Highlights from CZ’s Latest Clubhouse AMAs
Binance CEO Changpeng Zhao (CZ) recently hosted AMA sessions on Clubhouse to address several topics about Binance, cryptocurrencies, blockchains, regulations, and more. Here are some of his statements from the sessions.
Binance Pay and Crypto Adoption
A recent development in the Binance ecosystem that CZ addressed during his AMAs is the launch of Binance Pay, a contactless, borderless, and secure user-to-user cryptocurrency payment feature on the Binance App.
In response to a question about boosting crypto adoption, CZ cited that Binance Pay is the latest in Binance’s attempts to further drive payments as a viable crypto use case. “Transferring of money should be the most obvious use case for crypto. And so far, no one in crypto has really cracked it, to be honest,” he said.
In Binance Pay’s case, CZ is hoping that some of the best practices in the fintech world can apply to crypto as well. He noted, “We're learning from some of the most successful electronic wallets in Asia, like WeChat and Alipay. They all have a very simple user interface. When I want to receive a payment, these apps show a QR code, and my friend can use the same app to scan that QR code and move money to me.”
“We borrowed that concept and applied that to Binance. So, right now, with Binance, you can just scan each other’s apps and pay. And more than that, you can pay with any cryptocurrency that you want,” CZ said, adding that the team is working on integrating Binance Pay to online and offline merchants.
Meanwhile, CZ spoke further on the challenges that face crypto adoption. He said that while DeFi and NFTs are interesting frontiers, the crypto industry has yet to unlock the problem of making it easy for people to use crypto. He cited several technical roadblocks, like the difficulty of securing private keys, encrypting backups, setting crypto inheritance plans. “There are a lot of issues that we haven't solved today. For the average person, it’s just very difficult for them to use crypto. I think that's the key problem that we need to solve,” CZ noted.
CZ acknowledged that while Binance does not comment publicly on the specific communications, the organization maintains “...a very collaborative posture with all regulators and agencies around the world. We actually have active dialogues with most of the law enforcement agencies.”
“Binance has probably the strongest KYC-AML program in the industry. We use no less than a dozen third-party KYC-AML tools and vendors. We also do intelligent, IP-based geo-fencing, including some of the common VPNs people use. So even if people use a VPN, we have technologies to block them. And on top of that, we actually do a few other analysis [procedures] that even regulators are not requiring.”
Centralization vs Decentralization
Decentralization is one of the recurring topics in the AMA sessions and crypto in general. CZ, who wrote a blog on the topic years ago, further clarified his stance on the matter, given the recent prominence of Binance Smart Chain (BSC). “As with most things in this world, I view decentralization as a gradient scale, not a binary 1 or 0. There are many different dimensions of decentralization, and many degrees of decentralization for each dimension,” CZ pointed out, adding that there are several dimensions of decentralization, such as:
Founder, team, foundation influence
Open source and amount of community contributions
Consensus algo, mining concentration, or number of nodes
Technical design, ability to blacklist, whitelist, freezing of funds, or interventions
And many other factors
“Take Bitcoin for example. It is by far the most decentralized cryptocurrency in existence, no question about it. It has no active founder, no foundation, no marketing department, etc. The community is distributed, to the point where disagreements are settled via forks. But if you look at Bitcoin mining pools, the top 3 mining pools control over 51% of the hash power,” CZ noted about Bitcoin. He clarified that it’s not necessarily a problem and that it’s further proof that there are different degrees of decentralization, even for Bitcoin.
CZ also pointed out that other blockchain problems perceived as more decentralized have a certain degree of centralization. He pointed out that the absence of Dogecoin’s founder in the development of that blockchain is good for decentralization, but he added that “Its largest address holds 27% of the total supply, and the top 20 addresses hold more than 50+% of the total supply.” In Ethereum’s case, he noted that founder Vitalik Buterin is heavily involved on the tech side, and his potential influence in the blockchain’s direction is one type of centralization.
Blockchain Performance and Decentralization
In response to a question about tradeoffs between blockchain performance and decentralization, CZ noted that the “technology may be lagging a bit” in comparison to how crazy the cryptocurrency industry has grown. He added, “It’s possible that not every type of application is suited for smart contracts, as others will need native blockchains. I originally thought trading will be one of those kinds of applications [that will need a native chain], but someone invented DeFi, so I didn’t predict that.”
CZ shared that BSC can handle 300-500 transactions per second, around 20x to 40x faster than Ethereum, and BSC transactions currently outnumber those on Ethereum at a ratio of 2:1. Nonetheless, he pointed out that there’s still a lot of room to grow, and that “blockchain performance should at least double every year, at least according to Moore’s Law.”
(Moore’s Law is a popular tech observation stating that we can expect the speed and capability of our computers to increase every couple of years, while paying less for them.)
Binance Smart Chain (BSC)
The Binance-branded blockchain, which has increased in popularity in recent weeks, is also a hot topic during the AMAs. “I do agree BSC is probably less decentralized than ETH still. I (CZ) am often wrongly associated as its founder, mainly due to the ‘Binance’ in its name, and the fact that I shill BSC constantly. I didn’t create BSC. It was started as a community project. Binance did provide initial funding and branding support. It was presented to me, and I just said ‘yes.’ I didn’t even read the whitepaper until it was published on Twitter. Compared to Vitalik with ETH, I believe I am much less involved with the growth direction of it, technical stuff, and everything in general. In that sense, I would almost argue that BSC is more decentralized” in this regard.
