Listen to CZ Compare Binance to Bitcoin - Ep.173

Transcript

Hi everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin. I know you're all excited to hear my interview with CZ, which was the kickoff fireside chat at Ethereal. And it was, as usual, a fun interview. However, before we begin, a couple notes. First, I'm doing another survey to find out what you want from the podcast and how I can make them better. Last year, we heard you loud and clear on the news front, and so have begun including a weekly news recap at the end of every Unconfirmed. This year, what would you like to see from Unchained? Please take a moment to fill out the survey to let us know what you'd like from the show.

The link is in the show notes, or you can just go to surveymonkey.com/r/unchained2020. Again that's surveymonkey.com/r/unchained2020. And guess what? Crypto.com has offered our survey respondents a chance to win a metal MCO Visa card, and Crypto.com will stake these cards indefinitely. 10 lucky winners will enjoy card benefits, including free Spotify, free Netflix, 3% back on all spending, and they'll earn extra interest on their crypto deposit, and more. Thanks, Crypto.com.

Again, take the survey now. surveymonkey.com/r/unchained2020. One other thing, Unchained is hiring. I'm looking for a remote editorial assistant to start working later this summer, as one of my staff is headed off to grad school. This role handles numerous editorial tasks from booking to proofreading to social media, and deals with everything from the show itself to the show notes to the newsletter. If you love crypto and have journalism experience, get in touch. I have a link to the job posting in the show notes of this episode, and the listing is also available on my website. There you can find all the details on what you should send in and where.

And now, here is my fireside chat with CZ from the Ethereal conference. In response to the challenging times, crypto.com is waving the 3.5% credit card fee for all crypto purchases for the next 3 months. Download the crypto.com app today. The Stellar network connects your business to the global financial infrastructure, whether you're looking to power a payment application or issue digital assets like stablecoins or digital dollars. Stellar is easy to learn and fast to implement. Start your journey today at unchained.stellar.org.

Kraken is the best exchange in the world for buying and selling digital assets. It has the tightest security, deep liquidity, and a great fee structure with no minimum or hidden fees. Whether you're looking for a simple fiat on-ramp or futures trading, Kraken is the place for you. Hey CZ, how are you? It's nice to actually have an interaction face-to-face. Yes, I think last time we talked was just over the phone, or yeah, we don't get we didn't get to see each other sort of visually.

No, no, we didn't. Um so, before we keep chatting, I just want to say to everyone, welcome to the kickoff talk for Ethereal, which will be this fireside chat that I'm conducting with Changpeng Zhao, aka CZ, who's the CEO of Binance. And if you don't know who I am, I am the host of a couple crypto podcasts, Unchained and Unconfirmed. Welcome, CZ. Thank you for having me here. So, in your tweet yesterday about our chat, you said that last time I interviewed you, I asked you tough, bordering misleading questions. And I wondered, what questions in particular

did you take issue with? Well you Well, you asked me if I was worried about it going to jail. I mean, who asked that? Well, but I do think I mean, my questions about US regulations, I think at least, were on point because you know, since the time of our interview, now Binance has changed its approach to the US and I remember last time when I was asking you all about the US regulations, you said that my line of questioning was like telling somebody who didn't like hot weather that they had to live in the US or live in Florida. And you said you know, that like that was ridiculous.

But apparently now you've decided that even though you don't like hot weather, you will come to Florida. So, now you have Binance US which is specific to the US market and obviously it's unique regulations, I guess we could call them. And even within that, there's Binance USD which is approved by the New York State Department of Financial Services which is easily one of the toughest crypto regulators. So, it seems that I was right that the way Binance was operating was not really in line with US regulation. Would you agree with that and that's why you launched Binance US?

So, again, I think I will have to disagree with that line of questioning. But I think the question is worded in a misleading way. It's just that okay, because not every company starts in the US and we didn't start in the US. We wasn't targeting the US customers specifically and but we got to a big point where big enough. Getting regulated in the US is really expensive. I don't like it's just like I don't know, 48 state you have to get licenses with. I think I think our partner is still going through that process. It's very time consuming. So, but at a certain size, we said, "Well, the US market is a important market and we want to be able to service that market.

So, we partnered with BAM Trading Services and they're still as far as I understand, they are still very much going through the licensing state-by-state process. So, they're able to service, I believe, 37 states and there's a few big states they're not able to service just yet. So, we're still waiting for them to get the license go through that. The narrative is not so much that we were targeting the US illegally before and now we're doing it properly. It's not quite like that from at least from my perspective. Okay. Okay. Well, I guess now I'm two for two in asking you borderline misleading questions.

Um, so but speaking of BUSD, which I mentioned earlier, that's part of Venus, which is your stablecoin initiative and you know, that will create kind of many different types of stablecoins for, you know, different fiat currencies. And in the Chinese version of your announcement, you referenced Libra when you talked about Venus and you your co-founder Ha Yi, I think is her name, said that Venus was, quote, the One Belt One Road Initiative version of Libra.

