Time: At 12:30 on May 30
Group: Camp of Ten Questions with Fred Wang
Jian Zhang: FCoin founder and former CTO of Huobi.com, who founded Huobi Digital Currency and Blockchain Research Center. Meanwhile, Jian Zhang is also the author of "Blockchain: Defining the Future of Finance and Economy", one of the blockchain enlightenment and bestsellers in China. In May 2018, he established the FCoin digital asset trading platform to explore the autonomous community development direction of the digital asset trading platform.
Fred Wang: Founder of Mars Finance, Chairman of Linekong (HK. 8267), founding partner of Geek Founders and former senior vice president of Kingsoft.
The following is the sorted dialogue script.
Fred Wang: Let me introduce today's guest: Jian Zhang, founder of FCoin. Let's take a look at his experience. In 2013, he began to deal with the digital currency; in 2014, he developed the qukuai.com, a blockchain information query website, and "Kuaiqian wallet" of Bitcoin wallet. In the same year, he joined Huobi Global, acting as CTO, and founded Huobi digital currency and blockchain research center. In the second half of 2016, he resigned from Huobi Global and established the Bochen Technology; in March 2018, he became the co-founder of Singer Capital; In May, he set up the FCoin digital asset trading platform to explore the autonomous community development direction of the digital asset trading platform. He is the author of "Blockchain: Defining the Future of Finance and Economy " and "Fintech: Restructuring the Future Financial Ecology" etc. "Dialoguing with thinking pioneers and facing the location with highest waves and strongest wind" has been characters of Ten Questions with Fred Wang, and today’s guest, Jian Zhang, is a seaman standing in the forefront, the Fcoin he founded became the biggest dark horse in the field of digital currency exchange and even the entire blockchain industry in 2018 as its turnover exceeds the sum of turnovers from the second to the seventh exchanges after it was launched online for only over 10 days since the end of this May, which completely shocked the traditional exchanges giants in the old pattern. Big tree is easy to be blown by wind and the popular person tends to cause troubles. The popularity of Fcoin has triggered a wide range of controversies and implication far beyond our imagination. It is a blockchain exchange battle almost like the 3Q battle and the hundred-regiment campaign on the Internet. We have too much to know and want to know about Fcoin. Let us restore the most authentic and transparent Fcoin to everyone tonight in the Ten Questions with Fred Wang of Mars finance without dead corner. Now, let's begin today's Ten Questions.
Fred Wang: First question, since June 21, there has been flooded with reports about you and FCoin on the Internet. How did you get through those days? Do you think you are popular now?
Jian Zhang: Haha, it is very easy to answer this question. Because I grow up too fast, I'm too busy to spare time to care about what has happened and I even have no time to eat or sleep for a long time.
Fred Wang: There are many people who praise you, especially Charles Xue, who is full of praise for you, and Chandler Guo (Baoerye), who kept sending small advertisements for you at the cost of being kicked out of the group. There are also many doubters. Changpeng Zhao, the boss of Binance, is always at such low-profile and never gives interviews to the media, and even when there was a major accident in the company, He Yi, the "first lady in coin circle", was asked by him to make explanation for it, but he has repeatedly attacked the "trading is mining" mode this time. I’m afraid the following questions might make you anxious. I've collected a list of attacks and criticisms made by the media and industrial peers against Fcoin and the "trans-fee mining" mode. Those attacks and criticisms can be generalized in seven articles that sound a bit like the "seven deadly sins" :
1. Click farming (a media reported that you invited people to enhance your rank on the internet at your own cost)
2. Ponzi Scheme (criticized by a famous economist in your circle)
3. Market destroyer, the all-rebate business mode won't last for a long time. (an exchange entrepreneur)
4. "High-priced ICO." It is not only a disguised ICO, but a high priced ICO." (Changpeng Zhao)
5. Banker. "You care about dividends, while the exchanges care about your principal." (Changpeng Zhao)
6. Wash sale. "If an exchange does not have service charge income, its profit depends on the rise of the platform coin, how it survives without the wash sale. (Changpeng Zhao)
7. Fund fraud. Both success and failure depends on capitals. (A digital currency trader)
It seems that Changpeng Zhang understands you more. Among the above criticisms, which item would you accept, and which is most unacceptable to you?
Jian Zhang: Ha ha, those problems are very sharp.I would not accept any of them. Now, I would like to start to explain them with the slightest one.
1. Click farming. This is the slightest one. The people who accused with this should be the ones who don't understand our mechanism. The nature of trading-is-mining mode is allowing the trader to become the owner of the exchange through returning trading fees (FT, the "shares" of the exchange), which is the original intention of the model design. Therefore, the mining activity will definitely generate huge trading volume, which is all user’s trading and is different from the fraud behavior of click farming on the platform. Because we will give 80% of our income (or 100% recently) to the FT holders, if we invited others to enhance the rank for us, how could we have such amount of money? Our mechanism is essentially eliminated fraud behavior on the platform and all trades are dealt with by users. If you know how Bitcoin works, you will know how the mining works. If you insist on such thinking, there is no difference in the nature of the Bitcoin and mining machine.
