Changpeng Zhao: Binance Lab’s returns are not going to be as good as holding BNB tokens
I’m sure many of you can empathize with this- sometimes you initially start writing with the intention of focusing on one topic, and then somehow discovers something else completely different but fascinating. This was me this weekend. In the middle of my research, I fell into this gem that I realized hasn’t been covered at all in the English media, which is CZ’s interview in May with a Chinese media firm. CZ is short for Changpeng Zhao, the founder of Binance. I know that CZ has done numerous interviews in the past few months in the English media (all here on youtube), but this one in the Chinese media is the most recent one with him discussing Binance Lab, Binance Research, decentralized exchanges and international relations.
Generally, I’m finding that in the Crypto world, the Chinese media interview questions tend to be more straightforward and in-your-face style, not like the let’s-be-polite-and-tell-me-your-story kind of format that you see in the English media. I recognize that can be partially attributed to the type of audience the interviewers focus on. But it’s quite refreshing to see how the Chinese media often is so skeptical, and how they attempt to demystify real value creation in Crypto companies (but be assured, FOMO is quite real). Such example s include the interview I am translating below, and another one is one is related to Justin Sun from TRON. The interview with Justin is in Chinese but has English captions, which you can check out on your own free time. In the interview, the host pin-pointedly asked Justin why he likes to talk about Peiwo, a social network app, and TRON, a cross border settlement tool, together (in minute 4:27) as that’s been the only technology that Tron has built up to this point of the article, why Peiwo is not seeing accelerated user growth (8:30) and why Peiwo and TRON is under one entity ( 9:10). (TRON’s youtube account posted this video a while back, but it did not make me feel more bullish on them after watching this video, not that I was already even bullish…)
Below is a translation of the most interesting things CZ said in the aforementioned interview with the Chinese media. He covered topics that were never mentioned or never addressed directly by him in person in English, which is why I’ve found it super insightful. The topic that I originally intended to write about for this post will be shared next weekend. Hint, it’s related to go-to-market strategies in Asia.
The original interview video is here and there are english captions, but some of the important stuff was mis-highlighted or was translated poorly. So I translated here the most interesting parts in a Q&A format with respective to the video time mark. I also bolded the information I haven’t found anywhere else.
Why are you number one? (1:00)
I think we are number one because of a few main reasons. 1) a primary objective of mine and the team is that we need to protect our customers. This is one of the most ingrained values at Binance and is shown through every little thing we do, including the ICO incident last year when we returned our coins to our users. We did a good job protecting our users then. Whenever we list a new coin, we also try to protect our users. Once they’ve been using Binance for a long time, the users recognize that we value them. We don’t actually do too much marketing, our users come primarily from word of mouth. Protecting customers is very crucial to us. 2) Secondly, our team is very hardcore, the team is very strong and very hardworking. 3) Thirdly, we are very lucky. When we make decisions, usually there is incomplete information, so there is a chance we make bad decisions. Historically, we have made poor decisions, but those are more infrequent, and most of the large decisions we’ve made correctly.
In China, there are a lot of rumors about Binance, and Binance often have to come out and clear themselves of these rumors, how do you feel about this? (2:09)
I feel like Chinese media is so different from international media when portraying us. International media tends to be more neutral, but even then sometimes Bloomberg would write rumors about us, or they’d write defamations about us. Nonetheless, often times though they are not doing it on purpose, they just don’t understand. However, when the articles about us are written internationally in english or other languages, and then they get translated into Chinese, somehow it goes awry. I’m not sure if it’s because the Chinese media can’t translate or what, but they take these articles and they spin them into really exaggerated and negative titles. It’s certainly more eye catching when they publish an article that says bad things about Binance than good things. Ultimately, what I’m most worried about is Binance not having any media exposure at all. That’s worse than Binance having bad media coverage. Every time we clear ourselves of the rumors or defamations, our users are able to handle these media coverages better. Our biggest fans are able to dispel these rumors and convince new users who still are trying to figure out what the truth is. This in turn make our existing users more faithful to us and our community even stronger. Overtime, it’s going to be the good media companies that will go far and the good exchanges that will go far.
Some comics in China have described you as the Black Panther figure in Marvel, how do you feel about that? (3:50)
My friend said that it’s because I got tanner after going to Africa so they gave me that character, haha, I’m not sure. But honestly about my personality, I am not afraid nor do I hate authority. My Zodiac is Aquarius (Chinese people are very into Zodiac signs and genuinely believe in them), and I am a very amiable person. Similar to Aquarius personalities (water), I am very fluid and tolerant of people. Even when there are clashes, they are very short lived. I am also like water in the sense that when we encounter obstacles, we tend to go around and find a detour around the issue. My personality is very calm. I never yell nor curse at anyone on the team. But I am also very principled, and I am firm but gentle. I constantly push for doing things that is beneficial for the world and is meaningful. This is how I feel about cryptocurrency. But in this process we never attack any government, industry or person, we are not aggressive like that and we just want to lift the industry.
How do you manage risk when it comes to making decisions in the industry? (5:50)
We don’t ever have complete information when making decisions, but when we make mistakes we recognize them immediately. When we are off the beaten path, we turn back immediately. We adjust and fix ourselves very quickly. We do extensive risk management. When it comes to very risky events, we will always have a few backup plans to deal with surprises.