And so, you know, when you guys made this announcement at that time, it looked like Libra was just going to be this single global currency and Venus was going to take a different strategy of, you know, being different stablecoins of different central bank currencies. But now obviously Libra is actually going in the direction that Venus was supposed to go. So, is that changing your strategy with Venus? Uh, okay. So, I think there's some some misinformation there as well. The Venus was never meant to be a stablecoin on its own. It's a basket project encompassing several or many stablecoins in different parts of the world. And our approach is always to work with local governments, local corporate

corporations, or other regular regulatory bodies to issue different stable coins for different regions. We did not have the thought of issuing a basket backed stable coin as a single stable coin. I haven't really figured out how the economics of that would work. So we took a very much simpler approach. Say look, US is a big market and also we we found a very strong partner there, Paxos. They're actually the issuer of the Binance USD stable coin. So even though it's called Binance USD, the issuer is actually not us. So it's issued by a Paxos, which is fully regulated by NYDFS, one of the strictest regulators in the world. And their bank

account is I assume it's audited by some by the auditing firms. I actually don't see the bank account, but it is transparent. It is it is like there's a piece of mind to it. So that's one part of it. And I think very recently I heard that the government of Bermuda is even accepting BUSD for tax payments. So among a few other stable coins that's also issued from the US. So that's quite good. We also issued BGBP. We recently So that's a British pound one. We also issued ABKRW, which is a Korean won one. So there's more in the works. So our approach to stable coins that I think the simplest approach is basically look, take some

fiat, put it in escrow, make sure it's totally transparent, audited, regulated, and then issue a stable coin on that. That's the simplest way. There are other more fancier ways like algorithm algorithmatic I can't pronounce that word. Different type of stable coins which are fancier, but that's fine. So we just provide a very simple option for our users. And we want to do this in more and more regions uh the Venus project, which is a kind of a encompassing project. Right, right. But actually, so maybe you misunderstood my question because I was saying that now that Libra is essentially doing what you had planned to do, like, does that change that strategy at all?

Um no, not necessarily. Uh I think Libra's kind of Libra's um well, base based on uh common perception, they're very much focused on the US. They have a very strong presence in the US. It's a US company and they're dealing with US regulators uh very heavily. Um and uh they do have a lot of reach globally in terms of user base. So, um that's great. Um but I mean, uh our philosophy is always uh one more option doesn't hurt users. So, we're going to throw uh where where wherever it makes sense, we're going to provide our option. Um so, we don't see ourselves as competition to Libra. Uh we don't see ourselves as competition to other stable coins. So, uh we support other stable coin initiatives. We support um So, we support anything that users want,

really. So, if if if a coin has a lot of users, we'll likely support it. And hopefully, we will be able to uh provide us- usability uh to a lot of users with our own stable coin. But if if a lot of people use it, then it's great. If nobody uses it, then we're going to shut it down. So, that's kind of our philosophy. And China now is in the early stages of rolling out its central bank digital currency, DCEP. Does Binance ever see itself launching a Chinese yuan stable coin as part of the Venus project? Um so, right now, to be honest, we have no plans and there's two versions of Chinese yuan. There's the onshore uh RMB, there's the offshore RMB. And they're and they're not supposed to mix because China do have a very strict flight uh capital controls. So, right

now, I don't think you can get a bank to support you to issue a stable coin in China. Um there has been attempts to issue a stable coin based on the overseas the sort of oversee RMB, but very little very little adoption. I think basically, um today US dollar is still the dominant uh dominant fiat currency and we see that much of the volume is in US dollar based stable coins. So, this is actually like the stable coins actually in this sense is very good for US dollar. Uh, it's actually improves improves US dollar's dominance, but we'll see.

Um, things might change, but basically if there's a way to issue a stable coin properly um with bank with banking support with approvals, fully transparent auditing, if there's those things, then, um, we are more than happy to do that. So, we're talking with a few different initiatives or different projects, but nothing's it's too early stages. Nothing's very concrete right now. And what impact thing DCEP will have generally on the adoption of crypto? To be honest, based on my limited understanding right now, it feels very much like a digital version of RMB, which probably probably plus a blockchain um, architecture somewhere in in there. So, it's still very much controlled,

um, it's still access to it is still very much limited to a to a number of large banks. So, um, how easy it is to for for a sort of a crypto player to integrate that into the ecosystem, I'm not sure. So, so far we have we do not have access to access to it. So, um, they're testing my understanding is they're testing it among a few big banks initially. So, hopefully if it gets really wide wide adoption, if everyone in China is using it, and if there's a blockchain interface that we can interface directly onto Binance and let people deposit and withdraw, that'd be that'd be great. If we can't if we can't do that, then the usage will be somewhat limited. Uh, it's still useful in the sense of, uh, educating everybody about blockchain and