2. I would not reply directly to the Ponzi scheme, banker, wash sale and fund fraud. Please refer to the principle and history of Bitcoin, from which you can see how many hats it were covered with on the way. There are still people who say Bitcoin is a Ponzi scheme, and what they say are not denying FCoin but denying the value of the entire crypto digital economy.
3. Market destroyer, all-rebate business mode will not last for a long time, which is a little bit gentle. My reply is that, first, we are not in full rebate, and the exchange will have 20% of the income for research and development and operation in a long term, which is very sustainable; Second, the full refund of transaction fee is the issuance mode of our FT, and it may take some time for those who do not understand the principle of the Token economy to understand it.
4. The high priced ICO is most funny. Firstly, Binance is raised with the help of the ICO, and it has been launched online for numerous times without any result except a huge amount of money raised, how can it evaluate other people's ICO be high-priced or not, isn’t it insane? Second, many people use the volume we don't release to calculate our market capitalization, which is itself a mistake. The unissued FT, which is neither trading nor participating in dividends, does not exist yet and it is a completely confusing concept to calculate market capitalization in such way. There is no project with the market capitalization calculated in such way in the coin circle. Third, in terms of our trading volume, dividend yield, number of active traders and growth rate, our market capitalization is not over-valuated but under-valuated.
Fred Wang: The trading volume of FCoin cannot be found on CoinMarketCap. The trading volume can only be reckoned reversely by the outside world according to the dividend mechanism set in your white paper and the dividend amount you officially announced. The rise in the value of the trade is insane. It is reported that on June 15, the daily trading volume of FCoin reached as high as 30.7 billion Yuan, which is more than the sum of OKEx (9.7 billion Yuan), Binance (9.2 billion Yuan) and Huobi (5.4 billion Yuan). I wonder if you intend to release this data, is this data authentic?
Jian Zhang: The data itself cannot be falsified, because we need distribute the commission fee to traders, the FT holders who have received our dividends, all understand what this means. Furthermore, with the development of our website, we will gradually complete comprehensive asset transparency, and then everyone will be able to verify the authenticity of the data. Our mechanism determines that we cannot falsify the data and it has to be authentic in every link. Otherwise it won't work at all. It's the point that a lot of people don't think about clearly.
Fred Wang: Why didn’t CoinMarketCap, Feixiaohao.com, TokenClub and other third-party statistics agencies include your data?
Jian Zhang: Due to the rapid development of FCoin, our core teams are all running at full capacity, so we have little investment in channels and markets. As is known to us, CoinMarketCap is a website that is very slow in response and very mysterious. I know one of the founders of Feixiaohao.com, but I don't have time to proactively promote the docking. But it seems they have some of our data and they should release our data on the website soon. I also know the TokenClub, but it is estimated that we failed to complete the docking for the reason regarding time. As you know, since we officially released our data on May 21, it's only a little more than a month.
Fred Wang: Because of the rebate and dividend mechanism, there should be a large number of quantitative trading in these trading volumes. How do you think about these funds? What percentage do they account for in the total turnover?
Jian Zhang: We did not calculate the proportion of quantitative trading, for the time being, we exert all efforts to cope with various pressures caused by the growth. But we can see that all types of transactions are growing fast. The form of community is being diversified.
Fred Wang: According to the " FCoin’s mining income multiplication plan ", there will be a piecewise function of 50%, 20%, 10% and 5% for the returned fee rate when inviting friends to make trading. It can be seen from the latest announcement that it has reached the stage of 10% at present. With fewer rebates and less attraction, users are likely to migrate. As is described in the commonly used words of "recrimination" in the Internet financial circle, users will run away after grabbing money from the platforms one by one. The so-called traders may be flying down a field like locusts, and what will FCoin do to increase trading volumes at that time?
Jian Zhang: In general, you don't worry about it. There will be some people to pursuit for a mature market, as long as there is interest rate, even it is very small. Besides, as I mentioned in the last question, in addition to chasing interest rate spreads, the trading pattern of the community has been diversified. Due to the liquidity and depth, traders with all kinds of funds are willing to trade in FCoin. So you don't worry about it at all. In addition, the mechanism I designed will not affect most users' transaction even if the return rate of invited friends is reduced to 0%, because the return of 100% transaction fee will last for a long time and is still very attractive.
Fred Wang: The traditional exchanges and trading mechanisms are relatively formed with innovation for a long time, what is to do is count the heads, which will inevitably bring trading volume. You have achieved innovation in the trading mechanism of Fcoin. "Trans-fee mining, and ownership means dividend". For users, trading used to be the payment cost, but now trading is the profit link. How do you think of such a mechanism?
Jian Zhang: That's a very good question. There are three core reasons that I can make disruptive innovations in such a relatively formed market.
