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November 25, 2020

In Conversation With

How Binance got lucky with Changpeng Zhao (CZ)


(12:22) Binance CEO Changpeng Zhao (CZ) explained that he got into cryptocurrency because it was a better form of money. He decided to dedicate his career to this industry. He explained that at first, the team was singularly focused on building an exchange. They began to slowly expand the business with features such as staking, etc. based on user feedback. They didn’t set out on creating an ecosystem but instead focused on building products they knew how to build. With the success of Binance, they got quite a bit of cash on hand and were able to grow. Over the course of acquisitions, they now have an ecosystem, but that wasn’t from the beginning. It was a natural evolution of things.

CZ also compared the ICO model to venture capital fundraising.

(20:49) “Having gone through that experience myself, I totally think that ICOs or blockchain fundraising in general are a super useful tool that we have now. So blockchain fundraising allows us to raise money from people from all over the world. That has helped companies like Binance to grow very quickly.”

(21:11) He went on to explain that there are plus and minuses to ICOs vs. traditional venture capital, where it would take three to six months to raise a round and then you need to raise another round, etc. Another limitation with VC is a much heavier legal structure localized in one region, which would have prevented them from growing into a more internationalized, global exchange. He also talked about the risks both for traditional VC finance and ICOs, where most startups fail even when you have the best of intentions and the most skilled teams.

(21:56) “At Binance, we got lucky; we could have failed 1,000 times. So we got lucky. We had a strong team, obviously, but we also were lucky in a lot of areas. People have to realize those kinds of inherent risks.”

CZ addressed the stigma that is attached to the cryptocurrency industry, saying:

(24:00) “Anytime something negative happens with any financial thing related, crypto gets the blame. We’ve seen that a lot. But I think the narrative is really changing nowadays….In the last two or three years, things have changed very much for the better — we have central banks issuing cryptocurrencies, we have countries pushing for a blockchain education. We have already come a long way.”

(28:19) CZ says in terms of cultural differences between the East and the West, not much has changed. In terms of regulation, however, a lot has changed over the last two years.

(28:32) “The US more or less has a clearer way to do things. Coinbase is running in the US and has a set of licenses and a way of doing things that are more or less viewed as the accepted way of doing things. The exchange has not gotten into trouble and has the recipe for doing things.”
(29:29) “China for the last two years has been negative on exchanges and bitcoin but did a 180 degree turn on the blockchain. They’re pushing blockchain very hard, encouraging blockchain education and pushing decentralized currencies. That’s all positive.”
(29:56) “Singapore is very open to think tank innovation and by default is relatively friendly toward blockchain tech companies and bitcoin businesses.”
(30:09) “The EU is different, they’ve got an open atmosphere. They already have many countries that share one currency. In the EU, it’s easier to have the mindset to adapt to a different currency.”

(31:26) On decentralized finance (DeFi), CZ says it is a really good thing and that it’s at an early stage, but as all things new there will be a high rate of failures. The concept of DeFi itself will endure.

(32:05) “There will be a small number of successful projects that will stick around and that will last for a long time and could potentially be very valuable as well and they will continue to provide a valuable service in this space. So i think the DeFi concept works. The exact execution of it will need some experiment. Most projects will fail, just like any other new projects do, but some will succeed. It’s a really interesting space to keep an eye on. Also I think it will help the growth of our industry.

Teana asked CZ about the next killer app in crypto.

(33:08) “It’s very difficult to predict which one’s going to be the next killer app. If you had asked me at the end of 2016 what’s the next killer app for the next pump…I would not have said ICOs. So even then I would not know. So think DeFi definitely has the potential to be a killer app. I think blockchain fundraising will be a tool that people use for entrepreneurs. Whether it’s going to be something else, e-commerce, payments or other things. All those things are possible, that’s very hard to predict,” said CZ.

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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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