Binance's Sixth Anniversary: The Challenges Faced Over the Years, How Will It Lead the Industry Forward Next?

Table of Contents

Introduction

The cryptocurrency industry has recently faced strong pressure from the U.S. government, leading to a variety of FUD panic and uncertainty in the market. As a leading player in the industry, the cryptocurrency exchange Binance has naturally become one of the focal points of this storm. Its founder, Changpeng Zhao (CZ), recently stated on Twitter: "I believe that the secret to building a tight and strong team is not through banquets, outings, counseling, or therapists, although they all help, they gradually disappear over time. The real secret is... some external pressure. This allows team members to build reliance, resilience, and most importantly, trust while fighting side by side."

Just last week, Binance celebrated its sixth anniversary, having weathered numerous crises and pressures over the years. While the entire cryptocurrency industry faced bottlenecks, Binance always managed to overcome them. After each breakthrough, it led the industry to new heights, once again demonstrating the spirit and value of blockchain to the public. How has Binance faced challenges along the way and grown to become the world's largest cryptocurrency exchange? Let's revisit this story from the inception of Binance and review its journey!

Binance Founder Changpeng Zhao: Binance's growth has not been smooth sailing

Changpeng Zhao's (CZ) Letter: Binance's sixth anniversary and outlook on three major trends

1. Transition from traditional finance to cryptocurrency, vision driving financial freedom

In 2005, CZ was developing a high-frequency trading system for a brokerage firm, laying a solid foundation of financial knowledge and engineering skills, becoming a top engineer and entrepreneur. In 2013, after attending a Bitcoin seminar, CZ developed a keen interest in blockchain technology, selling his house the following year to invest all his personal assets in Bitcoin and resigning from his job to fully engage in the cryptocurrency business.

Three years later, CZ founded the cryptocurrency exchange Binance in July 2017. At that time, it offered only two service languages and listed a total of five tokens, including popular cryptocurrencies like Bitcoin, Ethereum, Litecoin, and its own BNB token.

Although shortly after its establishment, regulations from the Chinese government affected the exchange's operations, Binance had already been committed to serving a global user base from the beginning, promoting financial freedom. Due to its diverse user composition, Binance was able to quickly adjust its organization, deeply cultivate the international market, and still maintain solid community support and a leading market position in multiple countries and regions.

2. Leveraging a solid foundation to become the world's top exchange

Having immersed in traditional finance and engineering for many years, CZ successfully laid a solid foundation for Binance's stable and rapid growth.

In 2018, within six months, Binance had accumulated over 6 million users, becoming the world's largest cryptocurrency exchange by trading volume. As the first platform token issued in the industry, BNB's market value reached $1.3 billion, making it the highest-ranked platform native token and fourth among all cryptocurrencies.

In an interview, CZ mentioned that many cryptocurrency exchanges claim to be global, but upon closer inspection, they usually focus on specific regions where their teams are located and offer only one or two languages.

As the founder, CZ, drawing on his experience of living and working around the world, created more localized services and products for users worldwide. Binance currently serves 180 countries and regions, with website customer support available in 40 languages, truly embodying a global vision.

Furthermore, CZ shared Binance's four key steps and operational principles for success:

1. Sustainable business model: A successful business model and clear profit path are essential for efficient growth and global expansion.
2. Understanding user preferences: Ensuring products can be customized to provide value to different countries and regions.
3. Legal compliance and security: Maintaining contact and deep cooperation with regulatory bodies and local governments to allow local users to trade on the platform without concerns.
4. Viewing industry development as a responsibility: In comparison to traditional financial markets, cryptocurrency exchanges are still in their early stages. Therefore, industry leaders should take on the responsibility of driving industry development, raising industry standards, and promoting the widespread adoption of cryptocurrencies.