The first is the devotion to public interests. I often say privately, you won't succeed without the devotion to the public interests when dealing with the public blockchain. Even it seems that you are "successful" in the short term, your success won't be sustainable. Exchanges have become the most centralized existence in the industry of de-centralization of blockchain. Cutting leeks, self trading, shady deal, coin theft and over-deposit loss, which make the exchange lost the trust of more and more people. So it's incredibly important to have devotion to public interests.
The second is a profound understanding for Bitcoin. My own blockchain book has influenced a lot of people, and I mentioned in my book that Bitcoin and blockchain are "genius inventions." "Without a deep understanding of the mechanism of Bitcoin, it is difficult to understand FCoin for why it has been successful. In my book, I use the profit cycle model to explain why Bitcoin has been successful for the first time.
The third is the recognition upgrade and deep thinking of the Token economy. I've said this on a number of occasions, but I won't go into it again.
Fred Wang: There is a quite revolutionary paragraph in the FCoin’s white paper, which is: "FCoin is not a company in the traditional sense. It is a key step in the evolution of digital asset trading platforms into communities. The FCoin community is an open, transparent, and Token-based organization and the FCoin Token (FT) represents all rights and interests of the trading platform. Speaking simply, it is to use the Token economy to remake exchanges that were extremely centralized and incredibly lucrative and return the most of the profits to traders (the "miners", as you call them). In my opinion, this seems to be in line with Satoshi Nakamoto's Bitcoin design idea, which reminds me that the exchanges, which have been operating at the top of the blockchain industry for many years, have been operating in a traditional, centralized mode! The rebellion against centralization should be the reason for the barbaric growth of FCoin. I observed that you, the CTO background of institute of technology who few appeared before the media in the past, describe your design idea in some of the media interview with such words: "(it) is one of the greatest innovation after the Bitcoin," "those who really understand you will marvel at the ingenious design." would you like to share with us what is "great" and what is "fine" again? Ha ha.
Jian Zhang: OK, let me answer this question briefly. Some time ago, I opened a Twitter account to disclose the core understanding of the FT.
One of the key points about the FT: The essence of the FT is to make a practice of transforming production relations with the thought of the Token economy.
Change the relationship between producer and consumer or between service provider and user from the antagonistic relationship of interests between them to a unity one. This may be the first large-scale practice in human history to promote the evolution of corporate institutions into community institutions.
The second key point about the FT: It is the perfect mode for the Token economy in the future and even BTC2.0. Unlike digital coin like Bitcoin, the Token like FT not only has an interest circulation mechanism (similar to Bitcoin), but also an interest return mechanism (most digital coins do not have), or namely a clear dividend, as a value center. So the FT is turning a new page in the crypto economy.
In addition, FT is also a gateway to digital coin investment, because FCoin is the best quality coin in the online market. If you hold FT, you can exchange all the coins in the FCoin trading. It is a value investment for the fools and very simple in operation.
Fred Wang: When did you start the idea? How many people were involved? Who suggested this idea first? A lot of people say somebody tried it before and didn't succeed as you do today?
Jian Zhang: The idea is to start with the devotion to the public interests and gradually shape up with the upgrade of the understanding of the Token economy according to the starting point of Bitcoin principle. It was started probably in the second half of last year. It was originated from the understanding of transparency and the desire for transparency in the ecological practice of exchanges. It gradually expanded to the innovation of mechanism and the design of model in the later time. The design of the whole model wasn’t confirmed until the night before the launch of FCoin. The whole model design was completed by me, but I had a lot of discussions with my friends and partners and gained a lot of inspiration.
Fred Wang: I'm very curious, why is the stock exchange in the Token economy mode launched at this time? Is it because of the bear market of digital currency industry? If the industry is in an upward phase where investors, including new entrants, can easily make money and being big and strong, isn't this model going to be popular so quickly?
Jian Zhang: The time when I launched the exchanges in such mode is in coincidence the bear market of the digital currency industry. We are trying to accelerate it as quickly as possible, and did not anticipate the coincidence with the bear market of digital currency. As for whether it doesn’t ascend so rapid or not, I think it might be, in the bear market, we have become more prominent.
Fred Wang: Binance was rising in a very short time last year, and so is today's FCoin. Why has the industry changed so quickly? It's like a heavyweight boxing match, in which roles of challengers and winners shift rapidly. You're a challenger, but soon became the winner once you get on the stage, and then the other challengers come around to challenge you. How do you feel transitions of these two roles after just a month?
Jian Zhang: I don't have time to feel such things and were pushed forward. My biggest impression is that I have no time to stop but to move forward.
Fred Wang: After FCoin became a disrupter in the industry, the three major exchanges responded one after another with their own countermeasures respectively. Binance and OKEx are in the joining mode, while Huobi Global initiated the ecological dividend. Did you ever think there would be a situation like this? To be honest, do you think the era of exchange profits from trading is coming to an end?
Jian Zhang: Yes. I think it's the return of the exchanges and Bitcoin, a return to the spirit of blockchain. I do this as a tribute to Mr. Satoshi Nakamoto for ushering in a great era.
