AMA with CZ | May 8, 2019
On the third live ask-me-anything session with Binance CEO CZ (Changpeng Zhao), he responded to questions about a wide variety of topics regarding Binance’s operations. Watch the full video session here.
Highlights:
- CZ confirms an upcoming margin trading feature for Binance.
- CZ talks about the timeline for the next Binance Launchpad token sale project.
- CZ reveals plans for a possible future by Binance.
- Plus, the latest updates from CZ on the security incident.
- Binance will take care of affected accounts from the incident through the SAFU fund and ensure the integrity of its networks and platforms before resuming its services.
- UPDATE: Following the AMA, CZ confirmed that Binance will not pursue the re-org approach on the Bitcoin network to resolve the matter.
(https://twitter.com/cz_binance/status/1125996194734399488)
Read the full AMA text below. (This AMA has been edited and condensed for clarity.)
Hello guys, this is CZ from Binance.
As you know, we had a security incident yesterday. I think the blog post pretty much explains it, and it's a very advanced persistent hacking effort. They use both external and internal methods. It's probably the most advanced [method] and the hackers are very patient. So they don't move as soon as they have one account.
So it's a bit unfortunate and our security measures were not able to stop that withdrawal, which cost us 7,000 BTC, around US$40 million. But luckily, we do have the SAFU safety fund set up to cover [those costs]. It is a very unfortunate incident, but it is what it is.
Right now our main effort is to focus on rebuilding and recovering the system. We need to make sure that we completely eradicate any trace of the hackers across all of our data just in case. It is a very tedious process. So, unfortunately, before we finish that [process], we will not be able to release withdrawals or accept deposits. We want to make sure everything is safe. Because we have a very large set of data and a very large system architecture, we do estimate that it will take about a week.
The Binance team is encouraging everyone to change the API keys if you trade with API. We highly recommend people to change their 2FA - to reset, disable and re-enable it. We advise people to take those security measures as a precaution.
A number of people have pledged very strong support, including Justin Sun, Coinbase, QKC, and a number of other exchanges and projects in our space. The current situation is, we do have the safety funds to cover the US$40 million, so we are completely OK there.
It does hurt us, but we are able to cover that. We have been working with other exchanges to block deposits from those hacked addresses.
There have been questions on whether we want to issue a rollback on the Bitcoin network. Because right now, the 7,000 BTC, if we distribute that to miners, it will be far higher than what they got paid for in the last few blocks. But there are concerns that if we do a rollback on the Bitcoin Network at that scale, [there will be] some negative consequences in terms of destroying credibility for Bitcoin. So the team is still deciding on that, and we're running through the numbers and checking everything.
We will try to maintain very high transparency, and we also enlisted community help. So the [Bitcoin network] reorg is an idea that came from the community, I actually did not know that we could do that, but there are serious consequences, so we will take that [suggestion] very cautiously.
[UPDATE: Following the AMA, CZ confirmed that Binance will not pursue the re-org approach to resolve the matter. See more: https://twitter.com/cz_binance/status/1125996194734399488]
I beg people to forgive us in terms of not allowing withdrawal for the next week or so. We do want to make sure that we are completely secure and we solve everything before we actually turn things back on, especially the deposit and withdrawal part. Security is our main concern, and we are working with and getting help from a number of partners.
So that's as much information as I have on the hacking. And as more information becomes available, I will share them proactively. I will remain active on Twitter and all of our accounts will be active.
People ask me how I feel. To be honest, I don't feel that well, but not in the sense that I feel sick or anything. It's just that okay, it's not a great day. But at the same time, we have dealt with different types of pressure at different points [before].
All of our efforts are focused on rebuilding and making sure everything is secure, and then we will turn on the withdraw and deposit [functions] as soon as possible. That will take some time, so
Please bear with us. There will be a few system upgrades. We will do those that during this week and there may be small periods of time where we have to hold trading for a couple of hours here and there for some of the core system upgrades because we actually do need to make some changes in the system.
But other than that, the team is very strong. The team's mentally in very good condition, even though we're under pressure and we're dealing with a setback but I think myself and the team, we all have dealt with higher pressure situations before and we are okay. Binance will stay, we will stay, and we’ll probably get even stronger after this, and we will continue on.
I apologize for the interruption of service at this instant. We do appreciate your support during this time, and if there's anything that you would wish to communicate to us, I think social media is probably the quickest way. I am active on Twitter, and you can reach me there.