3. Building a more complete ecosystem to give back to society through blockchain technology

In addition to its core exchange business, Binance began building a more comprehensive ecosystem from 2017 to 2018:

1. From its inception as a spot exchange, Binance established more fiat gateways to help global users easily enter the world of cryptocurrencies.
2. Investing in developing public chains to provide more possibilities for the blockchain community. In terms of daily active users, BNB Chain is currently the world's largest smart contract blockchain.
3. Establishing Binance Labs, a venture capital and incubator supporting blockchain ecosystem development. Binance Labs has invested in over 200 projects with a return on investment exceeding 10 times.
4. Launching Binance Academy, a free educational platform for industry professionals and the public. Binance Academy supports over 30 languages and offers over 1,000 articles on topics such as Web3, blockchain, and cryptocurrencies.
5. Initiating Binance Charity in collaboration with various national organizations and the United Nations to make charitable activities transparent and simplify emergency donation processes. In recent years, many charitable achievements have been made.
   ・Binance Refugee Card helped 15,000 Ukrainian refugees.
   ・Collaborated with Utiva to award technology industry scholarships to 1,000 African students.
   ・Donated $100,000 to support flood relief efforts in Italy.
   ・Airdropped approximately $5 million worth of BNB to users in the earthquake-stricken area of Turkey.

Through the power of blockchain, Binance Charity has addressed the lack of trust in charitable donations in the past by storing donation records transparently on the blockchain. Donors can track the flow and use of digital currencies, and the immutable nature of blockchain prevents the possibility of misappropriation. Donors can also donate more efficiently, with fast transaction speeds and low transaction costs. Binance Charity once again demonstrates the two significant values of cryptocurrencies: transparency and convenience.

4. Establishing the foundation for IEOs to provide a stage for promising new projects

After a prolonged bear market period, from 2018 to 2019, Bitcoin plummeted from nearly $20,000 to around $6,600, and cryptocurrency trading volume decreased by about 50% since early 2018. In this prolonged bear market, Binance's first offering of IEO (Initial Exchange Offering) brought vitality to the market, providing a platform for many promising startups amidst the silence. Compared to previous ICOs, IEOs are more cautious and rigorous in their review processes since they are fundraised by exchanges to prevent users from encountering misleading products or scams. Today, Binance's IEOs still offer the best returns among all exchanges, making them popular among users and setting a benchmark for platform reputation, leading to many imitations by other platforms.

This article also reviews the remarkable achievements of Binance Launchpad over the past three years. GMT is one of the most successful projects, with a historical maximum increase of over 38,100%, reaching nearly half a million global Web3 users. In the current bearish market environment, even though the highest returns are gradually stabilizing, with $HOOK at 37x, ID at 36x, and EDU at 28x, Binance Launchpad remains one of the most stable and highest-return investment opportunities in the entire cryptocurrency market.

5. Commitment to building infrastructure to achieve a high-throughput, low-cost trading environment

In the summer of 2020, DeFi (Decentralized Finance) emerged, leading many to call it the DeFi Summer. Communities flocked to the blockchain seeking wealth, but due to insufficient security awareness, there were frequent fraud and hacking incidents, harming many cryptocurrency communities. Under the limited capacity and speed of Layer 1, users often had to bear significant additional gas fees for verification. Binance introduced the first case of decentralized infrastructure supported by an exchange, launching BSC (Binance Smart Chain) in 2022, which transitioned to a dual-chain structure and was renamed BNB Chain. It provides a high transaction efficiency and low gas fee environment for users globally, benefiting many users and developers interested in DeFi but unable to access it.

Supported by Binance, BNB Chain announced the third blockchain in its ecosystem, BNB Greenfield, in March this year. It offers a more secure, convenient, and fast decentralized storage infrastructure to help users and DApps establish, store, and exchange data with complete ownership, creating a new data economy. Last month, it announced its participation in Layer 2 network scaling solutions, launching the basic version opBNB based on Optimism OP Stack, which is already operating on the test network. opBNB raises the gas limit to 100 million, enabling 4,000 transfers per second with an average transaction cost of less than $0.005, achieving a trading environment with high throughput and low cost.