Fred Wang: How will FCoin fight in this battle next? Are you ready for your next magic weapon? As you mentioned in your previous interview, "full transparency is only the starting point for the evolution of FCoin, which will be followed by the transformation of the clearing and settlement system of the exchange based on Zipper's cross-chain technology. The ultimate goal is to transform exchanges into the architecture of token+blockchain and practice the Token economy." Could you tell me the specific timetable?
Jian Zhang: A lot of people think I'm going to disrupt exchanges because I'm deeply involved in them. Actually I am not at all. My original intention is to practice the Token economy. The exchange happens to be the most familiar to me and the thorough example of practicing the Token economy. The exchange has been transformed into the architecture of token+blockchain and I hope it can be completed in the first half of tomorrow. Since we already have the basis for institutional innovation, the evolution of technology is much easier. In addition, today I will release another product of FInsur that practices the Token economy to transform the insurance industry with the Token economy. This is my first public disclosure. I designed the whole economic model as a consultant. The fundraising will start soon, and they project will be put in operation soon. Finsur.com FInsur has been brewed for a long time and it's going to be officially released.
Fred Wang: Many people think that this model is actually a price war a bit like the subsidy war in the Internet field. And we think that there are often no technical barriers to competing on price. "There are no barriers to the FCoin model, and everyone can do it," said Mr. Changpeng Zhao, who did call for the action.
I've noticed that while there are dozens of exchanges that claim to adopt a "trading is mining" mode, but more exchanges are in the stage of using gimmicks to raise funds in primary markets. Although there are a few imitators available on the market had put such mode online and few of them had achieved much. I consulted with transaction quantification friends and they said they couldn't run it at all after accessing to the API. What exactly is causing this? Now you can explain it.
Jian Zhang: Actually the technological barrier is very high. As you can imagine, we have taken the largest trading volume and order quantity in the world after being in the online market only for half a month, when our product technology is far from the optimal state. It couldn’t say even the first-tier exchanges at this technical level have no problem at all, let alone new exchanges, it is almost impossible to run. The threshold is not at low but high for an exchange to carry a lot of trading.
Fred Wang: My feeling is that there have been a large number of exchanges opening recently, which almost has the momentum of the “Hundred-Regiment Campaign” in the group purchase market. What do you think is the core competency of an exchange? What are the technical barriers for new entrants?
Jian Zhang: 1. Technology, which guarantees the massive transactions. 2. Trust, which is the foundation of startup. 3. Mechanism, which is the basis of profound understanding of and the Token economy. Our mode is almost impossible to replicate.
Fred Wang: The FT economic system is very well designed. Besides, there is no obvious physical harm in data concurrent and bearing, security and asset transparency for the time being at least. I was also surprised by the degree of completion of the FCoin product, with almost no short board. Both user experience and UI design are significantly ahead of most exchanges in the industry. I've heard that there are even head exchanges learning your UI. Can you disclose your team to us here? How long did it take FCoin to go from project approval to launch?
Jian Zhang: It took about half a year to prepare for the project and in most time, we are practicing our internal skills and doing new trading system infrastructure. That's why we can handle such a huge amount of transactions as soon as we are online. In addition, in terms of UI design, we have the best team in the industry, and I also have extensive accumulation and profound understanding of the product, which cannot be duplicated.
Fred Wang: What do you think are your personal and team advantages and disadvantages? What opportunities and threats do you currently face?
Jian Zhang: Our advantages are: 1. Accumulation and innovation of technology; 2. Profound understanding of Token economy; 3. Accumulation of community reputation and brand.
Fred Wang: What about the disadvantages?
Jian Zhang: Our disadvantage is: I am too tired. The opportunity is that we are at a turning point of reform, which has no exaggeration at all. We are doing a practice of transforming production relations with the Token economy and blockchain. Due to the promising future, we are lack of all kinds of talents. But our community model is of huge potential because we are more and more inclusive. We are all remodeling production relations, so we will use a new community framework to structure FCoin. Now it's just beginning and there will be a lot of wonderful actions. The threat is, uh, all kinds of back-stabbing. Our exchange rose so rapid recently those rumors are being spread every day, saying from time to time that we are the cheaters or we run away. But I'm not worried because we're doing what's right, what's aboveboard, and what's necessary in the future.
Fred Wang: It is believed that as the rate of return decreases, many high-frequency traders will gradually withdraw, and the FT price will also fall sharply. To some extent, the biggest beneficiaries of both dividends and the FT are high-frequency quantitative traders, comparing to ordinary investors and platforms. Their withdrawal seems to mean that a round of funding harvest has been completed at the macro level. Furthermore, if FCoin has a large number of imitators, together with the support plans of hundreds and thousands of large head exchanges, more high-frequency quantitative traders may emerge in the market, leading to an overall harvest in the digital currency market. If so, it will hurt the overall market in the second half of this year. Can you agree with that?
