CEX should be the first stop for users to enter the cryptocurrency world
Ryan Selkis: How did you overcome Binance’s four years of difficulty?
CZ: I don’t think we faced any obstacles in the beginning, we were already the number one cryptocurrency exchange in the world in terms of trading volume around December 2017. The policy at the time may have been a hindrance, but it didn’t affect us that much, and we still maintained our lead until now.
It should be said that we have never encountered any major obstacles on the way forward, and I hope our future development path can be so smooth.
Ryan Selkis: What do you think are the problems with centralized exchanges in the cryptocurrency space, and what will you do next for Binance?
CZ: I think the biggest issue for centralized exchanges is KYC. We provide services in more than 180 countries, each with its own set of laws and regulations. Users in some countries don’t even have a street address and a bank card that can be used for payment. They will leave the name of a certain village. How to verify the authenticity of the address has become a big problem. We tried hard to localize KYC policies, but many other exchanges simply skip this step.
For DeFi, the vast majority of decentralized wallets today are not designed for ordinary people, and most ordinary people cannot understand the concept of private keys well. We are trying to solve this problem.
Ryan Selkis: Given that centralized exchanges cannot provide most of the services, such as staking, and DEXs are on the rise, how long do you think it will take before CEXs face the positive challenges of DEXs?
CZ: I think it’s still years away. In 10, 20 years, maybe we will see that decentralized exchanges will overwhelm centralized exchanges, but now, most players don’t really understand encryption.
Crypto-savvy developers have a way to generate their own wallets, save the private keys, and pass them on to future generations. But these things are hard to do. Still today, over 90% of the population does not have any kind of cryptocurrency, and they are more accustomed to using email-style passwords that they can call customer service to reset if lost.
But if the technology is more mature and wallets and tools for storing private keys are easier to use, more and more people will turn to DeFi, but in the short term, most people will still choose CEX as the first entry into cryptocurrencies stand.
Using BUSD is for user experience, not centralization
Ryan Selkis: While you emphasized that BNB Chain should be decentralized, you also made a centralized decision to exchange all stablecoins on the exchange for BUSD. Can you talk about the transition in between?
CZ: I think there are a few different concepts here, but people often confuse them. I want to make a distinction and let’s talk about how we make the user experience the easiest and most protective.
Each token has its own liquidity, and if you combine them to make joint orders deeper and thus keep slippage lower, this is actually the best protection for users.
We just lumped stablecoin liquidity into one, but many people misunderstood our announcement and thought we stopped supporting USDC, which is wrong. You can still withdraw them on Binance for a 1-to-1 conversion. At the same time, you can also trade in a comprehensive liquidity pool with close to zero slippage, and when you complete the transaction, you can convert back to USDC 1:1, which optimizes our user experience.
Although it’s called BUSD, it’s actually not issued by us, it’s issued by Paxos, an entity regulated by the New York Department of Financial Services, backed by fiat currency. So the criticism that “it’s a centralized decision” is really bad, I don’t think so, centralization is a bigger proposition.
Binance has no competitors, expansion is the future
Ryan Selkis: There are countless basic protocols and projects in the cryptocurrency field, as well as a large number of side chains, Layer-2, and various non-EVM public chains. How do you view this environment?
CZ: Binance is now a huge ecosystem, with a huge centralized exchange, BNB Chain, different wallets, different tokens, and various DeFi projects. I think it’s a very healthy environment. I personally spend a lot of time following exchanges because that is my main business and most of my knowledge.
Regarding various consensus mechanisms, I actually don’t know much about them. Maybe you can go to the tweet of V. God. He has a very deep understanding of various consensus mechanisms. But from my point of view, an ecosystem needs to have enough competition to keep growing. Various public chains, various tokens, is good for Binance, because we can have enough tokens to expand our business.
From the perspective of BNB Chain, maybe it will have some competition with Ethereum, but the cryptocurrency industry is still in a very early stage, so we also want more exchanges, more DeFi projects, and more Exchange cooperation. Just like CoinMarketCap is also working with various news aggregators. Our current market may only reach 3% to 5% of its potential. Competing in this 3% to 5% is obviously not interesting. We would rather spend more time educating users and expanding the market, so we do not. would consider others to be our competitors.
Regulation matches cryptocurrency, not cryptocurrency matches regulation
Ryan Selkis: I read your article on Binance Vision in 2017, and it was one of the best articles I’ve read. You mentioned that tokens can change our financial system, but now with regulation looming, we seem to have some troubles, do you think we can still achieve the original vision?
CZ: First of all thank you for the compliment. In 2017, we said we wanted to build an exchange, we wanted to build DeFi projects, we wanted to create a complete ecosystem. Fortunately, we are gradually approaching this goal.
Regarding regulation, I actually see a positive future. When regulators come into contact with a new industry, the first thing they think about is their original knowledge, such as how they regulate banks, how they regulate securities systems, and then apply it mechanically. But after a while, they realize that it’s a completely different situation, where you’re not moving at the speed of a car, you’re moving at the speed of a rocket, so they have to change their strategy.
I think we’re still in the first phase, but the second phase will come soon. Just like Dubai is launching a virtual asset supervision system called Vera. They realized that the regulation of traditional assets such as securities on crypto assets was not very effective.
What I’m trying to explain is that this is a completely different industry. Just like people used to ask “what is the Internet”, is it a radio? Is it the news media? Or a TV? No, these are not the Internet, the Internet is a new way of delivering information. The same goes for the blockchain, which is a new value transfer technology that allows us to conduct cross-border transactions quickly and change our business model.
Blockchain is also currently considered to be cryptocurrency, a commodity, especially in the United States. So they regulate cryptocurrencies as commodities, dividing them into securities, commodities, currencies. But cryptocurrencies may be nothing and everything, just like Bitcoin has all three properties at the same time.
In Europe, it was not long ago that a draft regulation of cryptocurrencies, the MiCA, was passed, allowing cryptocurrencies to circulate under more relaxed conditions. A month ago, Europe realized that more than 80% of stablecoins are now based on the dollar, and it would be even worse if they excluded themselves from cryptocurrencies, so they loosened the restrictions and hoped that things would get better.
Of course, things will not improve overnight, but the future of cryptocurrency regulation will definitely have a unique system like Europe or Dubai.
Bear Market Survival Advice
Ryan Selkis: A lot of people step into the cryptocurrency industry in a bull market and make a lot of money, but when a bear market hits, they probably all lose money. So, what do you recommend for them, and what do you think about the bear market?
CZ: What I want to tell people is, don’t just focus on the currency price, but also on the number of applications, the number of users, and how many developers there are. This is a long-term indicator.
In 2013, the industry was called Bitcoin, and it was my first bear market in the industry. In 2017, ICOs created a craze, anyone could issue tokens in the ERC-20 standard, and the market was filled with all kinds of “entrepreneurs” and fancy white papers. 2020 is DeFi, then last year we had NFTs, there will be a fifth wave in the future, maybe the metaverse, and many other possibilities.
The industry has been growing in numbers and applications and is still in very early stages. In the long run, no industry grows in a straight line. So, choose your favorite projects as much as possible, but don’t put all your eggs in one basket and don’t put all your money in cryptocurrency.
In each cycle, the decline is very rapid, but recovery usually takes several years, I can’t predict the future, all I can say is learn to recognize market risks and protect yourself.
