Time: At 14：00~16:40 on June 29
Groups: Mars 3.0 wechat group
Zhao Changpeng: Binance founder and CEO, expert of blockchain and trading system, former head of Bloomberg commodity futures research team and former technical director of blockchain.info.
Fred Wang: Founder of Mars Finance, chairman of Linekong (HK. 8267), and founder of Consensus Lab, the founding partner of Geek Founders
The following is the sorted dialogue script.
Fred Wang: Hi, everybody, good afternoon, and welcome to the 22nd Ten Questions with Fred Wang of the Mars Finance sponsored by the YUE Blockchain. I would like to introduce today's guest: Zhao Changpeng, founder and CEO of Binance. Many people call him CZ.
Let's take a look at the CZ’s experiences at first:
In 1977, born in Lianyungang, Jiangsu Province;
In 1987, came to Canada with his father and spent six years in the high school in Vancouver and studied college courses in Montreal.
In 1997, worked in the financial exchange system in Tokyo, Japan after graduation from the college.
In 2001, acted as the technical director of Bloomberg in New York.
In 2005, returned China to start his own business and established Fusion Information Technology Co., Ltd., mainly engaged in the businesses of domestic and foreign finance, securities system software development and system integration.
In 2013, resigned from Fusion and joined Blockchain.info, engaged in full-time in the Bitcoin industry.
In 2014, joined in OKCoin as co-founder, took the position of CTO, managed OKCoin's technical team and took charge of OKCoin's international marketing team.
In 2015, resigned from OKCoin and established Bijie Technology in August to provide rapid exchange construction services.
In 2017, found Binance and acted as CEO.
In Feb., 2018, listed in the Forbes' list of digital currency rich and ranked the third, with net assets of virtual currency worth of $1.1 billion to $2 billion.
At the beginning of this year, CZ was nominated by Forbes, which immediately drew high attentions of the public: he spent only 180 days to become a billionaire on the digital currency rich list. However, what many people tend to overlook is that CZ has 21 years of trading experience since he set up an online trading system for exchanges after graduating from the college.
According to the 10,000 hour rule, it is the necessary conditions for anyone shifting from the ordinary to world-class masters through 10,000 hours of tempering. So it is not surprise that CZ is of so much wealth and achievements today.
Recently, there is a cloud of smoke floated over the battlefield of digital currency exchanges as the new generation of exchanges, represented by the mining of deals, has broken out of the encirclement. Can the ten-billion empire of Binance remain invincible? I believe that CZ has his own ideas as he has experienced the ups and downs of the exchange.
CZ keeps a low profile and rarely makes public appearances. In addition to posting some messages on personal Twitter and weibo (microblog), CZ has been rarely interviewed by media. Thank you very much today for your participation in the Ten Questions with Fred Wang of Mars finance.
Zhao Changpeng: To be honest, it has been done for 20 years. It should be 20,000 hours at least.
Fred Wang: I just know that I and CZ are both Aquarius. It is said that the most important characteristic of Aquarius is that they are "willing to explore the truth" and "have rational wisdom". Therefore, I look forward to the dialogue with CZ today, which will bring more sparks and enlighten everyone at present. Now, let's begin today's Ten Questions.
Fred Wang: Congratulations CZ. Last night, I saw good news on you. Binance involved in the legal tender trading at the first and will set up a digital currency exchange in Uganda to build the new platform of BinanceUganda and support the local currency of the Ugandan shilling and other major digital currencies. However, compared to other competitors, the pace of Binance to introduce the legal tender transactions is significantly slower. What is the reason that Binance has not opened the platform? Why choose Uganda as the "first stop" for legal tender trading? It is said that the legal tender trading may be opened in an Asian country, can you give more details?
Zhao Changpeng: A lot of people are staring at well-developed economic and financial countries where it's really easier to make money. But I think if we want to make the intensive development in the industry, we need to popularize the blockchain and digital currency around the world. Africa is a place with a very large population base, and I think we're necessary to do it as a leader in the industry.
As for the strategy and strategy of tactics of Binance, we always have our own rhythm and generally do not follow others' rhythm. So while someone else was involving in the exchanges legal tender, we went to involve in the coin exchanges at first. There were a lot of people who asked me why I didn't support legal tender, of which the market was bigger, and I didn't think so at that time.
But now it is a good time to open up all our legal tender channels and Bridges, so that more people can directly enter in the Binance's system and do incremental and infrastructural work for the industry. As the first stop, Uganda is more suitable to our global strategy. Either legal tender exchange or coin exchange, we will engage in it from a global perspective.
