2. Trendsetter of the times Changpeng Zhao and his Binance

Binance’s market capitalization ranks fourth on Coinmarketcap. Because of a series of lawsuits, the stable currency USDT has just been surpassed. The price of BNB fell, reflecting the pessimistic sentiment in the market. How many users does the cryptocurrency have? There is no accurate statistical method. Binance has 120 million users, accounting for more than half of cryptocurrency users, so it is roughly reliable to say that cryptocurrency has 200 million users. The market value of Binance is 33 billion. If it all is converted to $275/per user based on customer value, this is also an underestimation, and the market has already considered its risks. It is also a myth that Changpeng Zhao is a dark horse that used Internet means and thinking to enter the field of cryptocurrency. He is deeply involved in lawsuits today and is hiding in the world. He and Binance mirror the rugged and fascinating side of cryptocurrencies.

idol or devil

On November 30, 2021, the media reported that Zhao Changpeng’s net worth reached 90 billion U.S. dollars (approximately equal to 573.3 billion yuan), surpassing Zhong Suisui, chairman of Nongfu Spring. He was promoted to the wealthiest Chinese person in just four years. Although cryptocurrency is the hot spot, who in the circle has done it? Changpeng Zhao has more than 8 million followers on Twitter, while Vitalik of Ethereum only has more than 4 million. Vitalik is called God V, so what should Changpeng Zhao be called? In a world where money is used to measure business success, Changpeng Zhao’s success inspires young people at the bottom to strive, and it is only natural that he becomes an idol.

The development of cryptocurrencies is disorderly, just like in the early years of China’s reform and opening up, fullness for the bold and famine for the timid. He is both the beneficiary and the victim of the disorder. At least one of Changpeng Zhao’s children was born in the United States. Although the child is American, Changpeng Zhao no longer dares to set foot in the United States. At the same time, although Changpeng Zhao was born in China, there is a high probability that he cannot return to China now. No one knows where he lives. A “vagrant” who lives in no fixed place controls a highly centralized and huge empire through a team of about 7,000 people in more than 50 countries or regions worldwide. The enigmatic Binance, the enigmatic Changpeng Zhao.

The fundamental elements needed for a successful start-up

1. To be successful in starting a business, you must have unique skills, that is, to have a leading position in the industry;

2. Good at seizing opportunities;

3. Have good helpers.

Zhao Changpeng is a computer major. In 2005, Zhao Changpeng founded Fusion in Shanghai, specializing in establishing high-frequency trading systems for securities companies. In 2013, Changpeng Zhao joined the cryptocurrency wallet team of Blockchain.info and became the group’s third member. Changpeng Zhao was the CTO of the cryptocurrency exchange OKCoin for less than a year. He left to start his second company, Bijie Technology, which makes cloud-based exchange software. At its peak, Bijay provided cloud-based exchange software to 30 exchanges.

Wallet, transaction, cloud technology, and encryption technology, Changpeng Zhao has all of them. His technical strength has a leading position in the industry. He still needs a chance.

The ICO in 2017 was an opportunity given to Changpeng Zhao by God. At the end of June 2017, the company “Binance,” named after the fusion of “binary” and “finance,” was born. He announced his white paper and token issuance plan. On July 2, the project used the token BNB to raise 15 million U.S. dollars, but after listing and trading on July 25, the value of BNB quickly shrank by 20%, and Binance’s ICO broke. Changpeng Zhao’s team tried to rescue the market through various means, but the effect was insignificant. Changpeng Zhao fell into despair and pain.

On August 8, 2017, his old acquaintance at OKcoin, He Yi, who was 33 years old, resigned from Yixia Technology and joined Binance as a co-founder and chief marketing officer. The beautiful He Yi used to be a host and an internet celebrity. She is willing to follow him, which shows that Binance is not ordinary. On the day He Yi joined, the price of BNB jumped 18 times in just two weeks, from $0.13 to $2.45. With the rapid growth of Binance, He Yi has also been dubbed “the first sister of the currency circle.” With money comes talent. He Yi is Zhao Changpeng’s good helper.

Changpeng Zhao has all the above three points. As for how big it can grow? It depends on the wind.

Trendsetter of the times

Changpeng Zhao didn’t start early. Many exchanges are before him, such as Huobi, OKCoin, and Yunbi. No wonder everyone is not optimistic about Binance. But who seized the opportunity of the times? Changpeng Zhao started to transfer the team to Japan a month before the China ban; when the opponents couldn’t operate, he could. The popularity of cryptocurrencies has made users anxiously looking for overseas exchanges. The Chinese still trust the Chinese because the ease of use of Chinese products generally exceeds that of similar foreign products. In terms of user experience, Binance is always number one. Binance’s webpage has 44 languages; who did it? He received millions of Chinese users in a few months and gained a firm foothold.

