Bankless - 173 - CZ & the State of Binance

Episode Date: May 29, 2023

We welcome back Founder and CEO of Binance, CZ for his second appearance on Bankless. Last time CZ was on, Terra Luna hadn’t collapsed yet and FTX was still competing with Binance. A lot has changed.  In today’s episode, we cover it all. Here were some of the questions we discussed: 1) How can we tell what’s real vs. FUD with Binance? 2) What Happened with FTX from CZ’s perspective?  3) The difference between the current bear market vs. previous ones 4) Community questions from Justin Drake & Degen Spartan ------ ✨ DEBRIEF | Unpacking the episode:  https://www.bankless.com/debrief-cz  ------ 🪂Airdrop Alpha is waiting for you on Bankless 🪂 https://bankless.cc/AirdropAlphaIsOnBankless  ------ BANKLESS SPONSOR TOOLS:  🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2   🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask   👾STADER LABS | ETHX LIQUID STAKING https://bankless.cc/Stader  ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum   🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/Toku   🎮IMMUTABLE | GAMING ECOSYSTEM https://bankless.cc/Immutable   🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle  ------ TIMESTAMPS:  0:00 Intro 6:54 How’s CZ 2023? 8:35 Why is Binance a FUD Magnet?  10:52 FTX & Ledger 16:57 Binance Transparency 26:40 Current Mood of Crypto 29:35 Another Cycle?  30:58 Binance’s Bear Market Strategy  36:44 Crypto’s Biggest Opportunity  39:48 Why Crypto Is Good for the World 42:06 The Exchange Wars 48:49 Best Regulation Jurisdictions  51:48 Justin Drake Question 54:00 Will Binance Buy a Bank? 56:30 BNB Chain Rollup on Ethereum? 59:13 CZ’s Thoughts on Twitter Post-Elon 1:00:36 CZ’s Bear Market Advice 1:04:46 Closing & Disclaimers  ------ RESOURCES: CZ https://twitter.com/cz_binance  CZ’s 1st Bankless Appearance https://www.youtube.com/watch?v=lldGpGsUcWw&ab_channel=Bankless   ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures 

Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. We have CZ on the podcast today. CZ, of course, is the CEO and founder of the world's largest crypto exchange, very influential in the crypto industry today. And this episode is mostly a lot of questions. We let CZ speak. We ask him things like, how can we tell what's fud and what's real about Binance? Number two, what happened with FDX? Did the events of 2023 change Binance?

How did it change crypto overall? Number three, we ask about the mood in crypto right now. What's different about today's bear market versus previous bare markets he's been in? Will we actually get another cycle? Is there a future bull market on the horizon? And finally, we end with questions from the community, questions from people like Justin Drake, D-Gen Spartan, many others, and we ask those directly to CZ. David, why is this episode significant to you? It's not often that we are able to talk to CZ. The finance world,

the finance ecosystem, it kind of seems like a black box. It seems like it's got many different parts, especially to us in the West, who we are just not Binance's customer base. Like, what's going on over there? It's always a question. As to like, what's up with Binance? What's up with CZ? This seems to be our semi-regular check-in with CZ. We had them on about a year ago last July, 2022, right in between three hours capital liquidation and before FTX liquidation. So kind of before all of the shit hit the fan. And now we are in a much different part of the crypto world, crypto market cycle. And so what's finance up to? What's easy up to? It's always an interesting question no matter where we are in the world. And today we get another

snapshot in time is to answer that question. Yeah, I think it's hard to overstate the importance of Binance in the ecosystem. And even if you don't believe that because you don't use Binance or whatever else, in many countries, finance is crypto to them. And it's kind of their first entry port. So we really need to know what's going on

in his mind. And I think this is going to be an interesting debrief for you and I. And of course, the debrief guys, is the episode after the episode. I know you have some thoughts. I have some thoughts too. And I should let people know.

A lot of people didn't want us to have CZ on the podcast. They thought that we shouldn't even have this conversation, that we shouldn't host him. So I think this episode is controversial. And I want to talk to you about that during the debrief. What were your actual impressions? And is that controversy justified? I think it's another big question I'd like to unpack.

Yeah. I think going to this episode, we really just let him talk and asked a whole bunch of questions because, look, man, I don't know. Who is the arbiter of what's true in this particular case? It's just kind of like, well, we'll see, right? Let's let the Lindy effect. Anyway, I want to talk about all of that with you in the debrief. And of course, guys, if you want access to that episode, you can upgrade to become a citizen

and get access to the bankless premium feed. That's where we release these bonus episodes, including all of our debriefs after the show. So click into that. Guys, we're going to get right to the episode with CZ. But before we do, we want to thank the sponsors that made this episode possible, including Cracken, which is our number one recommended exchange for 2023. Cracken's been with us for over 12 years. They have one of the strongest Lindy effects in crypto. Go create an account now.

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Toku is already working with the leading companies in the space, Protocol Labs, Hedera, Gitcoin, and many more. So transform your employment and token payroll operations with Toku. You can reach out to Toku at Toku.com slash bankless or click the link in the show notes. Bankless Nation excited to reintroduce you to CZ. Of course, he's been on the podcast before. He is the CEO and founder of Binance, which is an organization so large, I feel like it's not quite right to call it a centralized exchange. I think it's much more than that.

The last time we had CZ on was June. No, actually July of 2022. That was almost a year ago. My, how things changed since then. It was a whole different world. FDX was still in exchange back then. I guess Bitcoin was going down because this was post-3-Hours Capital and Terra. We were in a whole different stage of the market cycle.