Fred Wang: The opening of legal tender trading can allow more new investors to buy cryptocurrencies through legal tender, and thus bringing more traffic to the exchanges; at the same time, investors can easily liquidate digital assets. However, not all people are optimistic for the transaction behavior of legal tender, some people hold opposing views: the essence of digital currency is only a kind of information code with scarcity, and the transaction of digital currency with legal tender on the public platform is not data innovation, and the final result can only be the asset bubble. I believe you must have had in-depth communication with national financial regulators in Uganda, and I would like to hear your views on this.
Zhao Changpeng: This idea ought not to be logical. I believe that it should be better to open up the trading channels between legal tender and coin currency, the bigger, the better, and the wider the bridge is, the better they are, so that more people can enter or leave freely.
I believe that digital currency is a very good thing. In my experience, the people I see are mostly turning to one side. As long as he enters in, it is difficult for him to leave it. So I don't think there's anything to worry about. What we need now is to make the bridge as wide as possible, so that more people can enter in more easily.
We do have very deep communication with Uganda's financial regulators, and they are very supportive. With our efforts, more and more countries and regulators would support the digital currency, so the whole industry will be bigger and bigger.
Fred Wang: Many people are concerned about the current exchange battles. My question is, it is obvious to all that in just five months from last year, Binance has surpassed its peers to be number one in global trading volume. It took just 15 days for the FCoin with the character of "trans-fee mining", to reach the so-called trading volume (as many media and people in the circle said), and "the volume is the sum of the second to the seventh volumes." What's your first reaction to its market performance?
The charging mode of exchange has undergone many experiments, from the subsidy of zero commission fee to the maker-taker subsidy, there are many subsidy modes. I'm not particularly worried about that because ultimate competition depends on the products and services.
Fred Wang: I have noticed that you are not optimistic about the "trans-fee mining" model. You always keep a low profile and even attacked it on tweeting that it is "not only a disguised ICO, but also a high-priced ICO." Why did you react so strongly this time? There is even speculation that the "trans-fee mining" model is a big threat to the cryptocurrency, which also depends on high-frequency trading. My question goes straightly, is the mining model really having an impact on the safety of Binance and the DAU (daily active users) of major digital currency exchanges?
Zhao Changpeng: We have analyzed this data. We used to have very few users. Users of Binance are generally high-end users, and they are all clever enough to see the leakages in the pattern. I can share with you some of my thoughts or questions about this model with my own limited IQ.
As for as the business model is concerned, I think the business model has to be durable if it is successful. Let's think about it. The mines are all dug up. How does this business model keep working? Who is willing to pay 1‰ of the commission fee to continue the transaction, isn’t this to give the commission fee to others? It is beneficial to hold the currency trading on the platform because you can get dividends. But if no one goes to the platform for trading, the platform income will decrease and the reward of dividends will also decline. Who is willing to spend capitals to hold the platform currency as the return rate is at such low level?
For instance, as Binance has nearly 10 million users at present, even the commission fee is 1,000 BTC every day (it is much higher than the Binance’s actual commission fee), each person can receive 0.0001 (ten thousandth) BTC. It is not enough to pay the commission fee for network transfer by saving it up to 10 days. Who's willing to spend money on buying the platform currency? Then everyone will sell it, what will be the price of the platform currency?
If there is a solution, which would reduce the commission fee to attract people to involve in the trading, the income and corresponding dividends would be less. Would there be someone to hold the platform currency? What about the price of the platform currency? Or there is another scheme to let the project side of the coin to reduce liquidity with the hope to stabilize prices. It's like shooting a fighter with the bow and arrow, and good projects don't request the small exchanges. They bring users and traffic to the exchanges other than reducing the currency. There are many other problems.
After figuring out the unsustainable state, we know that the model will die sooner or later. In fact, there is no need to study it anymore, and there are many other problems in the short term.
We can look at this business model even when we're mining. Someone paid the commission fee, which was distributed to those holding the platform currency as dividends. If the platform does not have income, and it will issue the platform currency equivalent to 100% of the commission at zero cost, these currencies will be given to the person who involving in trading as the returned commission, and 20% of the platform currencies will be given to the platform as the introduction fee, which is also at zero cost. At the same time, the team will unlock 100% of commission fee at zero cost. At this time, only 100% commission fee is given to the people who enjoys the dividends, even if all the people who receive dividends will spend his all dividends to buy the platform currency, but the platform has over issued currency equivalent to 220%. What do you think the price of the currency will be in such demand-supply relation? The decrease in price of the platform currency causes fewer people to buy the currency in a vicious circle.
So, I think it's very difficult to stay in this model for so long. There are several reasons. First, interests are bound to some media, and there are many people who help him in voice. There is also someone who was held up at early stage, they are forced to pull other people to involve in the trading in a hope of selling their own currencies; the biggest reason is that he cleverly changed the concept and the packaging was really good. 100% commission fee will be returned, 20% extra bonus and dividends will be given to the traders, all of which are the favorite terms of the Chinese econnoisseur. In fact, they are exchanging (cheating) other people valuable digital currency on the platform at zero cost.