stable coins, cryptocurrencies, etc. And I think, um, today if you learn about blockchain and cryptocurrencies, you you cannot not learn about Bitcoin. So, I think that exposure helps a lot even if you can't use it. So, it's still early stages. Um we can't use it today uh because it's still being very limited testing. But hopefully uh very soon we will be able to use it. And if we can, then that'll be that'll be fantastic. Um that provides a much better on-ramp for RMB. We'll have to see. Yeah, and another thing uh that I find interesting that's happening right now as we're seeing this, you know, race amongst these central bank digital currencies taking place is that obviously at the same time we have this pandemic. So, I was curious to know what

impact do you think the coronavirus and the economic fallout from that will have on the adoption of crypto? And also I wondered if you're like already noticing any trends in terms of the activity on Binance. Sure, absolutely. Um so, I think um there's definitely a lot of trends that we're already noticing. The most obvious one on Binance right now is there's higher trading volumes. Uh there's far higher trading volumes ever since like a couple like about about 2 months ago. So, um there could be a different a variety of different reasons contributing to that. Uh it could be that people are just bored at home and they just trade more because there's less other distractions or other interesting things for them to do. Um it's also possible that um uh given that the governments are

printing money at record speed um to uh sort of support the economy or to try to um recover the economy. Um and it now there's those money is starting to flow into cryptocurrencies and we've seen the price recovering. So, um but all of those things I think have a very fundamental impact. Um and also the coronavirus has a huge impact in the sense that traditional industries are very much stopped, right? So, production in like we can like basically we can print a lot of money uh to sort of uh and hand out money to everybody, but the fundamental fact is uh production in like in a lot of sectors have completely stopped. There's a few essential sectors that still going strong uh and online online virtual businesses are still

going strong, which is good for us as well. Um, but then with the government printing so much money right now, um, and everyone being bored at home, um, so both of those both of all of those factors contribute to the growth. So, yeah, I mean, we so far I think I think as many KOLs or like OG's say in the space, we're we're kind of witnessing a perfect storm for Bitcoin and cryptocurrencies. So, I think if cryptocurrency does not shine in this environment, then then I mean the wrong industry. So, I'm pretty but I'm very confident about it. So.

During this time you also became the number one crypto futures trading venue. Why do you think that shift happened? Uh, to be honest, I think we got lucky there. So, I think, um, when we the futures platform actually have grown very quickly as well. Again, I thought it would take it multiple years to grow to the number one platform for futures, because when we we only started in late September last year. So, really only only just over half a year. And, there were there were existing established players with very large volumes, and we thought and we thought it was going to take a while. We deliberately engineered the product to be a little bit different. Even though it's just futures, yes, we copied a lot

of other features, other people's features, but the fee structure is very different. Our fee is about 1/7 of the existing players for fees that they charge for the taker side. So, we have very aggressive takers for the So, we can we are very attractive to the sort of smaller retail guys. We don't have a high maker rebate. So, it was deliberately engineered to be slightly different from the existing platforms. And we were growing slowly, and to be honest, March 12th, the biggest futures exchange experienced some issues, and that's the day when the Bitcoin price was moving really really widely.

The the price was dropping, and everyone wants to trade. Um, luckily, our system stayed up, and and so that that that moved a lot of liquidity to us. And actually, unbeknown to most retail people, a Binance Futures has the fastest API and most stable API. So, we average somewhere around 5 to 7 milliseconds, where which is about like uh some somewhere between like 1/3 to 1/10 of the latency of other platforms. So, these kind of things, over time, they kick in. But I honestly, we didn't expect it to be that quick. Um, so and we are we still offer a very limited product in terms of futures. We only have the perpetual uh the perpetual futures. So, we're actually looking to add settlement futures. Uh our futures is

settled in a USD or BUSD USD stable coin. And we're looking to provide a cryptocurrency stable sorry, crypto cryptocurrency settled futures contract. So, all of those things are going on, but um I think we got lucky on the futures growth. I would say that somehow your career in crypto seems to have been born under a lucky star. One one other thing I wanted to ask about was just like so what you're seeing kind of initially now in these early months after the coronavirus pandemic, would you do you think that your you know you that you have a sense of how long-term this will affect the adoption of crypto or or how you'll see

crypto trading or who gets involved in crypto, how you know how all those things will change? Yes, I think my feeling I could I could be very wrong on this. So, this is just my personal opinion. Is the impact going to be on the level of month. So, I think we're going to see I think it took about it took a couple of months for the impact to kick in. So, it didn't kick in like on the second day when we felt there was a financial crisis when the stock market crashed. Bitcoin actually crashed it it. So, you actually didn't have that sort of safe having effect on on day-to-day basis. But, I think we're seeing that there's a strong recovery right now. And so, it's been a couple months. And I think over the next few months, maybe 6

months, 12 months, 18 months-ish, we're going to see very, very significant impact. I think people more and more people are going to realize, "Okay, well, there's just unlimited cash flowing around." And they're only getting the minute they get that cash, they will want to put that into something that's of limited supply. And the easiest thing to put that into is actually cryptocurrencies. So, that like before that option 10 years ago, that option wasn't available. But, now this option is available. People can buy gold but other than a few like really old-timers, nobody really wants to buy gold anymore.