So business will continue, so far, many people did try to help us and donate money to us. Our response is the same, we are not short on the funds right now. If people want to donate, they should consider donating to Binance Charity Foundation, and there are different charity programs on there that I've personally pledged to donate to, including the CSW incident. I will continue to donate, so none of our efforts will change. We will continue our core business.
So let me go to the comments on Twitter, so that I can address some of the questions that I was previously planning to address under better circumstances. Thank you for all your support.
Is BNB Chain changing from BFT consensus to POS in the near future?
Are smart contracts possible [for BNB Chain?]
I think [the change to POS] is something that's probably for long-term in the future. We want to get the BFT for BNB Chain to work on a large extent first. Also, smart contracts are probably mid- to long-term. The current focus on BNB Chain is to help people to migrate to BNB Chain and to make it popular.
On several questions about Binance’s future plans:
We can't really predict the future too well, and we can't really forecast our detailed plans too much ahead of time, and things change. While we're working on a lot of things, we can't really disclose everything that we were working on so anything that has to do with the future plans we have is kind of hard to discuss or to confirm.
On several questions about coins not being listed/delisted on Binance:
That's something that we can't discuss publicly. We do not discuss coins, projects, other exchanges, etc. So for any listing and not-listing request, it’s better to talk to the project teams, ask them to submit the Binance listing application form. And if you guys want to know, I have a detailed [blog on] listing tips.
On several questions regarding margin trading, stablecoins, and the next Binance Launchpad project:
We are working to arrange the next Launchpad project. We have actually gone through great lengths to select the right projects for Launchpad, but we have a few candidates already and we are finalizing the candidates for the next Launchpad. Hopefully, that will happen in May.
This time, we will try to shorten the BNB holding period, but [the holding amount for Launchpad eligibility] will probably still be 50 BNB. I think the lottery system worked quite well last time. A large number of people got tokens, so there were fewer complaints on social media. That seems to work, so we'll probably continue [the lottery system]. The exact project name [for the next Launchpad sale] will be announced a little bit later, but now everything's kind of shifted further out by a week. We’ll use the next week to focus on what we can do to resolve this issue and bring Binance.com back fully live as soon as possible.
There have been internal discussions about stablecoins, whether we want to offer our own stablecoin, and there are a few different proposals and plans. Likely, something may happen there. But again, plans change very quickly, so we can't really set things in stone or commit to stuff like that.
I think most people have already seen the margin flags edit in our API. Yes, we are working on a margin [trading] system that's rolling out actually very, very soon. We are going to first roll out [this system] to a few of our key clients, the large traders, so that they can help us test. They also have an agreement with us that, if there's a bug or something else [in the system], they will work closely with us [to fix those].
We will do a gradual rollout of the margin platform. It is actually being beta-tested by our internal team. The features and the code are basically done. We're just testing it out for any potential bugs.
On the fiat side, we launched Binance Singapore last month. If you guys follow me on Twitter, you will see that we have had a lot of interaction with Argentina. So that's most likely where the next fiat channel [for Binance] will turn on.
Your hair is grey now?
My hair has always been grey, but it's just slightly grey. I'm actually close a very bright window, which makes the grey much more apparent. Also, that may be because I didn't sleep at all last night. So I've been up for 29 hours. So that helps with the grey hair a little bit as well.
Are any of this on Binance in the near future: reward and staking, crypto cards, crypto bank?
We are working with different partners on offering credit cards or being able to spend crypto directly from your credit card. I don't know all the exact progress yet, because things happen more or less in a decentralized manner in our organization. On the crypto bank question, we are not really looking into the banking business.
Will Binance ever use USD as a base currency? I know it's your business model not to, but it is inconvenient to exchange in Binance and transfer to another exchange to cash out.
Binance.com is unlikely to offer USD direct trading, but we do have a number of fiat gateways in the works. Potentially, some of them will be able to support USD, while some of the payment channels, including paying with a credit card, are already available.
Will you open up opportunities to be Binance-validated. Is there is a possibility or option to stake coins for those who who can be validated?
That's related to Binance DEX. On the BNB Chain, that's a little bit early. We have a very closed network of validators running out there. We do not disclose their identities for privacy reasons. And right now we just want to make sure that the network works. To be honest, I have not thought too much about the governance model, staking, and how to become a validator in the past once BNB Chain gets adoption, that's probably the next step, so that will come soon.
Do Philippine projects have a chance to get listed on Binance exchange?
At Binance exchange, we don't differentiate between locations or where the project is.
