Binance in 2021: Innovating in an Increasingly Decentralized World
In this personal letter addressed to our community, Binance CEO CZ shares his reflections looking back at 2020 and our goals for the new year, including trends and developments that may define the industry, and areas of focus for 2021. Advancing the industry’s collective mission to further the freedom of money around the world, we aim to ensure the sustainable development and continued growth of the global crypto ecosystem.
In my New Year message last year, I emphasized building foundations for the growth of the global crypto ecosystem for generations to come. In 2020, we worked hard to bring new products, improvements and developments to key ecosystem initiatives. I feel like we are still working on the basement level of a new building, and haven’t even started to build the floors above ground yet. There is still much more work to be done.
The Crypto World After COVID-19
The COVID-19 pandemic has changed the way we live, impacting the well-being of countless individuals and damaging the global economy.
In 2020, worldwide markets faced unprecedented volatility and instability in already-vulnerable economies and countries. With global economic uncertainties, inflation, and traditional assets suffering due to the macroeconomic shock caused by the pandemic, people around the world have increasingly looked to bitcoin and crypto as an alternative asset. As a result, the crypto market has grown rapidly, setting the stage for mainstream audiences to consider crypto adoption for the first time.
This past year, interest in crypto continued to rise amongst traditional investors, and corporate onboarding numbers continued to increase. In 2020, the number of institutional clients we onboarded was nearly 70% higher than in 2019, while new institutional client applications increased 35% quarter-over-quarter, signalling growing institutional interest in crypto.
The pandemic also led to drastic macroeconomic changes, such as Quantitative Easing (QE) in almost all countries, which also drives people to crypto. As the new QE money flows into the global market, I think much of it will be converted into one form of cryptocurrency or another.
This year, Binance reached an all-time high 24-hour spot trading volume of $15 billion, while the average daily spot trading volume increased by 36% to $3.88 billion. In addition, users turned to the crypto futures market in search of hedging and liquidity opportunities. Overall, Binance Futures has ascended to become the top crypto futures exchange in the world, with top ranks in trading volumes for Bitcoin and several other cryptocurrencies.
Meanwhile, products we added to our portfolio in 2020 have a growing audience with deep liquidity on offer. Binance Pool, our mining pool product that debuted 9 months ago, offers users some of the lowest fees available. Recently, it became the #2 mining pool by hashrate. Binance Earn, which allows users to earn interest on their crypto assets, now holds over $2.9 billion in crypto assets.
While the longer-term economic impacts of COVID are unknown, as we’re still in the midst of major economic disruptions and historic volatility, I believe bitcoin/crypto will continue to rise and be at the forefront of positive change.
The Future of the Crypto World: Compliance
Our industry is very new and innovative, so inherently, there are more regulations and guidelines needed and under development; similar to how Google and Microsoft persevered during the .com boom. Also, cryptocurrencies cater to a global audience, and because this is such a cutting-edge sector, guidelines in most jurisdictions are still evolving. We believe that ultimately, everyone wants regulation that promotes innovation and an open market. I am optimistic about the positive progress of regulatory frameworks and guidelines around the world, and I believe we will continue to see more clarity on cryptocurrency regulations in the next 12 months.
Compliance is a journey, not a destination – especially in new tech sectors. Responsible players are always working to meet new and changing standards and improve existing practices. We take our compliance standards very seriously, and will continue to heavily invest in this complex and ever-changing environment. Over the next twelve months, I think the regulatory environment will trend towards increasing clarity.
Our goal is to continue adhering to local rules and regulations, which allow us to protect and provide the best services to our users, as well as bring greater adoption. In addition to the many regtech solutions we invest in and compliance partners we work with, we continue working closely with regulators, complying in the places where we operate as a global decentralized organization, and helping to positively influence regulations that will benefit our industry. We hope to work with more local governments and policymakers in the new year and encourage them to reach out to us to work together.
Innovation: Decentralized Finance (DeFi) and BNB Smart Chain
This year, we saw the rise of decentralized finance (DeFi) as a compelling use of blockchain technology to spread the freedom of money. Through DeFi, people are given new ways to participate in crypto-fueled financial products and benefit from their gains. The emergence of DeFi also drove more traffic to blockchain networks, and this brings a new set of challenges to developers, like higher network fees and congestion.
To help solve this problem for the crypto community, we worked with the BNB Chain community to launch BNB Smart Chain (BSC) as our contribution to driving more innovation to decentralized solutions such as DeFi and other blockchain-related solutions. BSC offers a high-performance and low-fee blockchain network that’s compatible with the Ethereum Virtual Machine. Now, developers can worry less about costs and focus more on innovating, and we even have rewards for developers.
Though BSC has only been live for 4 months, it’s growing rapidly, and features 60 projects total. In addition, users enjoy average gas prices as low as $0.07. The current number of unique addresses exceeds 4.6 million, while the all-time high daily transaction total sits at over 473,000.