Jian Zhang: The quantitative trade will not withdraw, instead, more and more traders of all kinds would flow in. Digital currency exchanges do not too much but too little trades, with only a few types of trading and institutional investors. We will continue to return 100% of the commission fee of the FT for more than several years in conservative estimate. At that time, this digital currency ecology will expand N times, let alone the current pattern.
The plans of establishing hundreds or thousands of exchanges are incorrect measures and will not have much impact on the industry. Is the exchange threshold at such low level?
Wensheng CAI: FT model is to change the relations of production, so that the producer also has the means of production, that is, the user is also the owner! There is so much room to expand and the FT model can be copied in every industry.
Jian Zhang: Yes, we are just the prelude and there will be a huge number of investors behind us.
Fred Wang: There are even extreme voices in the market who believe that this round of market decline has something to do with the FT. What do you think? It is also thought that a lot of high-frequency traders have cashed their investments out and left the market, along with nearly 5 billion Yuan in liquidity, forming a liquidity black hole. (I noticed that the withdraw of Mt.Gox in bankruptcy liquidation triggered the liquidation, which was worth $1 billion in total) I don't know if you've heard that before, but what would it be like to hear that?
Jian Zhang: It is very complex for reasons of a market that rises or falls in short term, far from being determined by one or two factors, otherwise is it too easy to invest? Increased liquidity, in the long run, must benefit the industry. All the power and most central value of the Token economy is the qualitative change in liquidity. The most profound change in Token is liquidity enhancement comparing to the traditional equity. It will lead to further improvement of the market issuance mechanism, further reduction of the cost of collaboration, and further elimination of information asymmetry.
Fred Wang: Your enthusiastic supporters (such as baoerye and many of your investors) think that the highly innovative FCoin mode may continue to attract more users and even encircle all blockchain investors, eventually giving rise to the first digital currency exchange with 10 million users. Do you think it's possible? In other words, do you currently have such target expectance?
Jian Zhang: As our model is subversive, we are practicing the Token economy through blockchain to transform the production relationship, promote the relationship between service providers and users from antagonistic to unified and advance the times. So the scale of digital currency in the future can only be imagined. In the future, the scale of digital economy is far beyond 10 million. Of course, I'm extremely optimistic for it. I am not care about the current market layout, but I am concerned on the market space in the future.
Fred Wang: The price of FT surged all the way to $1.25, then fell rapidly, showing an inverted V pattern, and the fluctuation curve of the coin price was so steep that I'm sure you didn't expect it at first. Is this market performance going to disrupt your original FT economic blueprint?
Jian Zhang: I can say I predicted it and I didn't predict it. I often say not try to predict the short-term market performance, because that's efforts in vain. In the long run, prices move up and down around value. So the value plays a critical role. FCoin's core mission is to create value for the community. So I always remind people not to care about short-term fluctuations but care about long-term value. So, it didn't mess with my original design.
Fred Wang: You once said that you have great confidence in the economic system of FCoin. When the public chain of FCoin goes online, it will be written into the smart contract, which will never be changed. After a month of roller-coaster ups and downs in price, do you still think so?
Jian Zhang: Yes, this fluctuation is understandable to us compared with the early days of Bitcoin. It's hard to understand such fluctuations without having experienced the development of new things, especially the growth of Bitcoin. Why the fluctuation is so big? Because this is a new thing, it is a new species. All of us don't know how to price it yet, and I always say the early market price discovery is premature. But more and more people will cognize and understand it.
It can be seen from the history that new things are not understandable at the early days, and even it was called a fraud. When Jack Ma was selling products on the Internet, there was someone called him a liar.
Fred Wang: Yes, new things, such as MI and Jinri Toutiao, have such experience in the history of industry. I continue to ask you, in terms of market capitalization, the total market capitalization of FT was reckoned reversely to reach 50 billion Yuan (it took 13 years for 58’s Ganji.com to achieve the same market capitalization) according to the market capitalization of circulated shares, and now its market capitalization is still over 35 billion Yuan, which was once the sum of market capitalizations of BNB and HT, do you think it is reasonable? In China, there may be no more than 30 Internet companies with a "market capitalization" bigger than the FT, with such a high "market capitalization" as the starting point, what will be the follow-up strategic measures of FCoin? Will they be more positive or more conservative?
Jian Zhang: Yes, I just explained this problem. It is a mistake to calculate our market capitalization with our total shares including those we have not issued. The unissued FT shares can be used for neither trading nor participating in dividends, so they did not exist at all, and it is actually a confusing concept to calculate the market capitalization with them. There is no project with the market capitalization calculated in such way in the coin circle. Its concept is not as the same as that of the non-circulated shares in the traditional financial market at all and you will not understand it if you haven’t learned the growth of Bitcoin. So our "market capitalization" rises gradually as the "value" we created.
Fred Wang: Before the voting mode emerged in the coin circle, the coin process of the traditional exchanges was basically in the black box stage, and the high coin cost has been widely criticized. According to a report released in April by financial technology analytics firm of Autonomous Research, the market price of a cryptocurrency-listed exchange is typically $1 million, and $3 million is required to pay for faster liquidity. The costs charged by the cryptocurrency exchanges for listed coin are 10 times as much as the costs charged by traditional exchanges for securities.