Your thoughts and plan on decentralized exchange? (6:40)
The current state of decentralized exchanges is that there are performance limitations- it’s relatively slower, transaction fees are more expensive, very difficult to use and frankly, not much more secure than centralized exchanges. In decentralized exchanges, there is low liquidity, thin trading volume so we are looking to invest more into this space. We’ve invested through outside teams to building a decentralized exchange and we also have built our own chain. We are not trying to take more market share. Other exchanges may look at us as competitors, but we don’t really look at them that way. We actually spent a lot of time trying to help other exchanges. This may be very hard for the Chinese people to understand. But if you look at international exchanges, they never slander us. We are always trying to help each other.
Binance labs (7:50)
We want them to invest into long term infrastructure investments, such as wallets and blockchain technology. Say we invest into 100 projects, 50% of them will fail, and 10–20% of them may break even. and then 10% of do well. On average, I don’t think the returns will beat that of the Binance coin. That is, we might as well keep these Binance coins ourselves for better returns than if were to invest these BNB coins into other projects.I am confident that even if we carefully choose and find good projects to invest in, the return of the Binance coin will beat the average return of these investments. So then why do we have this fund? We want the industry to develop. we will find projects that are beneficial and constructive to this industry. When i created this team, I told them, I’m not going to look at your returns. If you can invest 10% of your projects that lay the foundation of the future blockchain infrastructure, that’s good enough, so i don’t give these teams pressure. We also have a Binance charity fund, also invested by a really famous individual, but this news hasn’t been announced yet. The mission there is to teach blockchain to people. To bring blockchain education to the poor, lagging, underdeveloped countries and third world countries such as those in Africa. In Africa, we already have plans to launch 1000 computers. These computers will be to used to teach individuals blockchains and then have them to teach other people.
The creation of Binance Research (9:28)
We are launching a new project called Binance Research, which is Binance’s research arm on auditing the cryptocurrencies that are looking to list on Binance. When cryptocurrencies want to list on our platform, we do a lot of audits but these Crypto companies have expressed that they don’t get feedback from us. 99% of companies who apply on Binance don’t hear back from us. Companies want feedback, so we decided we will share them. And we will share our ratings of these companies publicly and explain why certain coins were not qualified to be listed. Or why we think some coins are not ready to get listed now. I’m not sure right now what kind of lash-back we’d get from the community, but this component will come from Binance’s objective rating.
Binance trading levers/futures plan? (10:00)
We previously in our whitepaper wrote about plans to provide leverage and and futures trading. However, Binance’s current priority is to have more people own cryptocurrencies. Leverage only provides more ways for people to trade. Trading futures is similar. There could be a lot of market manipulations. Many cryptocurrencies would not be able to handle this. So we believe creating a decentralized exchange is more important for now, and will accomplish the mission of allowing more individuals to own coins. So we decided to do that first, and we are pushing out our leverage and futures trading plan for later.
CZ’s international relations experience? (11:00)
I’ve actually interacted with a lot of presidential-level and government individuals that I’ve not disclosed. The ones i’ve disclosed are those who are familiar with the blockchain industry. But after interacting with multiple countries, i’ve learned that more leaders are becoming familiar with blockchain. Some countries are banning ICO, other countries have pre-requisites for the cryptocurrency industry to flourish , but so far no country I’ve met has said “I’m going to abandon blockchain”, so this is a very good sign. Ever since we announced going to Malta, about 30–40 blockchain companies have also entered the country, with each of the investments greater than $10mn. I previously visited a lot of countries, and we are lucky that our reputation in the industry is very good because feedback from our users are positive. Subsequently we have always been invited to meet prime ministers. We actually never reach out to prime ministers to offer to meet them. This is i think because we are lucky but also because we do things with integrity. We want to continue to do the exchange business properly and protects our users, which should be better for us.
What do you think about the Nasdaq’s recent announcement that they are also looking to build out an exchange? (12:37)
When I saw that news, i was delighted. Nasdaq was able to go through regulators and get approval. They can do this much better than what we can do, this is our weakness. The stock exchange have a large traditional system so this announcement should have a very positive effect on the industry. Funds trading on the Nasdaq may feel comfortable putting into crypto now if they see it on the Nasdaq. This is a good pressure on us and we will make sure we make our service and products even better. This is good for us, for our customers, for the industry.
Jack Ma and Buffet dismissed the value of cryptocurrency, what do you say? (14:16)
Each of these successful people have their respective angles. I admire them both very much. I have always said that wait for a few years and look at thing change. I said that a few years ago and now bitcoin is thousands of dollars. I think I will let time prove this. I personally believe in cryptocurrency and blockchain and i believe the space hasn’t even developed more than .1%. There are thousand times more room for development. It’s very rare now that successful financiers can convince me while it’s usually the other way around where I convince them the value of Cryptocurrency. You see individuals changing their minds on cryptocurrency overtime. For example, JP Morgan’s CEO, initially dismissed bitcoin but now is welcoming it. We welcome everyone to try it out and do their own research.