Fred Wang: On June 19, Xu Mingxing followed soon, and OKEx officially announced a win-win plan to support 100 exchanges in the "trans-fee mining" model. Shortly afterwards, the Binance announced to launch the digital asset exchange open alliance scheme and said it would support to increase the exchanges in the "trans-fee mining" model to 1,000. You have a piece of microblog that once said "it needs to muddy the water of capital pool," which means a lot to the industry. Now, is the water in the capital pool muddy?
Zhao Changpeng: It seems that the water has been muddy enough before I have time to stir it, which can be seen from the price. It's very simple, actually, but we're very modest, and if there's a good model, we'll learn and copy it. It is not difficult to copy the model, and many people have copied the BNB model, but what you may not understand is that although Binance raised the funds, we insist to operate the platform up to now by doing a good job on it after raising the funds.
Fred Wang: Many people think that it is impossible to use the "trans-fee mining" model of Token economics in traditional exchanges, because the rules and playing methods of the platform currency have already been worked out. Although Ms. He Yi has previously said that the scheme for 1, 000 alliance exchanges was decided just by "tapping the forehead", another popular exchange of Bit-z has taken the plunge and launched the "trans-fee mining" model on June 25th. According to the official release of Bit-z, the mining record of 1 million BZ has been completed after being online for 25 minutes. The trading volume has reached 6.18 billion Yuan after 3 hour and 27 billion Yuan in 12 hours, and Bit-Z has jumped to the top rank in the world in terms of the trading volume. Ha ha, the mass don't know to believe whom. Amid the land beset by war, what is the monetary policy of Binance? Does the word of "muddy" you mentioned is only make a gesture of attacking , or it is followed by then killing tactics behind?
Zhao Changpeng: It is difficult for me to answer this question publicly. If necessary, there must be some killing tactics, but I can't say exactly what it is. The characteristic of Binance is that we usually have backhand preparation, and our alternative schemes are very thorough and implemented very fast.
Fred Wang: Last year, either for a quick move overseas, or the return of commissions and referrals, you set precedents in the industry. However, it was only after a large number of exchanges followed that Binance announced the platform currency operation plan similar to OK. The pace of Binance seems to have slowed according to the rhythm of the exchanges following the “trans-fee mining” model. Did you switch from the brave attacks to wisdom measures? Or I'll ask you straightly, were the activists becoming conservative as the company got bigger?
Zhao Changpeng: Ah? We have not been particularly conservative, conservative people should still hold on the legal tender. I explained this model above, the model has little long-term value and cuts many users according to my analysis.
Our rhythm is not slowing down. Please look at the moves in Uganda and other international moves of Binance, how many presidents have we seen publicly? There's a lot I didn't send out. Are we slower than others?
Fred Wang: Compared with the traditional financial market benchmarks, the digital currency exchange can be regarded as a super financial center, because it integrates the two core functions of CSRC - review and exchange circulation, which are at the top of the ecological chain. As far as I know, in the current digital currency exchange, Binance is famous for its strict use of coin. Many traders believe that currency of Binance is generally of high quality and more trustworthy than other exchanges. Ms. He Yi mentioned at a media communication meeting in May that Binance is the most strict coin exchange platform. According to statistics, the Break Point Conversions (BPC) of domestic competitive products was 81.25% and 77.94% in the period from January 6 to March 8, 2018. While the BPC of Binance is only 11.76%, and the currency of Binance is even less from April to May. How did Binance reach such a low BPC? Just because it's much stricter?
Zhao Changpeng: Why the BPC is so low? In fact, you may not understand that, I think, the strict review is the second link. The most important thing is the first link: to attract good currencies, you first need to have your own brand of trading platform, and a bad brand will not lead to good effect. Therefore, you must do positive brand-relating things so that there will be a positive energy cycle.
Of course, our coin reviewing ability is very strong. They often start work at 9 AM and come home at 1 or 2 o’clock in deep night, so they spend the entire day staring at the countless research projects in the white paper. Even so, there are times when we can't predict the future development of the project, so there are times we still step into the trap. But the number of traps that we stepped in should be very small.
The other one is that we never accept the affiliated currency. There are many people who have good relations with me, such as the old people in the industry, they come to request me, but we are sticking to the same reviewing standards, which has offended many people. But our principle is forever invariable, we protect the user first!
Fred Wang: As He Yi once explained, the only way to deal with the coin with Binance is to submit the project materials on our website, and our reviewing team will retrieve the information online, and the evaluation and research are conducted in different dimensions by different teams. Are you convenient to share the specific coin rules here? What optimizations and adjustments do you experienced in terms of your monetary policy rules?