Even if the voting mode is taken, the project side will also bear a huge cost pressure. Taking HADAX as an example, according to the results of the first round of voting for HADAX on February 12 to 28, the number of votes in the top three projects reached the level of 10 million, and the actual funds consumed by the voting was 4.793 million, 4.439 million and 4.365 million respectively.
For the project owners, if they do not pay the high coin fees or have strong capital strength, they will not be able to list in mainstream exchanges, and then face the risk of being marginalized in the intensive market competition. Many project owners are looking for a friendlier exchange. Do you think there is an opportunity for innovation in exchange’s coin management? What is your current coin strategy? A lot of people in this group care about it.
Jian Zhang: Yes, it's a very good question. At present, the high coin cost has even caused the bad coins to drive out the good ones. Therefore, the people who cry out can make more money than those doing actual work, which is a vicious circle, and in the long run, it will lead to a great depression in the coin circle and such depression might already take place at present.
If a large number of projects that can raise funds easily will get access to the coin opportunity in the long run, those projects will lost the value support, which is very negative to the long-term development of the industry. So I think there's a tremendous opportunity for innovation.
Our goal is to enable real valuable projects to get the liquidity to motivate teams and communities so as to create positive feedback. Therefore, we will never charge the "coin fee", and we will strive to explore and promote the market mechanism in the virtuous circle of the coin circle, such as lowering the threshold but disclosing strictly to protect the public interest. We will release gradually our specific strategy.
Fred Wang: There are huge global compliance risks for any form of dividends. The platform coins represented by FT have the characteristics of dividend yield, voting right and so on, while the dividend is the basic property of securities, so the possibility of FT being identified as securities by regulators will be great. In my opinion, the uncertainty of policy regulation is an important risk for FCoin in the future. Once Fcoin is identified as securities, it is necessary to face the challenges of licensing and pre-approval in accordance with the existing laws and regulations on securities supervision. Have you thought about the response?
Jian Zhang: At present, there are two kinds of platform coin properties, one is points, and the other is stocks, such kind of platform coin is similar to the stocks, doubtlessly, because it has all kinds of rights to dividends, to earnings and voting. But I don't think it's today’s stocks, it's the stocks in the future.
The regulation must undergo a cognitive upgrade. After many trials and efforts, we will find it difficult to regulate these newly emerging assets of high liquid with the previous financial regulation methods and regulations. At this time, regulators are willing to develop a new system, and FCoin is willing to cooperate and provide multi-faceted supports including technology.
We are also willing to invest in research and contribute to building a new regulatory system. The development direction of regulation will be the public regulation in the future. For example, traditional listed companies cannot be supervised by ordinary users, because it is impossible for an individual to go to the company to review its inventory and check the presence of assets. However, the presence of assets can be checked in the digital asset exchange at any time. Therefore, I believe that the public governance and self-governance must be the direction of regulation.
Fred Wang: The security problem is always a sword of Damocles hanging over the heads of many exchanges. According to rough statistics, one million Bitcoins have been stolen. Both Mt.Gox bankruptcy in 2014 and Bithumb’s stolen Bitcoins worthy of $32 million have caused the black swan in the coin market. As a technical expert, what do you think is the reason for the frequent security problems in exchanges?
Jian Zhang: There are two main reasons. The first is that the asset in the form of digital currency, which is different from most assets, is the completely digital storage, which is very vulnerable to hacking and stealing. Before the advent of digital currency, hackers stole a lot of information. It is hard to steal the assets in so direct manner, because information is digital, and many assets are centralized and offline. However, after the emergence of digital currency, it becomes a carnival of hackers, who, once stolen you key, will steal you assets. This is determined by the nature of digital assets.
The second is that a large number of exchanges are unprofessional. The digital currency exchange is the Internet + finance, which requires both the speed of the Internet and the rigorous and professional financial skills, as well as a profound understanding of blockchain assets. In fact, the threshold is very high.
Fred Wang: Although the FCoin’s white paper emphasizes its decentralization, I think it is just the decentralization of the operation mode at present. From the point of view of the product, Fcoin, Binance, HADAX, OKEx and so on are centralized exchanges, and a well-prepared DDoS attack will make everyone scrambling. As of June 15, there are 11,214 digital currency exchanges in the world according to CoinMarketCap. A senior domestic security expert told me that these exchanges basically have no overall security protection strategy, and it is a common problem that the trading system has no security audit and lacks security reinforcement. As you have experience in two exchanges, can you tell me if the situation is exactly as mentioned above?
Jian Zhang: You're right. We have completed the institutional decentralization and need time to finish the technological one. As I just said, the exchanges hold a lot of user assets, and its business logic is very complex, in fact, the threshold is very high. However, due to the lack of regulation, many immature teams enter this market simply because of the high profits, so the probability of problems is great. Such an accident only suggests that many people have a deep misunderstanding of exchanges.