The Binance CEO noted that BSC is designed to run with 21 validators, mainly for performance reasons. He then debunked misconceptions about the nodes and the perceived influence of Binance on them. “These 21 nodes are re-elected every 24 hours, based on how much BNB is staked with them. For example, if you have a high number of BNB yourself or can get a high number of BNB holders to delegate to your node, you can become one of these 21 validators within the next 24 hours. It is community-driven,” he clarified.
CZ added, “Does Binance or I have influence in the BSC community? Yes, we do. I am truly honored that many of the BSC community members do have a certain level of respect for our suggestions. Even then, I am not sure how much we could influence, and we don’t intend to use our influence much.”
BSC and Ethereum
While BSC has emerged as a viable alternative to Ethereum due to its faster transaction speeds and lower fees, CZ graciously acknowledged that BSC owes a lot of its success to the innovations done on the Ethereum blockchain.
“We’re more than happy to fund development [in Ethereum]. We’re honored to work with Gitcoin in supporting that ecosystem. This is something that probably most of the ETH community don’t know about, but we do want to encourage growth in multiple blockchains in the ecosystem,” CZ said, adding that Binance has a track record for supporting multiple blockchain projects within and outside of BSC, including a $100 million accelerator fund for BSC projects, as well as sponsorship for ETH hackathons, a $5 million fund for Polkadot projects, and similar efforts that have not been made public yet.
“I do tease the Ethereum guys from time to time [due to] their high fees, but to be honest, in my mind, it’s just for fun and for PR. Guys get riled up and they actually help us spread the message that BSC is much cheaper [in terms of fees],” CZ said regarding his previous tweets about Ethereum. “To be very frank, I fully support ETH development efforts. If we can donate more. I like to tease the [maximalists], because I’m not one, not even for BNB. As an exchange operator, we actually want a lot more coins to be successful. My vision of the world is that there will be thousands of blockchains, millions of tokens, and more exchange activity.”
The Binance CEO then doubled down on his commitment to support multiple blockchains. “We have a pretty open mindset. Right now we’re so early in the industry, and BSC doesn’t have to win, though of course, we promote BSC a lot more than the other [blockchains]. If it doesn’t win, we can try again, there’s an infinite number of times we can try in the future, so there are more opportunities. We want to grow the industry.”
BSC and NFTs
Non-fungible tokens (NFTs) have increased in popularity in recent weeks, highlighted by a recent $69 million auction for an art piece by crypto artist Beeple. Hence, a couple of questions about NFTs emerged during the AMA, which CZ responded to.
CZ said that while he’s not much of an art person himself, he supports the growth of NFTs and thinks that they can spur a new Renaissance of sorts for arts, because of the way it empowers artists from a financial standpoint. He then noted that today’s NFT boom can do to artists what ICOs did for promising entrepreneurs in 2017.
“When artists can better monetize that work, they basically are going to be paid better, and they can do more good work. So I think we'll see a lot more art, and the art industry is going to benefit from crypto,” CZ added.
In response to a question about the role of BSC in the rise of NFTs, CZ noted that there are already some crypto projects specializing in NFTs that have transferred to BSC, adding, “There's quite a lot of NFT activity going on BSC now.”
More Insights from CZ
Aside from BSC, CZ’s Clubhouse AMA also tackled a variety of topics, like Binance Card, customer support, regulations, freezing hacked funds, Coinbase’s IPO, women in blockchain, what Bitcoin stands for, and even CZ’s health.
1. Binance Card benefits: “We want to provide the lowest fees and the highest benefits. Given that BNB has gone up 10x since the launch of the card, it makes sense to readjust the tiers of rewards. This is something that I can relay to Joselito [Mendoza, Head of Swipe], and the team will decide on that.”
2. Binance customer support: “You’ll chat first with the bot, which helps sort out things and classify what problem you have. The bot is able to cover 48% of the cases and solve 80% of those covered cases. We also improve products and aim to lessen the need for people to ask for customer support. With that said, CS is one of the top two issues I focus on in Binance. I run a daily call on CS issues. This is not an easy problem to solve, but we’re working on it.”
3. Regulations in the age of crypto and DeFi: “Regulations can help protect people from the risks of crypto and DeFi, but they can also exclude people from opportunities. We need to design rules to protect small users while encouraging innovations.”
4. Freezing funds hacked from BSC projects: “BSC doesn’t have the ability to freeze funds, but Binance has been active in helping victims of hackers. If hackers move their funds to Binance, and we react fast enough and get sufficient proof from law enforcement (for verification purposes), we can help identify, monitor, and freeze funds, as long as it’s within the Binance platform.”
5. Coinbase $100 billion pre-IPO valuation: “Right now, Binance is growing at a healthy rate, and the advantages that we have with staying private outweigh the benefits of an IPO. We can’t really compare two companies by a single metric, because there are so many factors. What I do know is that a higher valuation for Coinbase is better for the industry, because it boosts the value of exchanges in the industry.
6. Women in blockchain: “About 70-80% of our respondents in our recent user surveys are male. I really wish that’s not the case, but I’m encouraged that we see more female KOLs in the community.”
7. What Bitcoin stands for: “In my view, crypto is not against anything. Bitcoin is just a protocol, it doesn’t care. It’s just a superior technology, a superior form of money. We have this tool, we don’t have to use it against something. We just want to provide better tools for people to have freedom of money.”
8. Health and maintaining high energy: “It’s important for me to work on something I’m passionate about. It’s the best way to spend my life, and that solves most of the energy problems. I’m lucky in this regard, that I get to spend all my time focusing on what’s the most meaningful thing for me to do. I’ve recently gone through two microsurgeries last year for my back, and they went well. I still have a healthy lifestyle, I’m not stressed out, and things are pretty good.”