We view the world as one, so every project has the same chance of getting listed on Binance.com.
Speaking of which, going forward, we will increasingly consider at higher priority projects that have already issued tokens on BNB Chain. So there will be some preference there. That would be an easier way to get listed.
Will there ever be a drawing tool on the Binance app? (e.g. Horizontal lines, etc.)
I hope there will be, but I don't know exactly when that will be. So in terms of development priorities, OCO (order-cancels-order feature) is coming, we've been working on that for quite a while. But again, that's probably delayed for about a week now.
Will we be able to change the indicator settings at some point in the future?
We hope to have that as well, but I think right now there are no immediate projects working on that right now.
When we sell crypto into USDT, which version are we getting, Omni, Ethereum, or Tron?
Right now, on USDT on Binance.com, we accept deposits for both Omni and Ethereum ERC20 versions, but the withdrawal is only available in Omni right now. As people deposit more ERC20 version and people withdraw more Omni version, there will be a point when the two balances flip. Once the ERC20 version reaches more than 50% compared to the Omni version, we will probably switch deposits and withdrawals into ERC20 version. And then exchange all the Omni version tokens into ERC20. I know Tron has issued their version as well. We are looking to see the possibility of supporting that, it's not that we're against it. It's just that we haven't had time to do all the development. So that's that.
Will Binance DEX and BNB Chain be open-source?
So eventually we will be open-sourcing BNB Chain and Binance DEX, but right now I think it’s more important to get some traction on the platform. To be honest, if we open-source right now, all the other exchanges just going to release a similar version of that chain. That is a consideration. We want to get some adoption first before we fully open source it, but eventually, we will open source everything.
When do you aim to have a cross-chain bridge (for BNB Chain)?
We want BNB Chain to get some momentum first, so we want to get a number of real projects with real market caps to issue on BNB Chain first, and then we’ll consider cross chain bridging. Initially, with the existing large-cap tokens, we will probably do pegging through Binance.com. It's not ideal, but that's the fastest thing to do.
Cosmos is trying to do the cross-chain bridging part. But right now they don't have a lot of projects live. They don't have a lot of blockchains live on Cosmos. So once they have a lot more projects, it should be quite technically feasible for us to connect with Cosmos. So we'll see how that works out.
How much does Binance charge to host IEOs on average?
Every project is different. If you do a popular sale on Binance Launchpad, it depends on the project, how many users they have, how mature the product is, what kind of services they need from us, how much advisory consulting they need from us. So that's that depends on every project. We don't have a set structure.
SegWit?
SegWit is on the road map, but it's kind of a lower priority because Bitcoin transactions do work right now, especially with Lightning Network, which have taken the load of Bitcoin main network. We want to strive to have the safest deposits and withdrawals, so [SegWit] is not a super high priority for us we have got so much stuff that's going on.
What will go on by the end of 2019 for BNB Chain and Binance DEX?
We just want to increase adoption, to be honest. So we don't really have a super-grand goal where we have to hit our number, etc.
Which countries have you visited? Or haven’t visited but are on top of your visit list?
I don't really have a travel schedule or a travel wish list. I just travel whenever the opportunity presents itself. I don't try to go to a country just for touring purposes. I have a feeling that I will travel to many countries just because I have to, so I will continue to do that.
What's your biggest secret?
I don't really have a lot. We're trying to be as transparent as possible, to the extent possible. So that's not a whole lot of Secret Sauce going on here. We just focus on the issues and whenever an issue presents itself, we try to resolve it. So now we have a pretty big issue to deal with and we just got to deal with it the best way we can.
Has the Binance DEX launch matched your expectations so far? What are the big learnings so far, or is it still too early?
DEX has exceeded my expectations, to be honest. When we first said we were going to develop DEX, that's about a year ago. I thought there would be an incremental improvement on the current DEX, but I didn't expect it to be so fast and the UI experience to be so smooth. So I think from a product perspective, it has exceeded my expectations. Right now I think the tech team collectively has done a fantastic job. Right now, it's really up to us to push it out together, with initial adoption, then critical mass, and then after that it should just basically spread on its own. So far, it's exceeded my expectations.
What are the biggest considerations for projects to choose BEP2 token over other choices? Any early learnings?
That's a good question. There's a lot of benefits on choosing BEP2. On the technical side, it is much faster to send and receive tokens. It is much cheaper as well and one block confirmation is final. This is instant finality. That's all technical merits. On the other side, for the earlier projects that migrate to BNB Chain, Binance.com will help push them and we will do joint marketing programs. They will get visibility. They will get a lot of exposure.