Zhao Changpeng: Actually, the principle of our project reviewing is very simple. We should have a good team with historical experience and good products with a huge number of users. However, we don't usually set a hard target, saying that the users must reach a given number, or that Telegram must have 10,000 users. Because if we set a goal like that, someone else will make it by fair and fault means.
Therefore, to the outside world, the specific rule of our coin reviewing is a black box that is very simple in fact, as long as we make a good preparation for the project, we will launch it. As for the projects we are working on, we are really making a detailed due diligence, including the technology, the code and other factors in a lot of aspects.
Fred Wang: At present, there are generally three coin models in the market, namely platform reviewing, voting, and ranking (according to the number of people dealing with the coin). Which mechanism do you think is more responsible for investors?
Zhao Changpeng: I think these three models can be very effective if well managed. I don’t think the coin model itself has problems, it's the parameters within the pattern that are difficult to deal with, how do you set these parameters and how do you balance them? How do you deal with the bad participants? How to defend against the influence of some interests?
Taking the community voting for an example, if it requires holding the platform currency in voting, our early investors of Angel investment who hadn't sold any of the coin will have a right to strong voting in their investments in other projects as they have a higher amount of money at present. Is it good or bad? You still have to put an upper limit, which is not clear. When operating in specific regions, the parameters should be adjusted, and these parameters should be adjusted for a long time.
Fred Wang: Objectively speaking, Binance’s currency model is a centralized evaluation and decision-making system. Although it will be more efficient and professional in the centralized system, it is still a black box for the outside world and inevitably misunderstood. For example, we can't falsify the high coin fees and centralization that are widely criticized by the outside world, and it will be difficult to clarify in the future.
By contrast, more and more exchanges in the industry have started to try new coin reviewing models. For example, HADAX launched the "super voting node", and reputable professional institutions in the industry can apply to participate in supervising the voting. FCoin established the coin voting committee, which is composed of three organizations: community committee members, community partners’ members, and expert review team. Will this model, which consists of different stakeholders to review the coin, achieve an effective assessment and become an open and transparent one? Will Binance learn from them in the future?
Zhao Changpeng: Community coin voting should be our invention. At present, there are a lot of different models, but I don't think any of them are important. What matters is whether you end up with a good result or not, and whether you protect your users or not.
I think Binance has done a good job in this regard, after our public block chain comes out, it will be easier to deal with the coin on it. In my opinion, the more complex the structure of the currency system is, the more interest structure is, and there would be more corrupts. In the end, it is of big probability to have problems.
Fred Wang: Media statistics show that by May 2018, Binance has supported 120 cryptocurrencies, more than 100 kinds of wallets and 240 trading portfolios. I don't know if my observation is clear. At present, there are mainly three commercialization means in the digital currency exchange: coin fee, commission fee and platform coin. If so, which is more important? And what are your reasons?
Zhao Changpeng: We are certainly charge the commission fee, which accounts for the biggest proportion in our income. It is very transparent and fair in this regard, and I like the simple model. So far, none of the coins held by the Binance team have been used, and none of our team has sold any coin. They should be worth a lot of money, but we haven't made a dime on the sale yet. In the long run, these currencies will be unlocked step by step in five years, and so far none of the unlocked currencies has been dealt with.
Fred Wang: As far as we know, Binance does not charge coin fee for all projects. I met Du Ting of QuarkChain a few days ago. He said that Binance didn’t charge coin fee on the QuarkChain at first time, and he appreciated your attitude to work very much. But there's no news showing that you don't charge any coin fee at all. So, does Binance charge the coin fee or not for projects and what are the criteria? On the issue of coin fees, it seems reasonable to charge coin fee from the project side in a market similar to last year's big bull market. But, be in today’s such a bear market, charging the coin fee for the new currency is like that the exchange directly cut the leek of project side at first, be like. Have you ever considered completely canceling the fee?
Zhao Changpeng: Our principle is depending on the project side, we will make a comprehensive consideration for the amount the project side is willing to pay, and it is also acceptable to us if they say the zero. If you fill out our application form, you will find there is one of items asking you fill up a price, and it is OK to write the zero. Then we will collect all the information and review them together. If you think your project is really excellent, it is OK to write the zero.
Fred Wang: Binance was launched online in July 2017. As it adopted an internationalized route at the beginning, all servers were registered and set up overseas. Besides, Binance deals with the coin transactions and does not involve in the trading of cryptocurrency against the legal tender. The policy of September 4 last year did not have a significant impact on the business of Binance. After September 4, the focus of Binance was gradually shifted to overseas markets. When it left Shanghai and took a sea-voyage eastward to Japan, what about your mood at that time? Do you think when Binance can return China? What difficulties Binance and you faced in moving from Shanghai to Tokyo?
Zhao Changpeng: This is the core advantage in our team, which is an internationalized team. In fact, when we were in China, we had teams in other countries.
I've lived in many countries since I was a child, so it's of no problem for me to move from one place to another. I also have a very strong advantage, and I have no problem to eat the hamburger or pasta only for a week.