So, and also there's more and more people are becoming more and more aware of the different economic impacts of different actions government take. So, I think over the next 12 to 18 months, we're we're going to see some really significant changes into the in the crypto space. And right now we're in a situation where there's a like there's a having going on, right? So, it's a perfect storm. So, after the having, the supply of Bitcoin is actually going to be decreased or the new supply of Bitcoin is going to be decreased a significant by half again. So the the supply is very, very limited and people will just have to I think and more and more people come in. And like the data we see on our platforms right now in terms of new users and also as

well as old users who who whose account has been dormant has been like they're really coming back alive really, really quickly. So, our customer support has been really busy as helping people forget with the password resets, etc. Because there's a lot of guys who like to just forget their password after a while, right? So, we're seeing all of those things happening. So, I think in the next 2 to 12 to 18 months, we're going to see some really a really significant increase in adoption in the in the crypto space. Yeah. Yeah, we'll see what happens. It's true that historically that has been the case after a having. Um so let's switch from talking about Bitcoin to Ethereum.

Your proposed Binance Smart Chain, which is a smart contract platform, will be compatible with Ethereum. But what do you say to the people who think that Binance Smart Chain is attempting to compete with Ethereum? Um well, I think basically that depends on the definition of competing um because uh it's really a person it's really a uh very personal subjective view for for each individual. So, I mean you can say Ethereum's competing with Bitcoin. I'm not sure if that's or you can also say BNB's competing with Bitcoin. Um uh uh at a broader level maybe uh you can also say we're kind of complementing each other. Um so we um so initially when Binance Chain first started, um our goal was to just provide a platform a very fast chain uh that solves a scale

uh performance issue with many of the existing blockchains and so that we can run a a decentralized exchange on it. And uh so that goal has been achieved. But the central but given the popularity of uh centralized exchanges and the ease of use for centralized exchanges, I think most people still don't really know how to hold their coin themselves to be honest. Um like if you guys if you grab 100 guys on the street, um only 99 99 of them would not know or at least are not confident in holding a Bitcoin on their own. So, until that changes um and we're looking uh and uh I think that uh decentralized exchanges will be relatively small, but uh it could change very quickly. We don't know.

One of the most requested features for Binance Chain was a smart contract. And um and everyone wants a EVM Ethereum Virtual Machine compatible uh smart contract chain. So we said, "Well, if users want it, let's provide it." So, we view ourselves as complementary to uh to Ethereum, not not not competing. Uh I I Ethereum does a lot of things very well. Um Ethereum is first Ethereum did fulfill their vision in the in the sense that they did build a unstoppable machine. It is well the the 1.0 version is still a little bit like they have performance bottlenecks which everyone's experiencing. So hopefully 2.0 will solve that. But from our perspective, look if something's already working and there's a very large community is already familiar with

Solidity programming. Then we should just go along with it instead of fight it. So we view ourselves We never really view ourselves as a competing with Ethereum. We support Ethereum. We listed on binance.com. We listed We have a very large number of pairing for it. So I think we support the initiatives that they're pushing forward. And I think some of the technical problems they're trying to solve are very meaningful. If Ethereum 2.0 solves the performance scalability problems using sharding, that's super useful. So we hope we hope that they they do well. Yeah.

And so if I'm a developer or user, why would I either create or choose to use an Ethereum dapp on the Binance Smart Chain as opposed to on Ethereum? Well number one Binance on the Binance chain if you use your token on your on the Binance chain and use the smart contract there, you can just port over your Ethereum contract. It will work on both chains. And then when you have when you have it on the Binance chain, there's a Binance decentralized exchange the Binance DEX that works out of the gate. It is a very I think the DEX on Binance chain is very well done. It has a very to the to the extent possible a very user-friendly interface and a very fast matching engine and it just works. And

and then you're also in the in the Binance ecosystem. To be honest, most developers you can be in both ecosystems. There are a lot of coins which which are dual chain or multi-chain right now. So that's just another option and And if you're are DEX and if your trading volume is high enough, we we you get a higher slightly higher chance of listing on Binance.com. So, you kind of more visible to the Binance ecosystem. We the Binance The Ethereum ecosystem has a very high number of users. The Binance ecosystem also has a large number of users. So, the and they're and they're two slightly different user groups to be honest. The Binance ecosystem has more heavier traders and centralized exchange users, whereas the Ethereum ecosystem has more developers and more sort of the tech

heavy pure decentralization type of guys. So, slightly two different even though we're kind of within the same industry, there's slightly there's some differentiations between the different players. So, it's just another choice that we provide for you for developers and users. So, it sounds like if there's more traders on in the Binance ecosystem, then maybe it would make sense for some of the DeFi projects to want you know, to move over there or to create Okay. Okay. So, I wonder if I wonder if there will be Ethereum people who will say, "You're you're stealing our DeFi users and developers."

