When people think crypto exchange, Binance is usually the first thing that comes to mind.
The exchange has seen meteoric growth, reaching the highest volume of any exchange just six months after launch and valued at almost $2 billion within the same time frame, making it the fastest ever platform to reach ‘tech unicorn’ status.
Binance recently celebrated the year anniversary of the platform’s conception by the team, making it a fitting time for an overview of the exchange, how far they’ve come, and obstacles met along the way.
The Early Days
Binance was founded in China 2017 by Changpeng Zhao and Yi He, both of whom worked previously at OKCoin – Zhao was the CTO for a short while. The project raised $17 million in the good old days of 2017 when ICOs were a little more… modest than the behemoths of today’s crypto space and pioneered the use of native exchange tokens with the launch of BNB token which offers traders a 50% discount on trading fees, a model that has since been adopted by other exchanges.
The project has since relocated multiple times due to harsh regulations in their local region, expanding to Japan and Malta to pursue more lenient regulations.
Since then they’ve had their share of legal battles and expansionary initiatives. Let’s start with the good stuff.
Binance established their new global compliance center in Bermuda, a small island territory with a population of 65,000. Through the Binance Charity Foundation the company put up $10 million towards local educational programs related to blockchain technology and an additional $5 million investment in local blockchain startups, creating 30 jobs for locals and 10 for external staff.
$15 million goes a long way in such a small place, hopefully allowing Binance to make a significant impact both long and short-term in the local economy, and hey – it doesn’t hurt to buy a little goodwill in the place where your compliance center is set up, right? This interesting and no doubt prosperous partnership had the added bonus of featuring Zhao looking perfectly at home in the traditional business attire of the island, Bermudan shorts.
Looking sharp, Zhao.
Binance turned their gaze to East Africa, partnering with local organizations in an effort to bolster the Ugandan economy and benefit from opportunities in the nation.
@binance will partner with @cryptosavannah @AggieKonde @HelenHaiyu to support Uganda's economic transformation and youth employment through blockchain, embracing the 4th industrial revolution. We will do this by creating thousands of jobs and bringing investments to Uganda.
— CZ ? Binance (@cz_binance) April 22, 2018
Binance met with the Ugandan president and held an open meeting with the Blockchain Association of Uganda, who quoted Zhao as saying:
“Binance is tailor-making partnerships according to the environment. We want to understand the landscape and grow our understanding of the market.”
Binance later announced that they would be continuing their work in other African nations in future.
The saga continues with Sequoia Capital VC firm taking Binance to court in Hong Kong over an alleged breach of contract that resulted in Sequoia missing out on a profitable investment in the blossoming exchange.
In the unlikely event that you’re not a venture capital funding enthusiast, Sequoia Capital provided seed funding that helped catapult companies like Google, Apple, Paypal, and Yahoo! to success, making them officially a big deal.
Sequoia were negotiating a round of funding for Binance in exchange for an 11% share of the company valued at $80 million. The VC firm proposed two rounds of funding valuing the crypto-exchange at $400 million and $1 billion respectively, but the sudden growth in the December market led Binance shareholders to rethink the proposition.
Binance looked for a second opinion and ended up going with IDG Captial who partnered with Binance valuing the company at $1 billion from the outset. Sequoia didn’t take kindly to being sidelined and convinced a high court judge in Hong King to issue an injunction preventing Binance from collaborating with other firms, claiming that the exchange broke an agreement between them by seeking outside funding.
The injunction was big news, although the VC firm received criticism for stalling the funding process while they continued to negotiate with Binance to prevent them from landing a deal in the meantime. The injunction was overturned in a matter of days, and Binance fired back by stating that they may need to ask crypto-projects seeking a listing to disclose any involvement with Sequoia before proceeding with the listing.
This was essentially some good old fashioned revenge tactics, putting upcoming projects in the tight spot of choosing between a leading crypto exchange and a leading VC firm, a choice that would probably work in Binance’s favor (there are a lot more venture capital firms than top-dog crypto exchanges with Binance’s influence on the market). The statement alone likely discouraged many projects from giving SC their business, and probably discouraged anyone from ever crossing Binance to boot.
DEX and Investment Fund
In May Binance announced the development of a native blockchain and a decentralized Binance exchange, a move seen as the forward-thinking project hedging their bets and protecting themselves from increasingly harsh international regulation by creating a DEX with no leadership and no legal accountability, cementing their position as a leading exchange regardless of the regulatory climate.
“Binance was growing too quickly, and too busy to start anything else. So, all we could do is to just start one more Binance. “
Earlier this month Binance announced a $1 billion investment fund, something that could see the exchange graduate from A+ crypto startup company to an entity that could end up rivaling the big players in traditional venture capitalism as well (shouldn’t have messed with Binance, Sequoia).
The Community Influence Inc. fund is aimed at helping emerging startup companies and other funds as well, with the funds being comprised of Binance’s own BNB tokens.
Now that you think Binance is the best thing to hit crypto since Doge memes, it’s time to take a look at the other side of the coin.
Binance, along with other major like OKex and HitBTC, has been accused of falsifying trading volume by as much as 92% to mislead investors as to the profitability and profile of the exchange.
A study in March 2018 found that trading volumes were significantly inflated. Crypto-trader Sylvian Ribes said:
“I found ridiculously massive discrepancies between exchanges. Not the kind that can be easily hand-waved away (“oh well, their users must behave differently”), but the kind that can only be explained by some figures being overstated as much as 95%.”
That said, Ribes was mostly taking aim at the other exchanges mentioned, particularly OKex, saying:
“It could however serve well to keep a close eye on Binance claimed volume in the future, although inspecting their volume history does not show any obvious suspicious activity.”
So we can probably put away the pitchforks for now, and keep that as a reminder to always stay frosty in the hectic world of cryptocurrencies.
All told, Binance’s story is a highly impressive one – I wonder what they’ll do next?
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