We had a customer service team of about 20 people overseas, but they could speak 30 different languages. It doesn't really matter where we are, it is important for me to understand the habits of international users and the international cultures, which is the most important part of our ability to expand the international market.
Fred Wang: However, in this March, the Japanese Financial Services Agency asked Binance to provide a solution on how to stop serving Japanese users by April 6 in the excuse that it failed to register in Japan or brought losses to investors, which means Binance would be expelled from the country. You said in later time that the company had no intention of setting up an exchange in Japan as "the Japanese exchange rules are too strict and it is not workable for Binance.” Would you abandon the Japanese market just because of strict exchange rules? For most of us, the move was a surprise.
Zhao Changpeng: Actually, the announcement explains its own problems. You can take a look at what the address is? There is just one word instead of the exact address. What’s more, it was on the day of the announcement that Malta's President tweeted that they welcome Binance to Malta. Malta should be the first country in the world where a digital currency company has been invited by the president.
Fred Wang: "I've never really held a strong notion of a single country," and "the earth is home," as you said in an interview. I don't know which country Binance has landed in now? Some "We Media" say that "Binance is an exchange outside the sovereign state", ha ha.
On March 23, 2018, Binance announced to officially start its business in Malta, and one month later, Binance has reached the cooperative agreements with the prime minister of the republic of Togo, the President of Uganda and the prime minister of Bermuda. In June, Binance announced it would establish a compliance base and a digital currency exchange in the Jersey Island. When you met the prime minister of Bermuda, pictures show you wear a suit and shorts, which became very popular on the internet. However, as far as I know, these countries and regions are either small in area (Malta has less than 316 square kilometers) or sparse in population (Jersey has a population of 76,000 only) and all of them lack of resources. You once said that it was the cryptocurrency that united the world. At present, the cooperation partners of Binance are mostly the countries and regions with few resources. Can I understand that it is more eager for digital currency assets in economically backward countries and regions?
Zhao Changpeng: The earth is my home. When Elon Musk turns the mankind into human beings in the intergalactic systems, the scope can be even larger.
I think most Chinese people probably only look at one place in China, actually the world is quite big. If you walk around the world, you will find that most countries want to attract block chain companies and digital currency exchanges at present. It is not that these small countries have few resources, but that the small countries respond more quickly, that there is less coordination within their internal ministries, and that everyone acts more quickly. They should have a strong advantage in this regard.
Fred Wang: During the spring and autumn period, Confucius traveled around almost all states in China to advocate the Confucianism. Nowadays, you're on the road to visiting dignitaries in different countries with an effort to establish a legalized digital currency exchange. You are probably the most knowledgeable and familiar with digital currency regulation policies in countries around the world. From what you know, is the global regulatory policy more optimistic or pessimistic as a whole? Which countries and regions are most active in issuing the digital currency policy?
Zhao Changpeng: From a national point of view, the countries we are publicized at the moment should be the friendliest, including Malta, Uganda, Bermuda and Jersey. There are also many other countries in Europe that have very high level of support for digital currencies, but we don't have enough energy to deal with it in those countries one by one. In fact, it should say that I don’t know the country opposing the digital currency and block chain industries for the time being.
Fred Wang: Before founding Binance, you joined OKCoin as a co-founder in 2014, acting as the CTO who was managing the technology team and taking charge of the international marketing team. You, He Yi and Xu Mingxing are called "OKCoin triple" in the circle. The pictures of three of you in front of the Company’s LOGO are still popularizing on the Internet. It is said that, He Yi paid three visits to invite you to join them, is this true? After you guys broke up, Xu Mingxing accused you of "not contributing a line of code nor solving a technical problem." When you heard what Xu Mingxing said, how did you understand it? In the past, you have never given an active response to Xu's accusation. Would you like to say something here today?
Zhao Changpeng: What do I have to explain about this? I don't think I need to explain my abilities. Ha ha, I am a little arrogant, sorry.
Fred Wang: You quit in 2005 and started your own business independently. Three years have passed. Boss is boss, speak frankly, what did you learn from Xu Mingxing? What made you feel disappointed and dissatisfied when you left them? Have you ever thought about the moment when you could make up with Xu Mingxing in a cup of wine?
Zhao Changpeng: I do not like dissing each other; I like concentrating on doing my own business. Execution creates value. Everyone has what I need learn, and I've been taught what I can't do. Ha ha. The past is meaningless. Many people like listening to stories, but I generally do not like telling stories, I prefer to do things.
Fred Wang: He Yi also left Xu Mingxing at low profile and joined the short video company of Yixia.com not long after you resigned. More surprisingly, two years later, in August 2017, she issued an open letter on social media announcing her resignation from the executive of Yixia.com and officially joins Binance serving as the CMO co-founder and director. How did you convince your old colleague to join Binance? What do you think of "the number one woman in the coin circle"?