What would you say to them? So, to be honest, I think there's always two sides that we can we can view anybody else on the on this planet. We can always view them as a collaborator or we can view them as a a competitor for any person on this planet because they're breathing our they're breathing my air. So, I think basically we are the fundamental situation where in in this industry is that we are a the the market is not nowhere near saturated. Right? So, only one in 1,000 people have some kind of crypto right now. So, only 0.1% of the population have crypto. There's 99.9% of the expansion that can be possible.

In a saturated market, if you introduce a new player, yes, you're going to take market share from other other players. In a nascent market, we one more player coming will make the will make the ecosystem bigger. That's much better for the ecosystem. So we would want to invite Libra to come in. We would want to invite IBM, Microsoft, other guys, Google to come in. So I think having more players in a small and not saturated market, but nowhere near saturated market makes this industry bigger. So now we we should be all collaborating to make this industry bigger.

Once you once you achieve like like say, look, if you want to do another search engine, you're probably you're probably competing with somebody else. If you do another browser, you're probably competing with somebody else. But if you're doing another blockchain or another blockchain application or another even another exchange, chances are you're not competing directly with us. There there so many users who are not using Binance right right now. So only 0.1% of the population are in crypto. Only a small portion of that are using Binance. So if you launch an exchange in somewhere else, you can get more users into this industry and that helps all of us. So there's two ways to view it. I think that's really depending on how a person likes to view.

That depends on their worldview. We don't view anybody as as competition right now. So we just want to grow this space bigger. Yeah, that reminds me I I asked a similar question to Wences Casares years ago and he mentioned he was talking about a different industry that he had launched a startup in, but he basically said what you're saying that competition just grows the pie. Today's episode is brought to you by Kraken. Kraken is the best exchange in the world for buying and selling digital assets. With all the recent exchange hacks and other troubles, you want to trade on an exchange you can trust.

Kraken's focus on security is utterly amazing. Their liquidity is deep and their fee structure is great with no minimum or hidden fees. They even reward you for trading so you can make more trades for less. If you're a beginner, you will find an easy on-ramp from five fiat currencies. And if you're an advanced trader, you'll love their 5x margin and futures trading. To learn more, please go to kraken.com. That's k r a k e n dot com. The Stellar network connects people to global currencies and assets. Stellar lets you make near instant payments in any currency with anyone, anywhere. It's an open blockchain network that acts as

payment rails for applications and institutions around the world, and designed so that existing financial systems can work together on a single platform. Transactions powered by Stellar are low cost, transparent, and fast, saving both businesses and end users the time and money associated with traditional payment networks. With Stellar, your business can issue digital dollars or exchange existing fiat currencies without the need for complicated smart contracts or new programming languages. It's robust documentation toolkits and multi-language support let you quickly integrate Stellar into your existing products and services. Learn more about Stellar and start building today at unchained.stellar.org.

In response to the challenging times, crypto.com is introducing three measures to help the community. First, the 3.5% credit card fee for all crypto purchases will be waived for the next 3 months. Second, you could get up to 10% back by using the MCO Visa card on food delivery and grocery shopping at merchants like Uber Eats, McDonald's, Domino's Pizza, Walmart, and more. Don't have a card yet? Buy gift cards on the crypto.com app from merchants like Whole Foods, Safeway, Burger King, Chipotle, Papa John's, Domino's, and more, and get 20% back on food and 10% back on groceries. This is a global offer, so check out which merchants are available in your country. Download the

crypto.com app today. All right. Well, one other thing I wanted to ask you about was some of your big news this year, which was that Binance recently acquired CoinMarketCap. And because Binance is an exchange and is also at least one of the largest holders of BNB, if not the largest, some people say that Binance could have an incentive to sway the rankings and the reported volume on CoinMarketCap. So, what do you say to people who are concerned about that? Uh well, I think so you if we do that then we if we do that in a negative way, just for the benefit of Binance, then CoinMarketCap loses a lot of value that it provides. So, I think neutrality is a very key value for CoinMarketCap and I recognize very well

myself and the CoinMarketCap team recognize that. And did we ask the CoinMarketCap to fix some of the fake volumes on CoinMarketCap? Yes, we did and I think all the community agrees that there's a lot of exchanges reporting fake volumes there. Uh well, we have our influence in that discussion, I think also yes. And but CoinMarket all the business units, what what I call business units, so I I view binance.com the exchange as one business unit, CMC is one business unit, Trust Wallet is another business unit. We have like, I don't know, 30-50 different business units. Each business unit operates relatively independently and so if Binance wants wants to put an ad on CMC, they will pay for it. So, the

binance.com exchange business will pay the CMC business to for that ad and they will pay at market rates. They'll get they'll get a lower tier of the market rate, so they will not be ripped off because for us it's really left pocket right pocket. But I think from my perspective, to maintain for the best thing to maintain value overall for of CMC and binance.com together is CMC being the CMC and binance.com the exchange being the exchange. I think both are strong enough to compete on their own. We don't need to sabotage one business for the benefit on of another business.