So we brought CZ on to talk about 2023 where we are today. CZ, welcome back to Bankless. How you doing? I'm doing all right. Thanks for having me. It's great to have you. I'm hearkening back to a tweet that you put out that hit me in early January, at 2023. And you said, I want to try to keep 2023 simple. Spend more time on less things.

Here are the do's and the don'ts. Number one, education. Number two, compliance. Number three, product and service. I imagine those are the dues and the don't. Number four, ignore FUD, fake news, attacks, etc. In the future, would appreciate if you can link to this post when I tweet four. I want to ask you, Cizzi, how's it going? Have you been able to keep 2023 simple? Actually, no. No. So the crop keeps coming. But now, like, every day I could have tweet four, every day, right? Luckily now, I don't even have to tweet four.

If you look at the news comments on their Twitter comments, everyone else is tweeting four. So I think that post worked out quite well. But it hasn't gone to what I hope that we don't really need to tweet for, just focus on the top three. So for me, I'm trying really, really hard to just focus on building products, education, compliance, etc. But, you know, the flood keeps coming.

But after a certain point, the flood loses its marginal impact, right? So after a media writes 40 negative articles about you, the 41st is not going to have much more. So the marginal impact is lost, and we don't respond to them anymore. So the mentality is still there. The reality is not as good as I would have hoped in terms of the amount of thought. But we keep building, yeah. Yeah, the four meme is a master class in how to intercept a meme into the world of crypto-twitter. it is now thoroughly inside of crypto culture.

There's like a handful of things like this, like Binance, that seem to just be fud magnets. Like Tether also comes to mind, just absolute fud magnet. What about Bynance attracts so much fud? Yeah. So on the floor, I didn't think it was going to be a meme, and then people turn into a meme, which is fantastic.

And then we kind of fueled upon it a bit, I've posted a few photos. I think a lot of the fud in the industry just targets the size, right? Tether is big. Tether is probably the biggest company in crypto now. in terms of like value locked in the platform, their revenue, etc. If we just look at the centralized exchange, we're probably smaller, but we're relatively big.

Tether is less public. Their CEOs are not in the community, and we're public, right? So we get on podcasts, we're entrenched in the community. We are a more to see platform. Today we have about 140 million retail users and they're all over the world, so we feel like we have to engage. I think it's mainly just share size. Well, there's a few things. Size is probably the biggest one that, you know, people just,

to like to talk up. If you write a negative article about a small exchange, nobody cares. You don't get clicks. But if whatever article you put Binance name in the title and hopefully something negative, people click more. When it's positive, you say, look, Bin Laden did this thing that was great, nobody cares. So to sell news has to be negative. And also the crypto, right? So anything that's crypto, they want to associate a negative spin on it. And the third thing is, unfortunately, like I look like I'm Chinese ethnicity. Right. So one of my friends, in the U.S., he told me that, no, in the U.S., they care about three things right now. Inflation, crypto, and China.

So just because I look Chinese, I may just draw that much more attention on it. So, yeah, it is what it is, but we've been trying really hard to keep our heads down and just move forward. Here's the thing, CZ, I really love your input in general, is because I think we're at this time in crypto, and it's not just a crypto problem. Okay, this is a problem that we have on the Internet today. all modern societies are facing this, in that it's very difficult to know what's fud and what's true. Like, we have no truth-finding mechanism. And just to, because I want you to weigh on on this, the state of the crypto market, it feels like to me, we almost have to, in order to understand it

now, we have to go back to 2022, back to you just after the last time we talked. And what happened to FDX, right? Sandbank-Bin-Fried was calling a lot of things fud at the time. That turned out to be very, very true. And so crypto is like, we're reeling from that. And we don't trust anybody anymore. I mean, there was a big blow up last week with Ledger, right? And like, I understand there were issues. There were some problems with Ledger. Maybe you think it's like crypto went too far with it, but that has been a beloved brand of crypto that has protected people's private keys for a long time. And now I feel like it's somewhat tarnished. At least the conversation is tarnished. And so I guess what I'm saying is it feels like crypto is not trusting anybody, but maybe with good reason. I mean, we'd

been lied to. Take us back to 2022. And in your own words, I think people want to hear it from you, CZ. What happened with FDX? Then we'll talk about FUD, how we can like determine truth from FUD, but take us back to 2022. What do you think happen in that whole story? So to be very frank, I don't know what happened inside FTCS, right? Our business are competitive in nature. So I try not to pry too much inside there. From what I know is basically, from what everybody else knows is that they took customer funds and used that to trade, trying to make money. And they actually did a poor job at that. And then they lost money.

And then to the point where they lost all the customers money pretty much. So that's basically it. Throughout that whole time, he was lying about it. He didn't tell the customers that he was doing this, et cetera. So it's serious. The situation was made worse by being how public. he was, how much time he spent in Washington, D.C., right? And how much time he spent talking to senators. He sponsored a third of the senators in Congress in the U.S. And then he was going to be the biggest

donor for Biden campaign next year. So now he's no longer. So all of that actually backfires when people discover this guy's a fraud. Before, you know, everyone's loving this child. He's a young entrepreneur. He's well-educated. He's white. He's American. He's got that every box ticked. But then now they find out he's fraud. And they, their trust is betrayed. They turn around. They come much harder on crypto. So they miss the bad guy. And now they're punishing all the remaining good guys and the bad guys together in crypto. They're just slaughting everybody in crypto. So it's bad. That's just pure fraud scam. Like that's made off, right, in crypto. Ledger was a different thing. No one has lost money on

ledger yet. Right. So they didn't take customers money away. They repositioned their product, which violates their fundamental principles of people using their product. We use ledger because we were told that this is a device that keeps your private key on the device. It never leaves the device. Now suddenly there's a way for you to leave the device. I think even just having the API available breaks the trust. So now it just increases a hacker attack surface. That itself is not fraud.

