When competitors couldn’t operate, he could. The popularity of cryptocurrencies made users eager to find overseas exchanges. Chinese people still trust Chinese people because Chinese products generally have better usability than similar foreign products. In terms of user experience, Binance has always been the first. Binance’s website supports 44 languages. Who else has done that? In just a few months, it attracted millions of Chinese users and gained a solid foothold.
The difference in vision, thinking, and decision-making has opened up a gap in fate with competitors. The same problem is a risk for opponents and an opportunity for him. The international market is not a paradise. Countless waves are testing Binance. The same wind cannot lift a pig.
A decentralized system without a headquarters
The largest centralized exchange is operated by the largest decentralized system, which has created Binance’s unique model. His subordinates can live wherever they want. Although the speed of communication is not perfect, it is an optimization between efficiency and effectiveness. The effectiveness lies in approaching the markets and time zones they want to serve.
How does such a decentralized system work? I found three articles written by Binance: “How Binance Efficiently Manages Remote Teams 2020-04-10” discusses team management. “Advanced Remote Office: Transitioning to a Decentralized Architecture 2020-06-04” explains how to coordinate distributed organizations technically. “From Remote Offices to Regional Offices: Working Around the World with Binance 2022-10-27” is a job advertisement. From these articles, it can be seen that they had over 7,000 employees in mid-2022. They started laying off employees in 2023 and reportedly laid off over 1,000 people. I did not see how they signed labor contracts or the text of the contracts. Working from home seems simple, but how to unify 7,000 people, how to assess them, and how to communicate effectively, after reading their fragmented articles, I am still unclear.
Binance is not just one business, but a diverse range of financial businesses. It is not a “company” but a group of “companies”. When Binance settled in Malta in 2018, they began operating remotely. Remote work does not seem to have affected their efficiency. “From 2018 to the end of 2019, Binance expanded its business at a crazy pace. During this time, there were new announcements almost every day: from leveraged trading, margin trading, loan services, to staking rewards and P2P trading, etc. In Q3 of 2019 alone, Binance launched 12 important products, exceeding the total of 12 largest competitors” (申旺2013-2021 Binance: A History).
Is this model right? Compared to Ethereum, although Zhao Changpeng is doing cryptocurrency trading, it still follows an internet mindset, and the model is lagging behind cryptocurrency. The Ethereum ecosystem is also a bunch of “companies,” but the “headquarters” of Ethereum- the Ethereum Foundation- has less than 30 people, and the projects on the Ethereum platform are independent.
Compared to YouTube, YouTube also follows an internet mindset and is centralized, but there are only about 1,000 people serving 2 billion customers. If Binance had 2 billion customers, I think Zhao Changpeng’s “company” would collapse.
Binance started with an exchange, not a platform, and all businesses are related. Its strengths are marketing and transaction speed, but it lags behind in management compared to cryptocurrency. Does Ethereum have customer service? No. Binance’s customer service team has over 1,000 people and still cannot provide phone support. Currently, cryptocurrencies are advanced in thinking but lagging in “tools.” Without removing the blockchain ledger, their advantages cannot be fully utilized, and they cannot compete with Binance.
Even in the Internet mode, Binance cannot be considered advanced, which is the second major problem that hinders Binance’s development apart from legal issues. The legal issue is the “debt”, and debts always need to be repaid.
The most fatal issue is the legal issue
Cryptocurrency is a single-layer system, while traditional finance is a multi-layer system, with brokers and fund custodians added between exchanges and users. This ensures the safety of user funds in the system. When a cryptocurrency exchange completes the tasks of a traditional exchange, broker, and fund custodian, there is no regulation left, and what remains is a test of human nature. If Sam Bankman-Fried’s FTX, the world’s second-largest exchange, had problems, it is reasonable to imagine that Binance could also have problems, isn’t it?
In order to address users’ suspicions, Binance has used the effective Merkle Tree in the field of cryptocurrencies to establish “reserve proof” to prove its innocence. From a data perspective, this is good, but these data need to be audited by a third party. The problem is that we have to trust the auditing party. If the auditing firm is bought out, the Merkle Tree loses its effectiveness from the beginning. Even if a fair auditing company is found to conduct audits, the Merkle Tree proof still requires a sufficient number of user accounts to assist in verification. If an exchange misappropriates user assets, verifying only a few users cannot provide 100% certainty. It needs a certain sample size. Binance’s publication of the Merkle Tree proof can only prove its ability to repay user assets, but it cannot prove that all encrypted assets deposited by users are safe and have not been misappropriated.
What we need is 100% verification, just like the verification process for the Bitcoin and Ethereum ledgers.
Why doesn’t Ethereum have such legal issues? Because it has machine verification. It is actually simple to achieve this kind of verification using machines. A chainless financial platform can use smart contracts to custody exchange funds and use smart contracts as intermediaries to replace brokers and custodians, ensuring the security of funds and allowing users to verify at any time. The Chainless white paper will be published on the chainless.hk website in due course.
Best wishes
Online, Zhao Changpeng is called CZ. After reading the open letter CZ wrote for Binance’s 6th anniversary, “Having experienced two industry winters, we are at a crucial moment in history,” and seeing his hardships and struggles, it is very touching. I wish him and Binance a smooth passage through difficult times and a bright future.