Uh binance.com can compete. It's already the number one exchange uh by most metric by most matrices. And CMC is the largest traffic website because it's useful to a lot of users. And uh so and also binance.com will not unnecessarily benefit uh give some benefit to CMC just to move CMC up. So I think both businesses will compete independently and they should build value independently. And that does not involve uh CMC directing all the traffic to binance.com. So people don't have to worry too much about that. And you did reference obviously the fake volumes or at least the inaccurate figures on CoinMarketCap. What can you do or what can CoinMarketCap do to make the numbers more accurate?

Um so uh so what I did was basically I posted a Twitter uh I posted a tweet and asking for feedback and that was probably the number one feed- feedback that people want to fix. So I just asked the team just fix it somehow. Um I don't care how you guys fix it. Um the team has what they call a liquidity metrics. Uh so they look at the order book depths. Uh they look at a bunch of other matrices to try to fix it. And what uh after that to be uh so I I mostly use CoinMarketCap for the for the coin market cap. So when I look when I look at a specific coin I I I go for I I look at that.

I did used to look use a CoinMarketCap for exchange rankings but it's so inaccurate right now it's it's kind of less useful. And then I look at the adjusted volumes that they had. I was like what? That's even less accurate than the reported volume. So I did give those feedback but other than that I didn't tell them how to fix it. So um I said look there's a bunch of matrices you can use. You can tie together with uh web visits or you can tie together They also They also have data on outbound clicks. How many people click on the links for each exchanges to go to the exchanges. And Binance is number one. Even though Binance is mostly ranked like 15 and uh or 20 or 25th spot because like there's a bunch of other guys with fake volumes in front of that. So we

look at those we look at those data even historically Binance is number one and actually if you look at the outbound data is very is actually very accurate. That's that gives it like a very accurate so they have a lot of data that they can use to sort of uh fix the ranking. I didn't I didn't I didn't ask I didn't tell them specifically how to fix it but just say look that's the number one user requested feature you guys fix it. Yeah, well we'll see how that goes. Good luck to you guys on that. Um one other thing I want to ask about was you know you guys launched this leverage trading in October and you did it with 125x leverage. When high leverage can so easily cause many traders to get wiped out, why did you offer such high

leverage? Okay so I'll be I'll make a confession. Um the high leverage is more of a PR gimmick. Um so the 125x is only available for small amounts. So, if you want to trade like I don't know if a couple hundred bucks yes you can go 100 you have you can go 125x. And in larger amounts if you want to trade $10 million no you don't get you don't get 125x leverage um because um if you get if you get liquidated the liquidity is not at the current liquidity is not in the in the industry is not strong enough to support that kind of liquidation. So, it's a tier system where it's for smaller amounts you get that you get you you get to that kind of leverage um and we have a deleveraging system that um if you if you if you if you approach

your margin and then um you get deleveraged. Um most of people actually only use like 10 20 uh max like most people don't really use above 30 50x. So, um the high leverage is really sort of just um well there was 100x and there was 101x. We said well 100 100 what and one doesn't really divide very well. 125 divides much better. If you if you divide it by eight you get a nice number. If you divide it by seven you get a nice number. So, we just said well let's go with that. So, most people don't use that high leverage.

Okay. Okay. Well, we got a nice admission there. Um so, this is going to be something else that a lot of people are going to be curious about. In early April, 11 class action lawsuits were filed against a number of crypto companies and token projects, and Binance was one of them. The suit named you and your co-founders Ha Yi and Roger Wang as defendants. The lawsuit noted that in 2019, Binance averaged more than 2.8 billion dollars in daily trading volume, had more than 15 million users worldwide, and listed 184 tokens. And it also talked about how in 2018, Binance brought in 446 million dollars in profit.

And then the lawsuit said, quote, "How did a company that was barely a year old generate such extraordinary profits? By building a platform that solicited the buying and selling of unregistered securities on a historically unprecedented scale." What is your response to that? Um so, on that point, my uh our lawyers told me not to say anything. So, I will I will I will not comment on that. But, we have lawyers handling it. Um so, it is what it is. Um I think every company Well, we were not without losses from the very beginning. Uh we had Sequoia suing us at one point. Um so, that that's resolved.