It's just repositioning the product in a very abrupt way. I don't think that's thought through this very well. So as you said, the industry is supposed to be a trustless industry. So we shouldn't blindly trust people. We should learn to risk control, and we should deal with that. Ledger, you know, if there's plenty of other hardware wallets on the market, I do believe many people will switch because of the fundamental principles are now different for Ledger. If people wanted to use an online backed up wallet, then they will use an online backed up wallet.

You don't need a hardware anymore. So I think they mixed up that positioning a bit. But overall, though, the industry is early. Such early industries, there's always fraud, there's always bad players, there's always failures. and over time, the industry will sort of accumulate around a few large, successful players. But then that's centralization. Today, I think Binance is too large. Binance.com, the centralized exchange is too large.

So I actually want to invest more in defy projects and make them grow. I think the future is defy. They will be more decentralized. But at the same time, even if you look at defy, Uniswad takes 70% of a trading volume in defy. So there are natural network effects there, but we still want to diversify. And as an industry, it's better to have multiple players at roughly equal sizes, more competition, more geographic distribution. So all of those will be better. And the more choices users have, the more competition they are, the stronger players will emerge eventually. So I think that's got to happen. Well, it is happening, but in the process, it's never smooth. It's always going to be issues. Speaking back to the kind of the zeitgeist that was around crypto in 2022, the bear market didn't really come fully embedded into the market until.

FTX game. FTX was like this climax, this culmination of a much smaller series of liquidations, right? First we had Terra Luna, and then that was like $40 billion, so nothing to scoff at. But people were worried about Terra Luna for a long time prior to that. And so it wasn't totally off the table before Terra Luna collapsed. And then Three O's Capital was liquidated, and that was a big surprise and shock to everyone, and much bigger and like they were super systemic, right? And then, fast forward, you have FTX go under. one saw that coming. And we saw these dominoes get bigger and bigger and bigger. And then it came to

Genesis and Grayscale and DCG. And that contagion spread into Gemini. And so I think like why perhaps there's so much flood going around is people saw this crescendoing dominoes getting bigger and bigger and bigger, which puts Binance in the conversation as in like, we didn't see three years capital coming. We didn't see FTX coming. Wow, now it's all the way at DCG. Anything is on the table. Look, it got to the crypto banks in the Tradfai world in America. And so I think to help understand why there's so much fun is like, oh, anything could be on the table. And one of the worries that I think people have is like, it's actually kind of hard to see inside of the black box of Binance. Like we could in this agenda, like we could have added like the last three bits of fud that have come out about

finance, right? Like the co-mingling of funds, regulatory fud. Like we don't know which one to talk about and addressing all of them is kind of pointless. But it is that black box nature of Binance. And so I'm wondering if you could reflect on what lessons have you as the leader of Binance learned in this last year or so, understanding that there is this very rock and a hard place that all of this crypto industry is in. What strategies have developed as a result of just everything that we've learned in the last year? Yeah, I think there's quite a few different things there. So I think if you look at the fundamental principles, right, if we use a centralized platform like Tether, like Binance, we want to be as transparent as possible. But there are limits. So in the last year, we've done proof of reserves.

And we actually did a new mechanism of proof of reserves using ZK Snarks. It was actually suggested by Vitalik, and we worked with their team to do that. There are limitations to proof of reserves. There are limitations to everything. And as a private company, we also need to make sure our privacy is protected. So if we publish all of our wallet addresses that we use, you'll be very clear which vendors we use. And those vendors may be attacked by hackers. our SMS providers, which has been attacked by hackers before, our email providers, which has been attacked by hackers before.

So they are privacy, security, and other competitive considerations. We're not a public company. We may not want to open our books so that our competitors knows exactly how much we spend on HR, exactly how much we spend on security, how much we spend on marketing. So there are considerations there. So businesses are not complete, transparent boxes, right? And Tethler, right? So which bank do they use?

And four or five years ago, every time they release which banks they use, that bank gets shut down. Right. So there are real operational considerations. I'm not saying that I do think that Tether is too much of a black box as an outsider. So there are those considerations. And then there's this thought that comes in. And then there's what do the users believe, right? How do we find truth?

So fundamentally, it's risk management. If you're using a new exchange platform, don't put all your money on one platform. And don't put all your money in one DFI problem. So that's risk management. Don't put all your money in one wallet. So there's diversification. And there's learning about the projects you interact with. Learning about the platforms you use. Learn about the ledger technologies. Understanding those concepts. Education, I think, is the best thing. And then there are fraud, which are very hard to differentiate. You know, FTX, we didn't see that coming. Luna, we could have seen that coming, to be honest. The design was flawed.

You can't mined Luna to try to push back the UST. That doesn't work. Mintin doesn't increase value. Seems so obvious now. Seems so obvious now. But some people actually did point that out when very few guys listened. Now we're learning that lesson. Three Aeros was a mismanagement of funds. They lost a bit of money on Luna, and then they went a bit crazy. Or they went very aggressive.