Zhao Changpeng: I persuade her with ideal! Ha, ha, ha. In my eyes, the number one woman of the coin field is "easy to make money with the appearance, but chose to struggle for the ideal!" And it's not a personal ideal; it's an ideal that really wants to do something meaningful.
Fred Wang: According to my observation over the years, it is easier to be successful to work with partners who had successful cooperation when they cooperate again and even reach the point of perfection. At the time of the emergency, He Yi was busy with forwarding clarifying articles in wechat groups. This is not a partner but a customer service girl! What an excellent woman He Yi is! When you found her, did you ever think that there would be such a combination of aces?
Zhao Changpeng: From the very beginning, I knew there would be no problem in our cooperation. I don't know what she can do. I don't have what she has, so I'm definitely not going to be a hero. Our philosophy is the same, that is, always find people who are better than you and give them space, responsibility and power, so it's easy to work with her.
Fred Wang: I reviewed your experience on the Internet. You went to Canada with your father when you were 10, and you stayed in Canada from 10 to 20. After graduation, you entered the financial trading market and also tried to start my own business. In 2013, he entered the Bitcoin industry in full-time and became the Blockchain CTO. In 2014, you joined OKCoin as a co-founder and took the post of CTO. In 2015, you left OKCoin, which cause a lot of controversies. In 2017, you founded Binance and operate it up to now.
I find it interesting to review your growing experiences. You never left the trading. I started my career as the tool software designer, and later worked in the online game industry for more than 10 years, many people in the circle called me "born for the game". But I think you were "born for trading." After graduating from university in 1997, your first job was the development of financial exchange system, and now you are running the digital currency exchange, it has been over 20 years. In my opinion, you are a person born for trading. Do you have a history of failed transactions? Or are you always the big winner?
Zhao Changpeng: There are three parts for explaining. The first part is my experience. As I just said, I have made great contributions to our internationalization program. The second part, actually I left OKCoin in a peaceful manner. His subsequent controversy with Rogerver came three months later, and I was inexplicably and innocently dragged into it.
The person who operates the trading platforms is forbidden to deal with the trade, so I've been really of poor ability for trading. I'm good at trading platforms.
Fred Wang: The trading is the foundation of human civilization. We are trading every day, but it's hard to make good deals. Why are you so interested with the trading platforms? Where does your understanding of the trading come from? Is it from your learning and growing experience? I heard that you like playing Texas Hold’em poker very much. Does it have anything to do with trading?
Zhao Changpeng: I actually had good luck. When I was in college, I was exposed to the corresponding trading system, so I was always in the industry where finance and technology merge. I think trading is the lifeblood and heart of an economy, and the exchanges should be more like the heart, so you can see directly how it affects the whole economy, that is why I've always liked this.
I think playing poker is different from trading. I play poker occasionally and always want to start a business. There is one similarity that you need to make some decisions when you don't have complete information. But I haven't touched a playing card for years. I have no time at all to play poker or even imagine it.
Fred Wang: I have read the book of Principles written by Ray Dalio, founder of the world's largest hedge fund of the Bridgewater, and I was struck by one line: "relationships are my main goal, everything I do is to achieve both goals and making money is just a side effect." So, as the head of the world's largest digital cryptocurrency exchange, who has known different trading systems for more than 20 years, what are your principles? From your point of view, does it need an ethical bottom line in the operation of trading platforms? What about your bottom line?
Zhao Changpeng: This book should be on my phone. My principle is very simple. When one takes care of himself, he should take care of others. This is the most basic principle that our species can survive. If we don't think so, our species will disappear. Well, you should think about how you can do something good for human beings. If you are strong, do more. If you are weak, do less. Everyone should try his best to do the contribution as much as he can.
The trading platforms must have ethical bottom lines, not engage in transactions, not manipulate the market, and provide a fair trading environment for users. These are the things we've always done, but our values are protecting users, and users are members of our community. What I'm going to deal with is the exchange, and I know how to do a very fair exchange, and we're going to exert positive energy in the industry.
Fred Wang: From the second half of 2015 to July 14, 2017 when Binance was established, your experience didn't seem to be well known by the public. Why did you leave the block chain industry and the fantastic digital currency market during this nearly two-year window period? Two years later, why you return back to the battlefield of the digital currency trading? And in the two years since you left the block chain, what's on your mind? Please do not hesitate to tell us.
Zhao Changpeng: I was practicing skills behind the closed door, ha ha ha. In fact, the exchange system of Binance has been developed since 2015. It is not in June 2017 that we started to develop the coin system of Binance because the system could not be developed in one month.