I think the innovations around liquidity pools and AMM, especially for stablecoin trading, are very interesting. I believe we will see more growth in this area in 2021. DEXs (decentralized exchanges) are also well fitted for listing small and less mature coins, which provides a good validation ground for larger CEXs (centralized exchanges) like Binance.
We have introduced many of these DeFi innovations already on Binance.com, such as interest- and yield-generating products in DeFi Staking and Binance Liquid Swap. We also created the Binance Innovation Zone specifically for listing newer coins, thus providing liquidity for DeFi tokens while protecting less-experienced traders from the risks in trading them.
I believe DeFi and CeFi are both essential to the crypto industry, as they meet differing user needs. Whatever happens, we are ready to support and adopt new innovations to address the needs of our users. In 2021, I believe we’ll see more convergence when it comes to product offerings on the CeFi (centralized finance) front.
Adoption: Fiat, Payments, Stablecoins, and Traditional Finance
Today, there are more participants than ever in the crypto space. PayPal entering the market is great for user education and adoption, as is Square’s continued strong growth in the crypto payments space. Stanley Druckenmiller, Paul Tudor Jones, Franklin Templeton and MassMutual, well-known names in the traditional financial space, all made investments in bitcoin or the cryptocurrency industry this year. Hedge funds, mutual funds, and even a 169-year old insurance company investing in the crypto space, are setting a precedent for this industry, and I believe these are hugely positive moves in the right direction. Maybe next year, we’ll start to see Pension Funds and Sovereign Wealth Funds start to deploy a small part of the tens-of-trillions of dollars that they manage into crypto in order to hedge out some of their fiat risk.
Another important area for us is the continued growth and mainstream adoption of cryptocurrencies. Growth in crypto payments was one of the most obvious use cases we hoped to see more of in 2020, but it’s still far from mass adoption. Existing fiat payment rails are convenient, low cost and well-established, making them difficult to replace in one swift move.
Since last year, we have been building on existing fiat payment rails in order to allow more users around the world to access crypto. This year, we launched 28 fiat channels. Users are now able to purchase crypto via 46 local currencies in total, using different payment methods including debit card, credit card, and bank transfer. In 2020 alone, there was over $31.9B in total order volumes for fiat, and the highest recorded single-day transaction volume reached 100M USD.
Additionally, the total market cap for BUSD, Binance’s 1:1 USD-backed stablecoin grew to $805M, becoming the 4th largest stablecoin. We are working to expand our fiat capabilities by making strategic investments. Notably, we invested in Tokocrypto, the first cryptocurrency exchange verified by the Indonesian government, as well as WazirX, a cryptocurrency exchange in India.
We will keep building out our payment rails in order to provide users with the best purchasing experience. Similarly, crypto payments is another field that saw significant progress this year, though it has yet to gain mainstream acceptance. I believe this is due to the ubiquity and sophistication of today’s existing payment methods, making it difficult for users to switch in such a short time period. For now, it’s best to allow crypto payments to coexist with more traditional payment methods. This is one of the reasons why we launched Binance Card, which allows users to spend their crypto directly from their Binance crypto wallets. This offers a much more convenient method of crypto payment and our Binance Card has been hugely popular amongst our users.
I also believe we’ll see cross-border payments with stablecoins continue to increase next year. Cross-border payments using stablecoins or any cryptocurrency are much cheaper and faster than traditional payment methods, arriving in a matter of seconds, compared to cross-border bank transfers that may take days. Traditional cross-border remittance platforms can charge as much as 7% in fees to remit money overseas, while cryptocurrencies only cost pennies to move – and Binance P2P has some of the lowest fees around. This year, the total Binance P2P transaction volumes reached $6B USD, and there are as many as 1,424 merchants worldwide. I believe we’ll see even greater adoption of stablecoins next year, thanks in part to the rising popularity of crypto-powered cross-border payments. We’ll continue to work to bridge the gap between fiat and cryptocurrencies, in order to reduce the barriers of entry for crypto, and provide more people with its benefits.
Use Cases: BNB and the Growing Ecosystem
There are so many applications and use cases for BNB, from gaming to cross-border remittances, that I personally can’t count or keep tabs on how many now. This year, the total number of BNB burned in 2020 is 13,384,040 (more than double compared to 2019), valued at nearly $219M USD. There is a large, diverse community in the BNB ecosystem that continues to innovate in finding strong use cases. I don’t know what they will come up with next, but I am sure many of them will be very exciting.
Another crypto asset class I’m looking into this year is NFTs. I think we will see increased sophistication and adoption for NFTs in 2021, from virtual items in games to concert tickets. I believe this is an exciting new area yet to be explored and I’m looking forward to seeing how these develop.
One of the biggest additions to our ecosystem this year was our acquisition of CoinMarketCap, one of the top crypto rankings and market data websites. I know this triggered some community discussions and concerns at the time, which is why I took time to address incoming questions in detail. As one of the premier information platforms in the crypto world, CoinMarketCap is a valuable window that allows mainstream audiences to understand cryptocurrency. The partnership between CMC and Binance can provide more accurate information and data for the entire crypto industry. Presently, the number of CMC users has reached 50 million, while the total number of views has exceeded 953 million.