The gap in vision, the gap in thinking, and the gap in decision-making have widened the gap with the fate of competitors. The same problem is a risk for the opponent but an opportunity for him. The international market is not a paradise. Countless big waves are testing Binance. In the same wind, pigs cannot fly.

A distributed system without a headquarters

The largest distributed system operates the largest centralized exchange, and the market has created Binance’s unique model. His men can live wherever they want. While communication speed isn’t perfect, it’s an optimization between efficiency and effectiveness in getting closer to the markets and time zones they wish to serve.

How does such a distributed system work? The author found Binance’s own three articles, “How Binance Efficiently Manages Remote Teams 2020-04-10” This article is about team management. “Remote Office Advanced: Transforming to a Decentralized Architecture 2020-06-04; This article is about how to cooperate with distributed organizations technically. That is a recruitment advertisement from Remote Offices to “Regional Offices: Around the World with Binance Work 2022-10-27”. It can be seen from it that they have more than 7,000 employees in mid-2022. They will start to lay off workers in 2023, and it is reported that more than 1,000 people have been laid off. I did not see how to sign labor contracts and Contract text. Home office is easy to say, how to unify 7,000 people, how to assess, how to communicate, and how to be efficient. I have read their articles, but I still don’t understand.

Binance does not only have one business but has an all-encompassing financial business. It is not a “company” but a group of “companies”. When Binance settled in Malta in 2018, it started working remotely. Telecommuting doesn’t affect their productivity. “From 2018 to the end of 2019, Binance was expanding its business at a crazy speed. During this period, new announcements were born almost every day, from leveraged transactions, margin trading transactions, loan services, to staking rewards and P2P transactions. Only In Q3 of 2019, Binance launched 12 important products, which exceeded the sum of the 12 largest competitors” (Shenwang 2013-2021 Binance: A Past Event).

This pattern, right? Compared with Ethereum, although Changpeng Zhao is engaged in cryptocurrency transactions, he still thinks of the Internet, and the model is more backward than cryptocurrency. The Ethereum ecosystem is also a bunch of “companies,” but the “headquarters” of Ethereum – the Ethereum Foundation has less than 30 people, and the projects on the Ethereum platform are all independent.

Compared with YouTube, YouTube is also a centralized Internet thinker, but it has less than 1,000 people and serves 2 billion customers. If Binance has 2 billion customers, I think Changpeng Zhao’s “company” will collapse.

Binance started as an exchange rather than a platform; all businesses are related. His advantage is marketing and transaction speed, which is far behind cryptocurrencies in management. Does Ethereum have customer service? No. Binance’s customer service team has more than 1,000 people and can still not provide telephone customer service. Cryptocurrencies are advanced in thinking and backward in “tools.” If the blockchain ledger is not removed, the advantages will not be brought into play, and it will not be able to compete with Binance.

Even with the Internet model, Binance is not advanced. It is the second biggest problem plagues the development of Binance, besides legal issues. The legal issue is “in debt,” and debts always must be paid.

Most importantly, legal issues

Cryptocurrency is a single-tier system, while traditional finance is a multi-tier system, with brokers and fund custodians added between exchanges and users. In this way, the security of user funds is guaranteed systematically. When an encrypted Exchange has the tasks of traditional exchanges, brokerages, and fund custody, there will be no supervision, and the rest will be a test of human nature. Something happened to Sam Bankman-Fried’s FTX, the world’s second-largest exchange, and it’s reasonable to imagine that Binance is also likely to have a problem, right?

In order to respond to the suspicion of users, Binance used the effective Merkle tree in the field of cryptocurrency to establish a “reserve certificate” to prove its innocence. From the data point of view, it is good, but these data need to be audited by a third party. The problem is that we must trust the auditor. If the audit firm is bought off, the Merkle tree would be useless from the start. Even if an unbiased auditing company is found to conduct an audit, the Merkle tree proof still needs enough user accounts to assist in the verification. If the exchange has misappropriated user assets, it cannot be 100% sure to verify only a few users and needs a specific sample size. Binance’s announcement of the Merkle tree proof can only prove that it has the ability to repay users’ assets but cannot prove that all encrypted assets deposited by users are safe and have not been misappropriated.

We need 100% verification, just like the Bitcoin and Ethereum ledgers verification.

Why doesn’t Ethereum have such legal issues? Because it has machine verification. Using machines to achieve this kind of verification is very simple. The chainless financial platform can use smart contracts to host exchange funds and use smart contracts as intermediaries to replace brokers and custodians to ensure the safety of funds and user verification at any time. The chainless white paper will be published on the chainless.hk website at that time.

Wish

Changpeng Zhao is called CZ online. The author read the open letter written by CZ for the 6th anniversary of Binance: “After two cold winters in the industry, we are now at a critical moment in history.” It is very moving to see his difficulties and strive. I wish him and Binance Get through the tough times and move on to a brighter.

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