Fred Wang: This may be a more personal issue. Some people say Zhao Changpeng has no friend. I don't believe it, but I have observed that, like leaders of other exchanges, such as Leon Li of HADAX and Mr. Xu of OKcoin, they all have their own social circles and often talk about their views and opinions in public media, including the circle of friends, and so their images are more vivid. But you rarely appear in the media or the community groups, and your public image is mysterious and alienated compared to your partner He Yi. After your picture on the Forbes cover caused explosion in the media last year, it made your image even more mysterious and even the image of Binance looks mysterious. Even in this interview, I continued to invite you for three months; did you deliberately keep the mysterious image? I've noticed that big stars in the entertainment industry tend to shy away from media interviews, but as soon as they show up, they will rouse all crowds. I think you are a person of such kind.
Zhao Changpeng: Actually, I don't think so at all. I think I should be more active than them. Maybe I cover a wider area. They should be more active than I for publicizing in China. I am also slow to update weibo, and I did not accustom to the interface of weibo (microblog), so I use Twitter more. Probably mainly because Twitter can't be accessed in China, so my messages read by people in China are second-hand ones.
In addition, I engage in the technology indeed, so there is still a lot of practical work to do, more things left for me to do in the limited time. If speculators are roused in an interview, it has nothing to do with me personally; it is mainly because we have strong brand awareness. The other reason is that the domestic news is often focusing on discussion and controversy. I don't like to participate in these discussions. I like to participate in some technical discussions that are helpful for the industry.
Fred Wang: I can see that the brand awareness of Binance Company is very strong. Your quarrel with Sequoia bubbled with noise in early May. You said on twitter: "it may soon require all projects submitting application to Binance to disclose whether it has a direct or indirect relationship with Sequoia." This quote was written by some of the block chain media you've dissed like this: "Binance will clean up all projects related to Sequoia Capital, and they even used the rupture to describe the relationship between Binance and Sequoia. Do you think Sequoia is an aggressive investor?
Zhao Changpeng: I think I do not make an assessment on a person or a company separately. But there is one of things that can be said is that the model of traditional investment institutions is very old-fashioned, and they have a lot of traps, and these tend to be very unfriendly or bad for a startup enterprise.
Fortunately, it has passed, and I think the discourse is in the hands of entrepreneurs. Now good projects and teams are never short of money. Therefore, I hope you can work hard and do your project well.
Fred Wang: Binance has quickly developed from a startup into an exchange giant in short time. Currently, the company's hand has been extended to the Binance Labs incubator and some other ecological layouts, including media. Why do exchanges have their own media? I've read BABI Finance which is in the fairly good operation. What do you think about Mars Finance? Please put forward some sincere advices.
Zhao Changpeng: BABI Finance is the company we invested in. I haven’t spent much time to involve in them because I know little this industry. They complained to me that Binance had never prompted them when twittering messages because I always forget them and I am not going to do so.
I think Mars Finance is operated very well, and furthermore, the media we're actually investing is very little in number in our industry, while the media invested by other exchanges are in a large number, and we're investing a lot in infrastructure projects today. I hope we will have the opportunity to cooperate later. You know, ha ha.
Fred Wang: On May 31, you tweeted out the Alex traffic ranking of an exchange in the past 30 days and questioned that the ranking based on trading volume did not match the one based on Alexa traffic analysis, suggesting that the trading volume of your rival is suspected of being fraudulent. However, as early as in this March, the US technology blog Medium published a signed article of Chasing fake volume: a crypto-plague, which caused heated discussions in the coin circle. According to the author, China's virtual currency exchanges, such as HADAX and Binance, all have fake trading volume, which accounts for 70 to 90 percent of the total trading volume. On the one hand, you accuse your competitors of fake volume. On the other hand, you've been accused by the tech media for the same reason. Who is on the side of truth? Is it because the different research tools or models that led to the false conclusion that trading volume was falsified?
Zhao Changpeng: When the article was translated into Chinese, there were some deviations. In fact, the article said that in all the exchanges, only Binance cannot be seen and determined to have the fake trading volume, because we did not involve in it. The fake transactions of other exchanges have said in that article, I will not repeat the numbers because the numbers are very high.
I think the users are all clever, whose trading volume is true and whose is false, including the fake traffic volume, the users should know in their hearts as no person is stupid. I think there are too much fake volumes today, a lot of fake trading volumes are not helpful for our industry as it seems that our industry is a fake one.
Fred Wang: I also noticed that you have said that you hope Binance would report lower volumes so that it doesn't always rank the first. Do not rank the first, as if you have mentioned in many occasions. Why do you have the idea of not being first? Are you afraid of being shot?
Zhao Changpeng: The real strong people will not call themselves the first master every day. In the context of the non-trading purpose, the more correct expression is that we don't care about the first, what we care more about is how much infrastructure work we have done for this industry, rather than harvest behavior. In fact, it is not because we want to be the first while exert our greatest efforts in work, it is enough to do things well, the first place is not important. And now all the rankings are somewhat flawed, and it is very difficult to make ranking, so it really doesn't matter.
