When Binance was born in July 2017, few would have thought that within 180 days, it would become the largest cryptocurrency exchange in the world. Today, Binance remains the world’s leading cryptocurrency exchange by trading volume. And the Chinese-Canadian coder who founded it, Binance CEO Changpeng Zhao, was named by Forbes as third on its “The Richest People In Cryptocurrency” list in 2018. Zhao, who is known as CZ, has an estimated net worth of US$1.2B according to Forbes, as of March 4, 2019.
What made Binance different, which led to its dramatic growth? This was the first question Bitcoin podcaster and Ministry of Nodes Co-founder Stephan Livera asked Zhao. Livera hosted a fireside chat with the Binance CEO at the ongoing Crypto Asia Summit. This free virtual summit is being hosted on the world’s first blockchain and cryptocurrency online live event platform and social network, ChainTalk TV.
“At the mission level, we want to increase the freedom of money. I think that resonates with a lot of our users who think that right now most of our money is not that free. And there’s a lot of restrictions with it. So I think that resonates with a lot of our community,” said Zhao.
On the regulatory front, however, the Binance CEO acknowledged that while they want to increase the freedom of money, each country has different regulations that can make this challenging.
“When we look at the regulations around the world, most people understand I think that the more regulation there is, the stronger the industry will be. But sometimes it works slightly in the opposite direction. When the regulations are good, when the regulations are protecting the users and also promoting innovation, that’s really good. But we’ve also seen regulations where they’re overly strict and they kill innovation. Not only do they kill the startups that want to service this, but the more restrictions we apply on traditional fiat money, the more people want crypto. So the more you try to regulate it, the more people actually want crypto.
“For some regulators who view crypto as a risk for users, a better approach may be to relax the regulations in the traditional fiat world. Make the freedom of transferring money easier and make the fees lower, and people will use crypto less. So there’s a lot of contrary ideas, that people don’t think about the secondary facts. And people think of crypto as one finite thing and if you regulate this thing, you’re done,” Zhao said.
Products people actually use
Recounting what the market was like in 2017, the Binance CEO said that apart from the highest or mission level, the middle and bottom levels also contributed to their success.
“The middle level — the very basic stuff — is we just want to be able to service users. We want to provide a product that services users’ needs and we want to provide customer support for people. That’s really the fundamental part: we want to build products that people actually use,” Zhao said.
“So in 2017, we looked at the market, we felt that there’s probably a market for crypto-to-crypto exchange. ICOs (initial coin offerings) were really hot back then. And we got lucky,” he said.
How about at the bottom or execution level? The Binance CEO said it was all the little things that made their product different. He pointed out that at the time, most of the products were web-only and didn’t have a mobile interface. They were English-only and did not have support for international languages.
“Customer support takes months to get a response. We said, well, it should take less than 24 hours. Ideally, in a couple of hours. So all of those little things add up. And we’re very transparent, we’re very open, we’re very engaging with the community. We want to be more than an organization. So I think all of those little things add up. I think the most important factor is we got lucky,” Zhao said with a slight laugh.
No secret sauce
“I think one thing that’s really interesting as well about Bitcoin and this… well, some people speak about it in terms of four-year cycles. We have this kind of boom and bust cycle. What we have historically seen with big exchanges is that obviously they have trouble during that crazy sort of bull run time. How did you adapt to that kind of thing in terms of dealing with customer support tickets and so on, and getting back to customers quickly? What was Binance doing differently there?” Livera asked.
“To be honest, we don’t have a silver bullet. There’s no secret sauce. I think we face the same challenges as everybody else,” Zhao said.
“It’s just a very challenging problem to solve on many fronts. Like technology-wise, this is the first time where you have exchanges allowing retail customers to connect from anywhere in the world. So you can have literally millions of users connecting to the exchange at the same time. Technically, this is very different from the traditional exchange technical architecture. The traditional exchanges — they have like brokers or members. Typically there’s a couple hundred of those guys. And then they have very high-speed systems that take users’ orders and they submit those orders to the exchange. But the exchange is only dealing with, I don’t know, 400 or 500 members. Or max a couple of thousand. And all of those members have servers collocated in their data centers,” he said.
Brave new world
“It’s very different when you move into the internet world with exchanges where guys are connecting from Africa, from all over the place. And the network speed varies from different places to different places. So that’s a technical challenge which is very difficult to solve. And I think we are ahead in most aspects in this area, but we’re not guaranteed to be ahead all the time,” he said.
At the end of the day, he said Binance will adapt to these changing needs and work hard to solve new challenges.
As Zhao put it, there’s no secret sauce. Only a clear mission and proper execution.