In addition, Trust Wallet which we acquired in 2018 has quickly become one of the most popular wallets in the crypto space. Trust Wallet is committed to providing user privacy and security in tandem with a best-in-class user experience, and currently has more than 5 million users and over 2.2 million monthly active users. It also supports several major blockchains, providing an important entry point for BNB Smart Chain users. In the future, Trust Wallet will continue to play an important role as an infrastructure provider for the DeFi world.
We’ve also made some important investments when it comes to DeFi, including strategic investments in the global crypto payment provider Swipe, the DEX aggregator 1inch.exchange, and Math Wallet. We will continue our efforts to expand the cryptocurrency ecosystem in 2021.
Responsibility: Binance Charity
2020 was full of humanitarian challenges with the Australian bushfires, Beirut explosion, and much more, on top of COVID-19. From the start of the virus, our Binance Charity team and supporters fought against COVID-19 alongside frontline healthcare heroes, providing timely support to communities in need.
Through its “Binance for Wuhan” and “Crypto Against COVID” campaign, Binance Charity raised over $4 million in cryptocurrencies – with three-quarters of the total donated by Binance – which enabled us to distribute more than 2 million pieces of personal protective equipment (PPE) to aid 400+ hospitals in 26+ countries around the world, especially the nations that were affected most by the coronavirus.
In response to the Australia Bushfire Relief, Binance Charity also raised over $2 million aiming at forest rehabilitation and wildlife restoration. Binance Charity also partnered with UNICEF and allocated $10,000 worth of crypto and provided timely support to those in need following the tragic explosion in Beirut this August. Binance Charity also fundraised $60,000 worth of crypto to Friends of Notre-Dame de Paris to contribute to the restoration of Notre-Dame Cathedral’s Mays, beautiful historical paintings that were damaged in the fire in April 2019.
Always exploring blockchain innovation in charity, the Binance Charity team also led the development of the first blockchain art donation platform, “NFT for Good” - an open platform for global artists to create, sell, auction and donate their NFT blockchain art to NGOs supporting global sustainable development.
Top Priority: Security
Security is a very extensive topic, I think there are a few areas to focus on in 2021:
1. User Education. I believe more user education is needed across the industry to help people avoid “rug pulls'' and scammers. We will continue emphasizing the importance of individuals educating themselves in order to make investment decisions cautiously and responsibly. Research before investing is key. In this area, Binance provides educational materials on Binance Academy, Binance Research, and CoinMarketCap to help investors make informed decisions.
2. Security Tools. Better tools are needed for regular people to securely hold their own private keys, with proper encrypted backups. Good cyber hygiene is complex and can be intimidating to cryptocurrency newcomers. We have invested heavily in multiple wallet developments to help on this front. Combining security with ease of use will be vital as more people invest in cryptocurrencies.
3. Security Infrastructure Investments. Centralized exchanges must increase security investments on technologies such as threshold signatures (TSS), to hold users’ funds more securely. Binance has open-sourced our TSS library, and a large number of community developers are contributing to it.
4. Personal Habits. Security threats and technologies used to defend against them evolve over time, but one thing remains constant: the human element. The human element is the weakest link. Attackers constantly prey on psychological flaws such as the desire for quick information and greed. There are increasingly sophisticated ways of abusing trust, including spear-phishing and social engineering. This can circumvent some of the most fundamental defense mechanisms we have relied on in the crypto ecosystem such as 2FA. At Binance, we continue to strive for zero trust in our enterprise security and trading platform security to protect our users.
Roots: Binance Angels & Community
Another vital component of Binance success this year has been the incredible support and commitment from our Binance Angels Community. Binance Angels consist of dedicated users who believe in blockchain, crypto, and Binance. Binance Angels are community builders at heart, and they share the same values as Binance – to spread the freedom of money all over the world. They are as passionate as we are about expanding the adoption of crypto and blockchain in their local communities, and they play a key role in helping us accomplish this mission.
Using their own life and professional experiences, our Binance Angels help us add more value to the Binance ecosystem. Our Binance Angels support and educate our users, help us improve our platform and user experience, and highlight our community’s concerns. They are instrumental in helping us build products and features that our communities want. We take pride in our Binance Angels community, and the support of our Angels has been critical in ensuring Binance’s success.
We currently have 239 Binance Angels who help us support users in more than 40 local communities – and growing! If you’d like to be part of the Binance Angels Community, apply through our Binance Angel Application.
Looking Ahead to 2021
In 2021, we will continue to keep our heads down and build products users love. We will continue to develop and improve services that are beneficial to society and protect our users and the industry. I’m very excited about the new developments and products we have planned for 2021.
On the personal side, my New Year’s resolution for the last 10 years has been getting a six-pack, but I’ve never gotten there. My main hope is just that 2021 will be less crazy than 2020, and that people's lives continue to improve.
Wishing everyone a healthy and happy new year.
- CZ, Binance CEO