Fred Wang: In the absence of adequate regulation, if the centralized exchanges has data falsification or make fake trading volume, it seems there is no better way to resolve them. In the block chain ecology that advocates the consensus mechanism, the exchanges, as one of the core links, cannot make people to form a consensus, which makes people feel a little helpless. How do you think this problem should be solved before the regulation is in place?
Zhao Changpeng: Now because of the rapid development of technology, I think that the state of regulation in place may never be achieved because technology is also moving forward. In addition, it's very difficult to regulate an industry, you have to estimate everything that's going to happen in the industry, and there's really no way to do that, instead, it is not because the regulation doesn't want to do it.
Therefore, I think a good regulatory framework actually has three parts: the regulatory authorities need to have a larger framework and a larger direction; Practitioners need to do their own work well other than doing bad things; the most important part is actually relying on the user, the user shall not support bad projects or bad platforms. This needs everybody to work hard together, only in doing so, can it make this industry good.
Fred Wang: On March 13, Binance announced to launch the public chain of BinanceChain, which focuses on the trading and conversion of block chain assets. By developing the Binancechain, Binance will be transformed from the enterprise to the community, and meanwhile, the Binancechain will also be used to transfer or trade different block chain assets. In addition, Binance announced that BNB would be transferred to the Binancechain. BNB surged to $11 after the announcement, up more than 25 percent in a single day.
In the past, the public chain used to be developed by the company was using the ERC20 Token. Why did the company develop a public chain by itself instead of using the existing resources and technologies in the industry? You said Binancechain is one of the highest priorities, so how much energy do you allocate to the BinanceChain? And what about its latest progress?
Zhao Changpeng: Our public chain project is being under development, and our team is very excellent. I hope I spend 20 percent of my time on the public chain project, but it seems the time is less than that at the moment, but I'll spend more time in next step.
The public chain is definitely going to be a trend in the coming five, 10, 20 years, so we will not give up the fairly good model, and we embrace the changes and innovations.
Fred Wang: Think of your announcement in early March that "a decentralized exchange will be launched in the coming months." In my opinion, the Binancechain launched is to build a circulation channel for BNB and an important technical support for decentralized exchanges. However, decentralized exchanges are only at the "looking good" stage at present. According to media statistics, there are more than 1,000 digital currency exchanges in the world, and less than 5 percent of them are decentralized exchanges, which take a very little market share. Someone say that the decentralized exchanges will not become mainstream in the next two to three years, and it will take a long time in the process of replacing the centralized exchanges. Do you agree with that? From the current intensified exchange battles, will the innovative community-based central trading mechanism be the direction of evolution?
Zhao Changpeng: I agree with that. At present, the performance of public block chain is not fast enough. In the short term, I think the large trading volume should still be on the centralized trading platform and the decentralized trading platforms may be years away from becoming the mainstream.
Fred Wang: Miners and exchanges are undoubtedly the two giants in the block chain industry. It is said that the Bitmain led by Wu Jihan, who ranks the first place in the miner industry in the world, has submitted their application form to the Hong Kong Exchanges and Clearing Limited（HKEX）in the end of September, it is valued up to $40 billion at most. The second miner Canaan-creative also sent a form to the HKEX in May. So, as the leading enterprise in the exchange industry, will Binance select to move closer to traditional financial markets?
Zhao Changpeng: We don't have plans for an IPO, and the IPO of the traditional financial industry has become a financing vehicle, or a vehicle for early investors for untangling, so I don't want to do that. Or in other words, it is a untangling tool for VC, but we don't have VC investors, and the block chain has taken us to the next era.
Fred Wang: As you've worked in traditional financial exchanges before, and the total market value of the currency market is far lower than that of the traditional capital market worldwide for the time being, do you think the digital currency exchanges will eventually replace the official and traditional financial exchanges in the future? Or will the two merge with each other to some extent?
Zhao Changpeng: I think the two kinds of exchanges will be parallel for a while. It’s a little early to say we're replacing them as our volume is still much smaller than them, and. It's hard to predict what will happen in the future. We just focus on getting our own things done.
Fred Wang: There are ups and downs in the digital currency market, and the last laugher is the winner. The digital currency exchange is our beacon in the new maritime navigation era. Binance’s value has increased from zero to a $10 billion within a year, thank you CZ and He Yi, your spirit has always inspired us as an example. In the new era, everyone has the opportunity, what shall we do is to work hard with a humble heart, we should learn from Zhao Changpeng and He Yi.
Thank you again Changpeng, thank you for joining the Ten Questions with Fred Wang of Mars Finance, I wish Binance becomes better and better! Thank you for joining us. This is our 22nd Ten Questions. See you next time.