They lost more money over time. And then three arrows probably brought down Voyager and Genesis because they moved a lot of money to them. It was a very convoluted web of loans borrowing going on. I actually don't know the full story. I've seen bits and pieces of it. And then there was Genesis and then even Gemini is somehow involving there. And then FTX happened, which really exaggerated all of those things.

So the industry does have systematic risk. In this last four years, this cycle, this defy cycle, there's a lot of borrowing, there's a lot of loans, there's a lot of high yield, API. All of those are high risk. So if you want high returns, you're going to deal with high risk. And people should learn to judge businesses for where they are. So they are businesses that are very simple that make money. is one of them. They hold a large amount of reserves and they just make money on interest rate. That's billions of dollars. Binance, we run a slightly more heavier business. Our business model is

very simple. People trade. We charge commissions. People can get a feel how many users we have. Just by the amount of funds that we get, just by the amount of news articles that cover us, etc. So people can get a sense. And we run a simple profitable business model and we don't need to do that. And we also don't have loans, right? We even put out a tweet saying, whoever can prove that we actually have any meaningful amount of loans from anybody can claim $15,000. No one came forward. It was actually posted by a friend of mine, the founder of Big Fury, George. No, he's a friend of mine, but he's very independent from us.

We don't have any business relationships. So we've done our part to be transparent, but the businesses have limitations on how transparent we can or will be. There is always a level of risk with any product you use, with any platform you use, with any contract, even using a bank, right? We've seen banks fail. And actually we now know many of them fail. So I think it's really the fundamental risk management and ability to research and not get

simple-minded, just read one article and believe everything in that article, both good and bad. All of those things need to come into play. But we don't teach our kids in school about this. Young kids are taught in school to believe what they read. And that is not good. We need to teach more about critical thinking, challenging everything. So we need to drill those skills into young generations. But I think as the technology are providing more information, more access to decentralization,

I think all of those things are coming together. I think that's a really good thought. And I hope a listeners take away from this that, I mean, risk management is the key thing you have to do in crypto. And if there's one thing crypto has taught me through everything, all the cycles, is the importance of risk management. And that's a balance, right? So you could go as far on one side of the spectrum is don't trust anybody, right?

And I don't think that's right. But you should be on the side of the spectrum, which is you don't trust anybody fully. And I think that's like the best place to be. It's certainly a learning lesson for many in the 2021 to 2022 cycle. We have a lot of trust, I think, in this industry to actually bring back in repair. So I'm glad to hear you talk about proof of reserves and defy and some added transparency. And I also recognize that there are issues for centralized exchange, even in just getting bank accounts. I mean, like, bankless has been kicked out of bank accounts.

ironic is that, right? It's a challenge all around. One thing I would point people to is this has kind of been most of my benchmark for things is Lindy effect. How long has the entity or the project been operating without like fail? I think that's important. You'll notice the blockfires of the world and the Celsius's of the world and the FTXs of the world. Well, they sort of formed in like the 2018 time period, a very small Lindy effect when you compare them to the kind of the crackens and the coin bases and maybe even the binances. We've been through a few cycles without taking all the funds. But let's leave 2022 in the past, shall we? CZ, let's talk about 2023 right now. What is up with crypto right now? Like, what is the mood that you're feeling? It's a mixed mood right now.

It's an interesting mood right now, I think. So from my experience, like I got into crypto from 2013, right? So that was one world market that year. So went from $100 to $1,000. And then, you know, there was a one year drop in 2014, and then 2015 we started to recover. And so it's one year sharp drop and then one year recovery, and then one or two years of all-time highs. So that's 2016, 2017, 21,000, then everyone was rushing in. 2013 was like a Bitcoin cycle. Everyone was like, well, what was this new thing about Bitcoin? 2017 was an ICO year. So Ethereum, ERC 20 tokens, anyone can issue a token, a white paper, you know, fundraising. And then 2018 happened, crash. And then

2019, pain for recovery. And then 2020, 21, again, the sort of all-time high years again. And, you know, there was defy, NFTs, GameFi, Metaverse, all of this stuff. And all of this stuff are still quite new, but a lot of money pulled in. And then 2022, you know, there's

three arrows. There's Luna. There's FTX. So it was crusher. So I think now, even if we look at the price chart, we're kind of recovering. So now it's kind of a recovering mood, and people are still very cautious. It's not like formal yet. But now there's like meme coins, which I don't really fully understand. But there's also at this stage, it's unclear in one or two years, what's the next drivers that will cause explosive growth, right? I think it might be something new, right? I think NFTs, DFI, they will continue to grow, but those were inventions of the last cycle.

They will continue to grow. And they may actually be more realistic use cases, etc. But from the angle, what's going to drive the next one? I think the mood is everyone's looking for that right now. We're not sure. I think this is probably why a lot of people part into Mimcoin, and they couldn't figure out what exactly is the next one. Mimcoin sounds fun, but it shows that they are funds that are ready to be deployed. So people want to buy stuff, and they look at meme points, they pile in. So that's my read. We are at, I believe we're at an interesting inflection point. Again, I could be very wrong. Hopefully, we're past the bottom of the bear market, and hopefully we're in the start of a bull market. But again, this is not financial advice. This is just a feel, a mood

thing, I could very well be wrong. One thing that we've discussed on bankless is that crypto markets tend to go in cycles. But is that always going to be true? Is it so definitively true that we get another cycle? Absolutely not, right? So there's nothing says we have to get another cycle. The history pattern is quite clear if you look at it,

but all swans were white until you saw a black one. So history doesn't predict the future. And we can't just say because previously there was fairly distinct four-year cycles. That's going to be a new one. So I think we've got to take that into consideration. It may be, it may not. And so the way I would position businesses are we should be prepared for a bull run.