Um again, I can't I cannot comment on that on that on that outcome uh on the details, but that's completely resolved. Um no issues anymore. So, we just have lawyers handle it. One of the trickier things in this world is that in the world I was brought up in, at least the values I was taught, you're you're you're innocent until proven guilty. Uh having somebody suing you is a standard Well, not a standard. It's it's a it's a it's a normal part of a business process. Um but, today, many people think that as long as as soon as there's a lawsuit, you're guilty, which is not the right Well, I don't think that's the right uh uh perception. So, we'll let the lawyers figure it out. Um unfortunately, in this kind of situations, all the lawyers tell tell you to not comment on it. So, I I

can't comment on the specifics, but we'll we'll see. Yeah. Yeah, I think what's interesting is that this sort of goes back to our first interview where I was asking you these questions. But, yeah, we'll see how this plays out because I think this was a these were things that a lot of people were wondering about and now we'll finally get our answer. So, another kind of controversial issue recently was that you know, obviously so we're seeing now that more and more blockchains are using delegated proof of stake and because of that some people are concerned about the power that exchanges might have in those systems because of the coins that they hold for their users. And a good example is what happened with the Steam blockchain when Binance initially helped

the Steam tokens on the exchange or used the the tokens on the exchange to help Justin Sun as he took control of Steam and then Binance later reversed course and helped a fork of Steam called Hive to basically remove some of the control that Justin Sun had. So, why did Binance change directions with Steam and how do you think exchanges should handle the power that they have in these delegated proof of stake systems with the coins they have? Yeah so to be very frank and I and I said this openly a few times already, which is we didn't know it was like a contentious fork. So, we go through many wallet upgrades, right? So, blockchain upgrades whenever there's a when whenever there's a blockchain upgrade is very often a soft

or even a hard fork. And typically the developers, the core developers will contact us say, "Look, there's a hard there's a hard fork coming. We'll you guys need to upgrade your wallet and support it." We'll just follow the instructions, really. So, they they give us a detailed level of instructions, we look at it, we just follow it. And so, when when this was and this was the Steam soft or the fork was presented to me as a upgrade and I was asked, "Just yeah we let's go for it." So, I didn't even I didn't approve it.

My team. So, Uh well so we have a my own team talked and I actually I didn't talk to Justin uh before this. So my uh their team was talking to our team on the wallet upgrade and my team asked me, "Hey, it was a standard like uh rubber stamp process where they say, 'Oh look, there's a wallet upgrade. We got to Are we going to support it or not?'" And they said, "Yes." Um so that was the extent. Um afterwards, the Steam community went ballistic and I was like, "Oh okay, well that's not that's not very good." So we I made a mistake of not realizing that uh which I fully admit and take responsibility for. And we do not want to get involved in governance blockchain uh blockchain governance as uh weighing our opinions, etc. Especially we don't want to use our our users' coins to do that. So if you

want to weigh in, then the only way we would do that is to make a vote feature on binance.com so that the guys we have a weighted a vote according to their to their balances. And then we use that to vote. But that's we don't we don't even have that feature today. Um because we don't really want to get into that. And um so after the fact um and the Steam works in a very uh uh uh strict way. Once once you vote like what they call power up, I which I learned afterwards, um then it's like when you power down, it takes 13 weeks to unlock. I I think we're still probably in that process or maybe we're we're we're probably near the end of that process.

And um so uh well as soon as we discovered, we reversed course. We said, "Look, this is not something we want to get involved with. Uh we we did what the community asked." The community still has some resentment on the actions that we took. They think we caused the fork. Um but the fundamental fact is uh after we reversed the actions, Justin Sun probably has a lot of financial um um what do you call it? Uh ability to influence that anyway. We we're like I didn't look at the data, but the for a while the Steam coin price was going up because both sides were trying to buy more Steam to vote.

So we seen that happening. I didn't really look into the details of that. But from our perspective, our principles are very simple. If it's not a contentious fork, if it's a regular upgrade, we definitely support it. We support the blockchain ecosystem will grow. So we have a standard process. Now we added a check to see if there's a contentious hard fork. But normally we will just support it upgrade. And but we our principles is we do not get involved in other people's blockchain governance. That's for their community. That's for whoever holds those coins. So we want to stay neutral in terms of other blockchain governance.

We we're not interested in that. So one of the interesting thing is right now there is somewhere I would say for any coins between like 10 to 30% of coins on exchange on Binance specifically. So for any delegated proof of stake consensus mechanisms, they have to design with this in mind. So ideally you can you design with this within with in such a way that is either easy for people to withdraw coins from exchange vote and not have those coins locked for 13 weeks before they can they can redeposit and trade. Or have a way for exchanges to to be able to vote on the users' behalf. So we would never vote on our behalf using the users' coins. We

want to If we So there there those kind of questions which are being considered. And someday we we might want to support it. But it does raise the question that of some of the blockchain designs where when they design it some some some of them have very simplistic designs where they just assume everyone holds like holds their coins in their in their own wallet. And they never trade and they just they just buy and then spend it. So but the world is not that kind of is not that naive. So we just have to take that into I just hope that other designers of blockchains take it take that into consideration.