Fred Wang: Some people also think that the frequent security problems of exchanges are largely due to the chaotic management inside. Do you agree with it?
Jian Zhang: I agree with it except poor professionalism. The frequent security problems are caused by lacks of financial preciseness and profound understanding of the safety of digital assets.
Fred Wang: FCoin adopts the mode of asset transparency, publicized wallet address and the real-time income display. Compared with other centralized exchanges, FCoin faces greater challenges. The larger the trading volume is, the greater the security risk is. I believe many hackers have already targeted toward you. How is FCoin defended in terms of security?
Jian Zhang: I have witnessed too many security incidents and know the significance of security to exchanges. It's a complicated thing and I'm just talking about ideas. The first is a strict process. The process chaos causes the vulnerabilities. Most exchanges, however, have no concept of financial preciseness at all, which is like how the Internet works. The second is the profound understanding of digital assets. it needs the accumulation of experience to determine how to design the wallet architecture, audit architecture and construction of various strict systems. Unfortunately, many practitioners do not have such experience at present. FCoin's pursuit for security is higher than any pursuit for speed of development.
Additional Question 1
Fred Wang: It is interesting that both Binance and FCoin were founded by the former exchange CTO, and both of them attach great importance to operational innovation. The rapid rise of Binance last year was also due to its pioneering in the industry in fee refunds and new entrant incentives, and its recognition by high-frequency quantitative traders at early stage. In this round of exchange war, your confrontation seems to be more direct. What do you think of Changpeng Zhao and Binance? What are the similarities and differences between you?
Jian Zhang: As I said in my friend circle, I appreciate Changpeng Zhao very much. I'm not kidding. In fact, I did not have much contact with him when I was in huobi, Global but I recently watched the video interview of Changpeng Zhao and really thumb up for him. I think his thinking is very clear and he can grasp the key point in solving problems. Therefore, it is not accidental that the Binance can achieve the achievements today. If I was under the original pattern, I may not have the opportunity to be his real competitor. But my exchange has different purpose and way of operating. I'm building a new community-based architecture that's not as same as the purpose of the company for benefits pursuit. So, what's different about us is that although we're all operating the exchanges apparently, but we're actually doing something different. What he does is the company with the pursuit of profit, what I do is the community for protecting the community interest, since we have different goals, we operate the exchanges in quite different ways.
Additional Question 2
Fred Wang: Changpeng Zhao attacked your "trading is mining" on Twitter. But FCoin was launched on BNB in the next afternoon and the trading volume even exceeded that of Binance itself. Many people think this is your marketing coup and you did a good job in the PR campaign. Can you disclose here the decision process for launching BNB? You have the CTO background, but why do you have such business skills?
Jian Zhang: Haha, this is an interesting and vivid question. He was attacking us on weibo at the time, but I can understand him. After all, in his view, we are in the commercial competition, once his interests are moved, he will make the counter fighting. In my opinion, the community's thinking is totally different. The idea of community is that everyone is community members as the part of the ecosystem, and our goals are strengthening the community and enhancing the interests of the members. Therefore, I insist on the idea of accepting everything as a sea. We don't regard anybody as a competitor. I prefer that the digital crypto economy can really take off.
BNB's ranking very high is in token in terms of market capitalization, so when a response is needed, I decided to respond positively after reflection and discussion with partners so as to express my appreciation. I put a valuable coin online at the same time. I really appreciate him. I'm not kidding.
Additional Question 3
Fred Wang: Your 5 innovative currencies of BTM, ICX, ZIP, OMG and ZIL, etc., are all related to the investment institutions of FCoin. Some people raised questions on the Internet: you have achieved the control of every step from the project to the exchange and there might be benefit transfer with all participants. Are there any misunderstandings about you?
Jian Zhang: This is a very big misunderstanding. The coin circle is so small that you can make a picture that all companies or organizations are in the direct or indirect connections. If you don't believe what I said, you can pick up a big company or organization and make a figure for it. Therefore, in the final analysis, the industry needs to develop healthily, and what we need is to expand the scale of the industry rather than to contend one another for the stock market. The answer is that the coin circle is too small and it needs to be expanded as soon as possible, haha.
Fred Wang: Is it also a closed ecological loop you build from project incubation to project investment and transaction? What is your vision of the FCoin ecology?
Jian Zhang: The FCoin ecology I envision is autonomous, open, and transparent and belongs to the public. Yes, FCoin should not be mine and its mission is to return to the community, which is the key to this mechanism that I designed. So, I'll do my best to achieve it. In addition, I will never construct any closed ecological loop. The real life ecology is open, shared and in win-win situation. That's the spirit of blockchain. So another goal is to justify the blockchain industry. I will create an organization which uses blockchain more efficiently in the traditional world to practice my ideal and promote the progress of the industry. This is another reason that FCoin comes out. Therefore, in addition to FCoin, I will also participate in more projects with the thought of Token economy.