So we've got to make sure our systems can handle another 10, 20, 30x volume. But we should also be prepared financially for another 90% crash. We've got to have the stamina to last. So that's how we would run a business. That's how Binance is structured today. We can survive on both sides. For people, I would usually recommend similar situations. I mean, everybody is in a different situation.

So it's very hard to give advice. to individuals, but that's how I usually structure things. There's this famous quote from that one Brazilian race car driver. You can't overtake 15 cars in sunny weather, but you can when it's raining. The idea is that in a bear market, it's easier to progress. You can pass people. Now, and Binance is already like number one in global volume, and so there's not really anyone left to pass, but there's a lot left to grow the pie in the world of bear market and

crypto. And so I'm wondering, what's Binance's strategy in the bear market to pass 15 cars during rainy weather? Actually, in the bear market, if you can just drive normally and just don't flip it, if you just don't steer it and like, you know, go into the ditch. So in bare market, it's basically about survival, right? So about stability, survival, et cetera. In a rainy day, you don't drive as fast as you can. You want to make sure that you stay on the road.

So I think that's basically our strategy. It wasn't that, you know, fancy. When others were failing, we just stay steady. We step secure. There was a massive bank run on us. people withdraw like $14 billion within a week. There was basically no issues. Other than one bank didn't open for like six hours, that was a bank issue.

And then crypto, there was zero issues. We actually told our team, make sure there's zero issues, right? So that was the best proof that, you know, every coin is back to one to one. So we were tested. So this comes back to the Lindy effect, right? So the more you tested, the more secure it could be. And doing bear markets, there are more consolidations. We're still seeing that today, right?

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They very likely have another large adoption cycle. Is there something more than that? Like, we don't know. What is the biggest opportunity for crypto? How do we begin to recast a vision for the world of what this industry, what this technology can do in 2023? I think the question should be changed. It should be not singular. but multiple. So if we talk about internet, right, we wouldn't say what's the next big thing

that would drive internet adoption. There's so many different things. There's video conferencing, there's, you know, social media, there's Google as information, hive mind. There's a lot of different things going on. So in the early days, you may say, what's the next thing? I think for crypto, blockchain is beyond one single thing now. So 2017, there was ICOs, right? That was ERC20 tokens, basically. And even 2021, there's multiple things going on. The next one may be multiple things. It's no longer a single thing that drives adoption, I think. Because the industry is bigger, there's more players, so there's different sectors. We should be looking at what's the next big NFT thing? What's the next big defy thing? What's the next big new thing? Maybe social media

for crypto has not been invented yet. And there's some old use cases that have not taken off, but are starting to. Payments. Payments was one of the most obvious use case, but there wasn't stable coins, there wasn't lightning network. There wasn't real-time fast payments. And now there's faster blockchains. There's been many new developments. And then we also have technologies that allow users to pay in crypto and the merchants accept just fiat. The transaction happens in real time, like finance pay,

Binance card, a few other credit card solutions in the market. And we're seeing the global economy in turmoil. So there's a lot of uncertainty in traditional financial industries in the global economy. We're seeing like Africa, you know, now the smartphone penetration is getting there. And now they don't have banks. only less than 11% of people in Africa have banks. And they're just latching on directly onto blockchain. So all of those things can be potentials.

I don't know which one. I think we'll see multiple, I guess you call them unicorns or however you call them, multiple successful new startup, new concepts, and plus old ones together that will shape the industry. So I think we'll see a lot more successes. CZ, I feel like the crypto industry, though, coming out of 2021 and 2022, has this reputation, fair or not, of being just a whole bunch of meme coins and frauds, and scammers, right? Let's say you were invited to speak to the United Nations, the entire world, all of the nations of the world. And they said, CZ, give us the case for crypto. We've heard

all of the fud about crypto, heard all of the bad things. Tell us why crypto is actually good for the world. What would you say to a group like that, make the case for crypto? Actually, I did do a talk in United Nations in Geneva, 2018, 2019. But that was more about how to use blockchain to able transparent charity philanthropy efforts. But I think today, if I was going to do another talk, I would say financial inclusion, financial access. If the audience is United Nations, there are many nations, many, many people without financial access.

People in less developed countries take them days to pay a bill. They don't have access to loans. They don't have access to many, many of the financial tools that we in developed worlds are quite used to. So that would be the message I would stress. And blockchain is that right technology. There was this fund that just gives loans to women that need loans to run their businesses in Africa. They have the lowest default rate of any loan business on the planet.

So there's a real woman that want to do business, but they have no access to financial tools. And they run very simple businesses that do make money, and they're able to return the loans in a period of time. And this really helps their lives. So actually, the name of the fund is just on the tip of my tongue, but I can't recall it. So these are great things. and they can do this with blockchain, they can do this with much bigger scale using the new technologies. So all of this can be done. So if I was doing a talk like that, I'd probably research this a bit more financial inclusion and just stress use cases in those areas. There's always been a theme in crypto of

the exchange wars. This was a big theme. I remember in 2017, because there were so many more exchanges than there are now. And so the exchange wars was a very big topic of conversation. There always will be exchange wars, I'm assuming, but the players have consolidated. And it makes sense for the leading exchange with the most volume to just focus on staying on the road during the times of a rainy season in the crypto world. But I know that your competitors, both Cracken and Coinbase, who I think are number two and three in terms of volume, are probably looking at how can they pass 15 cars while it's raining? Coinbase is doing Coinbase International. They're also spinning up their own layer two, which starts to be looking like B&B chain, but for Coinbase. Cracking, aligned with the metaphor of race cars, is literally sponsoring F1, which is an international sport. they are trying to also fill the vacuum that FTX has left in the international arena.