Right now it's quite easy to get listed on Binance DEX. As more projects come on to the Chain, the review process done by the community, it's done by a thread. Any voting feature will be manipulated, so we didn’t like that. The goal is to have at least 10 times more coins on the Binance DEX than on Binance.com, so that we can select from Binance DEX the more popular coins on DEX and we will list them on Binance.com. That's kind of the goal. There's a lot of incentives on that front.
How has the progress been on fiat exchanges launched in Jersey, Uganda, and Singapore?
On the fiat exchanges, we’ve been very careful. We follow the local regulatory requirements to the letter. We've been very careful not to scale them too aggressively. We don't want to step on anybody's toes or step on any land mines, etc. So we’re being very careful with expanding that.
We want each regulator to be comfortable with what we're doing. For example, in Jersey, we have multiple meetings with the regulators and they are very comfortable with the way we're doing things right now. We want to be the most compliant fiat exchanges around the world and we’ve adopted a very similar approach in Singapore as well. Right now there's only one pair on Singapore, and we are confirming and reconfirming with the regulatory authorities that we are doing everything properly. Eventually it will scale, but we're taking a very careful and compliant approach.
Binance has invested in so many early project teams, and also helped to raise funds on Launchpad. Which segments are you seeing early signs of success in real-world usable applications/blockchains? What part of the ecosystem are you most excited about?
I don't really have a crystal ball. I can't really predict the future that much, but we do try to invest in infrastructure projects – anything that can help build the ecosystem. In terms of applications, I think there are a few very obvious ones. There’s payments, e-commerce, etc. There's fundraising which is already probably the biggest killer app right now.
I see a number of really interesting games coming out of the DApps space, because games can be quite simple and especially games today, most people play them on the mobile – it’s a very short period of attention. I think gaming probably has a lot of potential.
Between institution and Retail adoption, which ones are you most excited about? How much is Binance focusing on institutional clients?
We have rolled out a number of key features for institutional clients, but I think right now, if you look at our user base, the majority of them is retail. Again, we don't judge, we don't decide. We just make sure we offer choices to people. For example, if large institutions want to come in and they require certain features, we would develop it for them. So that's that.
Final Remarks
I think the time is pretty tight. I think a number of people who joined late are still wondering about the hack or the security incident. Let me recap a bit very quickly on top of my head.
The hacker was able to control a large number of user accounts. Some of them could have a lot of funds. They were able to structure a withdrawal request in a sense where it did not violate any of our existing security checks.
And so that transaction went out, and that's the transaction we posted in the announcement. 7,000 BTC. It is a large sum of money. It's equivalent to about US$40 million right now.
But luckily, we do have the SAFU fund that will be able to cover it, and we will cover all the funds ourselves from the SAFU fund. All the users’ funds are okay.
We do need about a week. We need to go through a very detailed security review process to make sure that the system is completely clean. It will take more or less a week or so based on feedback from my team so far. We want to make sure everything is secure before we turn on deposits or withdrawals again. You can check on the blockchain, that's the only transaction that's suspicious. Our cold wallet is intact.
The only wallet that’s impacted is the Bitcoin hot wallet. All the other wallets are fine. The funds are secure. We did lose a bit of funds, but we are able to handle that.
We're just focused on building everything back up. That's the highest priority for the next week or so.
Regarding the rollback, I do see a lot of people objecting. I think there are some ethical and reputational considerations for a Bitcoin blockchain rollback. It’s interesting, that's a tech solution presented to us by the community including some of the core members of the Bitcoin development team. I actually didn't know that before, it actually never occurred to me, but we will consider it very, very carefully given the feedback we are receiving.
Other than that, I think that's all the time for today.
Thank you for your support, thank you for your understanding and being patient in waiting for at least a few days to a week or so for deposits and withdrawals to be re-opened. Again, we apologize for this and we hope that after this incident we will actually become more secure even though we paid a hefty price.
Thank you so much and please know how much we do appreciate your support. I will be active on Twitter. If you need to reach me, I will be extra active on Twitter for the next little while. Thank you again.
- CZ, Binance CEO
https://twitter.com/cz_binance
Watch the full video AMA here: https://www.youtube.com/watch?v=CDm-m1FNl1w
Join the Binance Community Telegram group: https://t.me/binanceexchange
Updated on March 28, 2023.