My purpose is not to earn money but to inspire the public so as to usher in the tide of the Token economy as soon as possible. I want to open this page, and I want more people to see it, just as they saw the opportunity and dividends of the Internet.
Additional Question 4
Fred Wang: I have heard that you and Leon Li, CEO of Huobi Global, have been cooperating for over a year. Could you tell us how you worked together at that time? What about your relationship at present? What was your main experience before joining the Huobi Global? This is the last question.
Jian Zhang: We knew each other immediately and decided to cooperate on the spot. We also fought together, understood each other and experienced many ups and downs together in later time. I miss that time very much. Leon Li is a natural entrepreneur with the characteristics that entrepreneurs need, which is why he can make his current achievements.
After that I left the Huobi Global and we had not too much contact with each other. In particular, HADAX has grown very quickly and he is very busy, but I respect him in my heart and I think we should work together to realize the ideal of blockchain and digital currency.
I spent most of the time to start a business and a few time on investment before I joined Huobi Global, but I was not very successful. It may still need to accumulate at that time, I entered in the coin circle in 2013, which is a new page opened in my life, I would like to extend my thanks to Satoshi Nakamoto!
Fred Wang: Clayton Christensen pointed out in his book of The Innovator's Dilemma that emerging companies have established an insurmountable advantage in manufacturing costs and design experience even as mature companies try to maintain their market position by introducing new structured products after the emergence of disruptive technologies. Now, Mr. Zhang has broken into the house with his Fcoin, creating himself as a disrupter of traditional digital currency exchanges. He opened a door for himself and for the digital currency market to enter the next era. Will China's digital currency market be better? We'll wait and see.
Thank you again, Mr. Zhang. Thank you for being here tonight. I wish FCoin all the best.
After Fred Wang completed his ten questions, he entered in the interaction between Jian Zhang and his friends. The following is the interaction content:
Qingfeng Huang: After platform FT is all dug up, what effect will be produced to the platform? Do you have any strategies for coping with it?
Jian Zhang: I can answer a few more questions, the first is after the FT platform are dug out, what effect will generate to the platform? It doesn't matter. Doesn't Bitcoin exist after it's been dug up? Why do we dig the mine? We want traders to hold our "shares." So once all the shares are returned to the community, I think it's a very good situation.
Qingfeng Huang: After the FT platform has been dug up, will the platform lose a lot of customers?
Jian Zhang: Many people think that a lot of customers will be lost after FT platform is dug up. It is very strange. What are exchanges doing for? Exchanges are for trading rather than mining, which is the issuance mechanism of the FT, but it is not core to the establishment and operation of the exchange. Understand? Let me give you an example, just like Bitcoin, the mining is its issuance mechanism and consensus mechanism. But the purpose of Bitcoin is not to be used for mining, it's for payment, I recommend you to read the white paper of Satoshi Nakamoto.
Tianhe Li: Buffer Fund has the behavior of market manipulation, I think it breaches the management way of governance fully depending on the community, how can it be better carried out?
Jian Zhang: if Buffer Funds can manipulate the market as you said, all the interventions of regulatory authorities, government departments involved as well as our platform are to the behavior of manipulating the market, in fact, you can't understand in such way. We are not market manipulation, we are stabilizing the market. What is market manipulation? You manipulate the markets while playing the cards, how can we do that. The role of my buffer fund is to restrict the abnormal sudden rise and drop when the FT fundamentals are unchanged. As for a new species or new things, the price mechanism is found immature in the market. Therefore, it is easy to be subject to the fluctuations caused by rumors and various emotions, but the fundamentals of the FT have not changed. Therefore, we do not want the sharp rise and fall of the FT to affect the interests of the most people. As it is an early mechanism and it will exit as the market matures.
Lili: In the process of answering the question, you mentioned many times that if you know the principle and history of Bitcoin, you can understand the FT mining reward system. Could you please explain the inheritance of the FT mechanism and the Bitcoin mechanism?
Jian Zhang: As for the inheritance of FT and Bitcoin mechanism. Actually, if you study them carefully, you can find that the difficulty of Bitcoin is adjusted once every 14 days. How is this difficulty adjustment made? For instance, we have developed a better mine, which, as is more advanced, is able to dig up all Bitcoins very quickly, but it isn't in fact, and Bitcoin is released at the same rate. Why? It has a mechanism of difficulty adjustment.
Similarly to Bitcoin, what you find is that Bitcoin has a mechanism designed to allow the market to adjust the increasing hash rate and difficulty of its mining machine, which in turn leads to it being a mechanism that is linearly released in the four years according to the original design.
So is the FT, which has two factors to do with mining: trading volume and price. But if you look at the model, you'll find that the FT release rate is proportional to the trading volume and inversely proportional to the price. But the volume determines the value of the FT and its price. So the interaction of these factors will lead to a linear increase in the release of the FT. This model may be a little bit more complicated to describe in words, but actually it's not complicated to write on paper, so you can study it yourself if you're interested with it.