And I'm wondering just like your highest level thoughts about the new international fight in the exchange wars, the crypto wars. What's your take here? I think the industries evolve from pure competition into actually, I think there's a lot of collaboration going on. Maybe not directly. I explain it. Okay. So historically, even today, there's always been more exchanges than projects. So every day, coin market cap gets 200 applications for exchange listings on their website.

Coin Market Cap list all the exchanges, and they're the highest volume website, and they send their volume to exchanges. So every day, there's more than 200 exchanges trying to register on Coin Market Cap, and there's way less than that new projects trying to get listed on Coin Market Cap. So just that's stats. And this has been for the last, however many years, you can go back, five, ten years. So there's always people wanting to do exchanges. And I think that's partially because exchange is a very transparent business.

You can calculate the revenues. Looking at the trading volume, you can estimate the revenues. They say, wow, look at the biggest exchange. and they make a lot of money, and people want to do it. And people think it's a very simple business, but exchanges are very difficult businesses to do. Security and customer support, regulatory stuff. There's so many different aspects.

Just because the business is more transparent, people want to do it. But if you look at traditional business, Google wakes 100 times more money than we do because they're the largest in the world. There's always a lot of competition between exchanges, getting users on, listing coins quickly, providing more products, etc.

I think Bynas have done a really good job making our products diversified and have a very complete suite of products and also the global coverage, to the point where our products are over complex. It's scary for a new user to like, you know, having so many numbers on the screen. But then more recently, in the bear market, there's consolidation. And then there's also regulatory pressure, challenges, etc. So Coinbase, Cracken, they've been in the US for a long time. And, you know, they deal with the US regulatory issues a lot more than we do. Binance does have a US arm, but, you know, it's much newer and is less vocal.

And so those guys are dealing with the U.S. regulatory environments, whereas we deal with the rest of the world. And now I believe Coinbase, Cracken, they're kind of moving more international to say, look, I couldn't comment on their motives. But it's good to have more competition. In this environment, it's better to have multiple exchanges or working with regulators together. If it's just one exchange dealing with regulators and the regulators will think, well, you're just one business. They will question whatever we say, the motives, et cetera. But it's multiple exchanges say we've got to regulate this industry this way. Here are the pros and cons. Sometimes they match. Sometimes they don't. And then the regulators get more and more

information from the industry. There are also many exchanges operate in very different ways. The large exchanges can survive on commission fees. And we actually survive pretty well. The smaller exchanges, they don't have the liquidity. They will tend to survive on other things, like listing fees. And they list every coin under the sun. They will try to negotiate. Some exchanges may involve in much crazy behavior instead of trading for profits on a principal trading. They trade for profits on their own. They could be running futures platforms that trade against their users, and the platform wouldn't know where the liquidation points are.

There are smaller futures platforms that were rumored to do that. And they're also geographic differences. There are exchanges that are based out of China, and they service much more wider user base than what the U.S. exchanges are able to service. They're also exchanges that based on specifically targeting Russia, for example. So all of those things happen. And it's actually good to have a diversified and distributed many different players, many different exchanges in the ecosystem. So I think all of those things are great. And many of them are pioneering new things, DFI wallets, other things.

So I think that's all of those things are great. So having more players is good. But there's also network effects in the industry. People gravitate towards what other people trust sometimes too. And liquidity gets more liquidity. So all of those things are in play. And we, as the largest player today, we get so much scrutiny. every regulator talks to us, every regulator put us under the microscope. And we tell them, look, we have the best KYC AML program, period, globally. And they may or may not trust it. Like we have auditors that audited and we provide an audit report. And we said, look, there are other small exchanges that don't even have a KYC program. They don't care, but they only care about us.

So having more exchanges that spread that load, then there's more education towards the regulators. There's more dialogue. Today, we're handling quite a big chunk of it. We would like to spread the load to other people as well. So there's pros and cons. But overall, though, it's healthier for the industry to have many, many exchanges. So a lot of exchanges, and obviously there's a lot of regulators around the world, and your number two on your kind of your 20-23 goals was compliance.

I want to ask you, give us kind of the global perspective. So you've talked to a lot of regulators, been in a lot of jurisdictions. What jurisdictions are actually doing this well with respect to good? crypto regulation, because I'm looking around, I feel like we haven't really seen it yet. Maybe you could point to like Mika or something like that. Maybe that's a start. What are the best practices that you're seeing? Who's doing this really well? I think Middle East and Europe, Mika's not kicked in yet, right? So I think those two regions are doing well. I think we've got to have realistic expectations. The first drafts of regulatory frameworks for crypto are generally going to be more restrictive.