6. Actively embracing regulatory compliance to lead the industry towards maturity

Starting in 2020, the COVID-19 pandemic caused significant harm worldwide, leading to increased public attention on economic policies, stable currencies, and remote work. Economic activities continued shifting to the digital realm, raising awareness of the need for Bitcoin as a store of value, digital gold, and its value. In May 2020, Bitcoin experienced its third halving, reducing block rewards from 12.5 BTC to 6.25 BTC, and in November, it reached an all-time high, leading to a thriving cryptocurrency market.

Driven by technology and market trends, the adoption of cryptocurrencies has been increasing. Binance realized that the widespread adoption of cryptocurrency services is essential. With more capabilities, exchanges have to shoulder more responsibilities. Greater compliance is crucial to maturing and stabilizing the industry, laying the foundation for widespread participation in the cryptocurrency market. Therefore, Binance has been promoting compliance efforts globally.

When many regulatory agencies were still figuring out how to regulate the industry, Binance took the initiative to assist, aiming to provide more investor protection to users. Simultaneously, it made efforts to develop payment and exchange systems in different countries to promote financial inclusion through cryptocurrencies.

To date, Binance has obtained licenses and regulatory approvals in a total of 17 countries/regions, including G7 countries like France, Italy, and Japan, making it the exchange with the most licenses and permits globally.

7. Transparency of reserve funds, the first to use Merkle Tree asset reserve proof and set industry standards

In November 2022, the exchange FTX went bankrupt due to improper use of assets, causing losses to institutions and users worldwide, eroding public confidence in the cryptocurrency field and raising many security-related doubts.

As a leading player in the industry, Binance took the lead in proposing detailed Proof of Reserves (PoR) for asset reserve proof.

Binance was the first exchange in the industry to deploy zk-SNARK succinct non-interactive zero-knowledge proof technology on PoR, integrating a large amount of data cryptographically into a hash value to prove that all user reserve funds in the exchange are securely stored and can be withdrawn at a 1:1 ratio at any time. It also ensures user privacy protection. Additionally, Binance undergoes regular audits by third-party audit firms and publicly displays the results on the reserve proof website. The detailed asset proof standards lead the industry towards a more transparent and responsible industry standard.

Following the FTX incident, many countries' attitudes towards cryptocurrencies were affected, posing significant regulatory challenges to exchanges, issuers, platforms, and institutions globally. Despite this, due to its years of construction and efforts, Binance has demonstrated commendable compliance achievements globally, such as:

1. Building on the permanent license obtained from the Astana International Financial Center Financial Services Authority (AFSA) last year, Binance officially launched a locally regulated exchange in Astana, Kazakhstan, in June 2023.
2. Successfully acquiring a licensed exchange in Japan, Binance Japan is expected to be officially launched this year, becoming a compliant exchange regulated by the Japanese Financial Services Agency (JFSA).
3. Establishing Gulf Binance in collaboration with Thailand's Gulf Innova, obtaining an operating license from the Thai Securities and Exchange Commission (SEC). This marks Binance's first license in Southeast Asia, with a local exchange in Thailand expected to go live by the end of the year.
4. Binance Nordics AB received registration approval from the Swedish Financial Supervisory Authority (Swedish FSA) to become a financial institution managing and trading cryptocurrencies in Sweden. Currently, Binance has obtained licenses and regulatory approvals in France, Italy, Lithuania, Spain, and Poland, and has stated that it will ensure its European operations comply with the latest EU regulations on virtual assets under MiCA.

Extension: Binance Paris Blockchain Week | Changpeng Zhao's dialogue with the French Minister of Digital Transformation

Conclusion

In 2023, the blockchain industry is facing a year of regulation, with all industry players encountering more stringent challenges. As a leader in the industry, Binance faces even more daunting challenges and carries a heavier mission. However, looking back at the history of human technological development, no significant revolution has occurred without facing numerous difficulties. The internet was no different in its early days, and today, the blockchain and cryptocurrency industry follow the same path. In its seventh year, Binance will embrace any challenges and once again lead the industry to new heights.