But our principles are very clear, very simple. In November, The Block reported that Binance had two Shanghai offices that closed after being visited by local authorities. And then in February, after some media outlets described Binance as being Malta-based, the Malta Financial Services Authority issued a statement saying that you were not authorized by the MFSA to operate in the cryptocurrency sphere there. So, where is Binance headquartered? Um well, I think well, this is the beauty of the blockchain, right? So, um you don't have to have like where where where's the Bitcoin office? Uh Bitcoin doesn't have an office. So, um we Uh we have we have people around 50 places in the world. And actually, to just to just to uh just to make the uh record correct, uh just to set the record, the

block article saying that we had a police raid that did not exist. Police raid uh on on a on a Binance office. So, that was pure fake. And within 12 hours of that post, the BNB market cap dropped from 2.6 billion to 2.2 billion. So, they actually had it So, that fake article actually had a very material impact on the BNB holders. So, they actually really wiped out $400 million. Yeah. But but just to clarify, I mean so the block did admit that police raid maybe wasn't the term, but to you know, to say that you guys were visited by local authorities checked out in their opinion.

Are you going to dispute that? even know. So, does So, I think the story carries a very much different weight if you say, "Well, a government official visited Coinbase." versus coin the police raided Coinbase. I think I think those two things are very very different. So, you kind of really are But but just But to say that the office closed after the visit from local authorities, are you going to dispute that? So, uh yes, I am. So, uh again, um so again, So, basically, um again, also at that same time, there was a Chinese CCTV uh visit of an office in Shanghai uh where um they reported it was a customer support office. So, um we is is is not is not is not is a is a outsourced

customer support office. It's not even Binance office. So, um again, so yes, I openly disputed that. Um so, I think people have all this um uh traditional uh mentalities they have. They're trying to classify what kind of horse is a car. So, you have to have an office. Uh wherever I sit, it's going to be the Binance office. Wherever Where Wherever I meet somebody, it's going to be in a Binance office. Um and and you have to have an entity. You have to have a headquarter. You have to have a bank account. Uh all of those things don't have to exist for blockchain companies.

Well, I mean, it just But even to do things like to to handle, you know, taxes for your employees, like I think you need a registered business entity. So, like why are you obfuscating it? Why not just be open about it? Like, you know, the the headquarters is registered in this place. Why not just say that? Um well, we we we don't we we don't uh So, we don't really we we we just don't It's It's It's the same thing as why Why don't you admit you're a horse? in front of horse. We're not a horse. We're a car. So, it's not that we don't want to admit it admitted. We It's not that we don't want to uh we want to obfuscate it or we want to try to hide. I'm not hiding. We're we're we're in the open.

I'm on Twitter every day. I go to conference I go to fiscal conferences. Uh so, we're not hiding. But it's just like, why don't you go back to this old way of being? I mean, we're we're we're we're not that. So, what are you saying? That you're like already some kind of DAO? Or I mean, what are you saying? Because It's not the old way. It is actually the current way. And until you can say like we're officially a DAO, like I I actually don't know, you know, what what you are or what what you're claiming to be. Uh so, well, let me put it this way. So, I don't think we're a DAO in most of the definitions of a DAO. I think again, I think that's a kind of a binary definition. You're either a traditional company or you're a DAO.

Um I think we're just a team working together really well. And we build a platform that works. And we have multiple uh we have multiple uh places we work. Uh most of Well, now most of it it was actually we mostly work from home even before the coronavirus quarantine. Uh we're working in 50 different countries now. Uh we have a we have a large team that works together to a common goal. Uh it's just a new type of organization. I wouldn't classify it to be honest uh if we classify it as a doubt, there's going to be a lot of debates why we're not a doubt. Um I so I don't want to go there either.

Yeah, I mean nobody would call you guys a doubt. And can I ask where you are right now, where you're doing stay at home? Yeah, I'm in I'm in Asia. So it's uh 7:00 p.m. here, so it's 7:00 a.m. your time. Where in Asia? I I I I I prefer not to disclose that. I think that's my own privacy. All right. Well, that's going to have to be where we're going to end because it's now 8:00 a.m. and that's it. Thank you so much, CZ, for making this fireside chat happen, especially last minute. And I hope everybody enjoys the rest of Ethereal. And did you want to say any last words?

Sure, thank you, Laura. And I always appreciate the tough questions. It actually makes it interesting conversation. Cheers. Yeah, I appreciate that you are willing to take my tough questions. I hope we can make this happen again. That's fun. It's fun. All right, great. see you later, Laura. Thanks for tuning in. To learn more about CZ and Binance, be sure to check out the links in the show notes of your podcast player. Don't forget to take the Unchained survey at surveymonkey.com/r/unchained2020 to have your say in how we can improve the show. Again, you can have a chance to win a metal MCO Visa card that crypto.com will stake indefinitely and that offers free Spotify, free Netflix,

and 3% back on all spending, plus extra interest on your crypto deposit. For your chance to win, fill out the survey at surveymonkey.com/r/unchained2020. Unchained is produced by me, Laura Shin, with help from Fractal Recording, Anthony Yoon, Daniel Nuss, Josh Durham, and the team at CLK Transcription. Thanks for listening.