They're going to be overly restrictive. We've seen that in general. We've seen that in general. Japan. Now, they had a fairly restrictive framework five years ago, six years ago. And now they are loosening up some of the stuff. And now Biners is going back into Japan. And Hong Kong is now opening up. But I think many places are opening up. And we also just got – we together with a local partner in Thailand just got a new license in Thailand. So many places are opening up. We're working very closely with France and Italy and Spain in Europe. And France is putting quite a lot of effort into Mika. We think that, you know, Mika is still restrictive, but it's not too bad. It's pretty good. The Middle East regions, Dubai,

Bahrain, Abu Dhabi, they're all revising the regulations over time and it's going. There are some negative pockets. While Hong Kong is positive, China just banked crypto completely, right? So there's no crypto payments. They're still doing that, huh? Like no change there? Not yet, not that we can see. So that's not good. US is a slightly different situation. There's a lot of lawsuits in the US. Americans like the lawsuits. It's regulation by enforcement. They won't use the guidelines for securities, for commodities, for whatever that was there 80 years ago. They want to use that. And we don't think that's the smartest approach, to be very frank. So it's better to make new

regulatory frameworks for new industries. So US was good for a while. It was very good banking support for crypto, but now that's gone. Different places are different. And it's important to have multiple players in multiple places trying to push this forward. But I do think, though, almost every smart leader will recognize this is a new technology for the future. and they will come around to it. CZ, it's not often that we get to have you here on bank lists. So once again, thank you for coming around. We asked our community if they had any questions for you.

And we've got three of them. Go for it. All right. So this first one actually comes from Justin Drake. Binance currently only has 10% of its validators connected to non-censoring relays. So he requests that Binance use more relays, especially non-censoring ones, so Binance Staked Heath can get a higher yield. He napkin math calculated that Binance Staked Eth is missing out on two.

million dollars of yield a month. And also, if Binance does accept and connect to more relays for its staking validators, Ethereum would become more censorship-resistant. I guess this isn't a question, but he requests, can we get 100% of Binance's stake teeth validators pointing to a non-censoring relay? I'll throw that one over to you. Okay. I understood the question much later in the question. Initially, I thought he was talking about B&B chain. I was like, I don't even know what relays are in B&B chain. I'm not that involved in the B&B ecosystem technically, on the technical level. he was talking about the Binance staking on Binance.com, how we use the funds to delegate to different nodes. Again, I don't know the details on top of my head. I will take his advice and check.

So Binance, we do offer an earned program and allow people to stake their coins on Binance.com and then we stake it for them on blockchain. We historically don't use that many nodes. We just pick one and then we stake it. And of course, that looks like that node is going to have a lot of coins staked on it. And for different coins, they have different implications on voting, all this other stuff. We got better. I did, but we're still not perfect. So I will ask the team to look. I know the rough concepts that may be issues, et cetera. I don't know the details of this eth or relays, etc. Yeah. I'm sure Justin Jake would be stoked to hear that. And if they pointed that, they're the

ether validator nodes to connect to the ultrasound.money relay, I'm sure he would be very, very happy. I'm sure the team managing this would know what that means. This next question actually addresses something you brought up earlier about crypto banks. This one actually comes from D-Gen Spartan. We've actually got a cast of characters asking questions here. Can you please buy a bank and make it crypto-friendly. We did look at that. He did say please. As anything, the reality is much more complex than the concept.

You buy one bank, you only works in one country, and you still have to deal with the bank regulators of that country. It doesn't mean that you buy a bank, you can do whatever you want to do. If the banking regulators say, look, you can't work with crypto, then they're going to take your license away if you do. So buying a bank doesn't prevent the regulators telling you, no, you can't touch crypto. So that's number one.

Number two is then banks usually work only in one country. You still need corresponding banks all over the world and most actually all of the corresponding banks are in the U.S. And the corresponding banks are no longer, the corresponding banks will tell your banks, look, if you touch crypto, we're not facilitating your international transactions. So that happens too. And then you have to get banking in every country, basically.

And banks are not cheap. Banks are very expensive for very little business, very little revenue, just because everybody thinks that banks are very profitable, their money printing machines, etc. So the amount of capital required is quite high, and the regulatory approval for buying a bank is the same or more as setting up a new bank, which are very onerous. So it's not just like, because you have money,

you can buy a whole lot of banks. And many banks don't have very strong business models. They're very risky businesses. They take your customer money. They loan it out, trying to make money. If they don't get it back, they declare bankruptcy. In many countries, the government will save them. But I don't like to run those kind of businesses.

I like to run businesses with no debt. It doesn't fit our model. So there's multiple, multiple reasons. We did look at it. We may make small investments in a few banks, just become minority investors, et cetera, so that hopefully that influences them to be more crypto-friendly.

It doesn't guarantee they will never cut crypto off. Yeah, it's tricky. It's not that simple. Maybe when we bring you on during next bull market, this same question will be asked, can you buy a country and make it crypto-friendly? But we'll save that one for later. Last question, this one comes from lydo.

Shout out to Lido. Have you ever considered making B&B chain a roll-up on Ethereum? Yes and no. Those topics came up. Those discussion come up. And I think there are also roll-ups on BNB-Chairn. We support many projects which are Rol-Uroup-2s, Ethereum, Bitcoin, or a BNBChair-Chang. We also support many native layer ones. I think the more options they are, the better. B&B is already a two native layer-one blockchains. So BNB is the native token on two different blockchains now.

