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Zhao Changpeng's Perspective: Six Principles a Sound Exchange Should Follow

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Zhao Changpeng

Due to the severe and far-reaching impact of FTX filing for bankruptcy on the blockchain industry, Binance CEO Changpeng Zhao shared six principles yesterday that he believes centralized exchanges should adopt to ensure the security of user funds and gain trust.

Zhao Changpeng's Six Key Principles

1. Avoiding User Fund Risks

  • User funds should never be used for trading or investment purposes.
  • Proactively provide users with risk warnings to understand the volatility of cryptocurrencies.

2. Never Use Native Tokens as Collateral

  • Native tokens refer to exchange tokens created by the operating exchange company.
  • Native tokens play an essential role in the operation of the blockchain and lay a solid foundation for it.
  • A healthy native token is crucial for the success of the blockchain.
  • Users need to be able to rely confidently on the native token of the blockchain they choose.

3. Share Real-Time Asset Proof

  • As part of Binance's commitment to transparency and building trust within the ecosystem, Binance has started sharing detailed information on major cold and hot wallet addresses. More information.
  • Asset proof serves as the starting point for Binance to establish hash tree fund proof, which Binance will share with the community in the coming weeks.
  • Binance's goal is for users on the platform to make informed decisions aligned with their financial objectives.
  • Other industry participants have provided this level of transparency, and Binance urges the blockchain industry to do the same to ensure that a few bad apples do not spoil the entire industry.

4. Maintain Strong Reserves

  • We have established the SAFU Fund to address extreme situations, with approximately $1 billion in the fund currently.
  • Other industry players should also make similar commitments.

5. Avoid High Leverage

  • Using debt to leverage is not wise.
  • The cryptocurrency market is highly volatile, which is why Binance's asset structure does not include debt.
  • Binance urges peers in the industry to maintain conservatism in their finances.

6. Strengthen and Enforce Security Protocols

  • Given the rapid nature of industry and project protocol developments, the industry needs to establish better alliances to ensure consistent standards for security measures on exchanges and projects.
  • Strong partnerships with law enforcement agencies are needed to support investigations and recover stolen funds.
  • To ensure clearer flow of blockchain assets, readiness for investment in on-chain analysis is necessary to address weaknesses in existing models. Transparency is achieved through solving these issues.
  • All exchanges should implement strict KYC and AML measures.

"We urge all other centralized exchanges to adopt these suggestions because we owe it to the people who trust us with their hard-earned money." Zhao Changpeng stated.