And the third one is coming, Greenfield, which is a storage-focused blockchain. Similar to Falkocoin, they're trying to do a little bit better. or we'll see. Look, I don't limit their options. I don't say, look, you can only do one thing. We are only a participate in the B&B chain ecosystem. They do respect my voice. So if I say something really strongly, they probably will consider very carefully. But I don't try to do that. I try to let them develop. Where I view my and or even Bynast.com's contribution is mostly contribution. We fund projects. We give them money, mostly just grants, no strings attached, like not even equity, no tokens. We found the developers and let the developers figure out what they think

they want to build. That's the best way to build a decentralized ecosystem, I believe. And today, even though many people accuse, you know, by BMW chain may be too closely associated with Bynes.com, the centralized exchange, but the developers actually have a lot of leeway. I want to increase the funding support in that ecosystem, whereas we don't want to dictate direction. So let them develop themselves. And the progress may be slower. It may not go in one country as one person likes. So he likes us to be a, he like the whole B&B ecosystem to be a roll-up. I don't think that would happen. But there are multiple roll-up solutions in that ecosystem, and also for Ethereum, too. So in a decentralized system, some feedback is slow by the economics

eventually will take care of it. If you build a product nobody uses, then eventually you're going to have to stop because you're going to run out of money. But if you build products people use, then you're going to grow more. So it's much more organic, slower, but much healthier growth. So we just want to support that. Want to fit in one non-crypto-related community question. What do you think of Twitter post-Elon Musk. I think, again, we are a very minority investor in there. So I have not gotten any information that's not public. But overall, I think he's doing fine. He's doing great. He cut the workforce significantly, but the platform seems to be no issues. There's no downtime. The new feature

releases seems to have picked up. The pace of new features coming out is faster. Now there's edit buttons. There's blue ticks. There's a bunch of other things. And his personality is perfect for running Twitter, I think, because he doesn't care about other people's things. said he doesn't care, right? That's the exact words he said. And Twitter is so influential. Every party wants content of the other party being removed. He's getting pressure from every side, I think. But, you know, he doesn't care. So he's just running the neutral platform, which is good. Everybody has their subjective views, right? So his neutral will be his neutral, which may not be other people's neutral. But, you know, I think he's doing a great job. For anyone

that can handle that amount of pressure, he's probably the best choice. So, yeah, it's going well, I think. Well, CZ, it's been great to have you on today. check in. It's been a year. We hope to have you on again. Maybe in another year time. Maybe we'll be closer to the bull market. We might still be in the same market. But I want to bookend this episode with this question to you. So there's a lot of 2021, 2021, 2022 entrance here. They're just new to crypto. That's when they entered. That's their class. And they just feel like they've been through hell. Like they've been just absolutely punched in the gut. And can you blame them? I mean, if they're still here, I got to say, even from the vet's perspective, you guys have earned your

stripes. All right? You've made it this far. I want to ask you, though, CZ, what advice do you have for people who've felt wrecked by this recent bear market? What would you tell them? I think for anybody who feels wrecked, pressure, depressed, etc., reduce the size. So reduce the exposure to crypto. Fundamentally, if you feel that, if your investment performance affects emotions, then you probably invest it too much. Half it or reduced by a third or fifth. And if you still feel that way, do it again, until you no longer feel like that. You feel like, okay, this is meaningful money. I want to make money on it. But if it drops by 10, 20, 50%, or even 100%, I'm still fine. That's the right size. I think that sizing is very, very important.

So instead of listening to people on Twitter, oh, it's going to go up, it's going to go down, people don't tell what percentage of their assets they're putting into that trade. So that's super important. And then the risk management we talked about earlier, don't put everything in one basket, don't put everything in one trade, don't put everything in one coin, all of that matters. But fundamentally, if people are feeling stressed, they invest it too much, reduce the size, and then try again. Also, if you want to start, start with a small size. Start with $100, with $1,000, whatever is comfortable to you. If you lose it, you know, it's gone and you should be fine with it. If you make money out of it, then maybe double the size, maybe slowly increase

that over time. So don't go all in. I think that's very much risk management, but very specifically sizing issue. If you're stressed out about this investment and it's going to wreck your life, it's going to change your lifestyle, you're not going to be able to pay rent, then the investment size is wrong. If you're stressed size down, that's what CZ says. And you know, I can't help notice. This was spoken like somebody who's had some personal experience with this. Like, have you learned these lessons the hard way, CZ, like the rest of us? Yes, I learned this lesson the hard way years ago. I worked in Bloomberg and then after Bloomberg, so 2005, I tried some trading on some stocks, everything I trade, it just feels like anything I touch, it goes down.

Anytime I sell, it goes up. And it was just so hard. And then even when I first got into crypto in 2013-ish, I tried trading crypto a little bit, and then we're like, okay, no, just buy and hold. Just buy and hold. So I'm not a trader. 90-something percent of people are not traders. And that's nothing wrong with that.

Trading takes a very special skill, and the professionals are honed over multiple decades per person. So they learned this skill over many years. And they have many special tools. For most people, trading is difficult. For most people, use it as a tool. Buy, hold it, use it for payments, commerce, etc. Trading is not for everyone.

For most people, I always say, don't trade. But the emotional aspect of it, but I'm also in this industry, right? So I see a lot of traders. I see a lot of guys who do well, who don't do well. And the emotional aspect is very, very intense. If you can't handle that emotion, then you've got to reduce the size. There you go. Good advice to end with.

And of course, if you're not a good trader, you can do what CZ did and start in exchange. for traders. That's the best way to do it. CZ, it's been a pleasure. Thank you so much for coming on bankless and chatting with us today. Thank you, Ryan. Thank you, David. It's a pleasure talking to you guys. I hope to see you guys next year. See soon. Cheers. Yes, risk and disclaimers, Bankless Nation, got to let you know. Of course, none of this was financial advice. Never is on bankless. Crypto is risky. Bitcoin, Eith. You know the assets. All of these things are risky. You could definitely lose what you put in. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.

You know,