Binance Turns 6
As Binance turns 6, it’s a chance to reflect on our journey together, share some stories and look ahead. What began as a mere dream has turned into a global platform that provides financial access to more than 140 million people all around the world, and hopefully billions more to come.
Allow me to share a few key moments in our journey that really stuck with me:
Our Humble Beginnings
Six years ago, with your support, Binance raised $15M equivalent in crypto and started our journey as a crypto-to-crypto exchange. Two weeks later (6 years ago today), we launched Binance exchange with 5 tokens in 2 languages. We had to borrow a customer support team from my friend’s company, and we had no marketing team.
Today, Binance supports 600+ tokens in 40+ languages, with thousands of employees on our customer support team. The BNB chain now powers everything from decentralized exchanges to storage applications.
Two months after we started, came a decisive test of what we stood for. On Sept 4, 2017, China issued a ban on crypto exchanges and ICOs. ICO projects in China had to return the investments received to their investors.
Many ICO token prices dropped due to this announcement. There were a few projects listed on Binance that dropped below their initial ICO prices, and the project teams didn’t have enough funds to make investors whole.
Our team did some calculations and called me. They asked if we should use our own funds to make our users whole. The total cost would be $6M, which at the time was a huge sum. We all unanimously agreed. The call lasted for about 5 minutes while I was on a moving train. The announcements (link1, link2) went out a few minutes later.
$6M was more than 40% of our treasury at the time, amounting to the largest single spend in Binance’s history by percent. We were not profitable back then, and were burning money as a 2-month-old startup, hiring people and buying servers, etc.
There were just two words in my mind: protect users.
As it turns out, the world favors people who do the right things. Our actions received an overwhelmingly positive response from the global crypto community. Many users across the globe flocked to us. A month later, we reached 120k users and began to turn a profit.
And we have been profitable ever since.
In the meantime, we continue to build, and our user base keeps on growing. On Dec 18, 2017, I received messages from a couple of friends congratulating me. It took me a few minutes to understand why: Binance became the world’s largest crypto exchange by trading volume on that day. Something we also managed to maintain ever since.
It was never all smooth sailing, though. Just a few days later, a potential VC investor brought an arbitration against us. It took multiple years to go through with this lawsuit. We won on all accounts.
Most internet startups (that burn cash) probably would not have survived a lawsuit like that, but thanks to crypto, we have built a sustainable business model. A few years after the lawsuit, we invited this potential investor to our Binance Labs 2 fund, and they joined as an LP. I am happy to say we now maintain a good relationship with them. Most problems can be solved.
One side effect of this lawsuit was that it prevented Binance from taking any VC investors. It increased our risks as a startup but probably helped us in the long run. We remained nimble and independent.
An Evolving Regulatory Landscape
In 2019, I had meetings with a Tier 1 regulator in Asia. At that time, the officials clearly stated that they do not regulate crypto.
While we still don’t have clarity on how crypto is classified as an asset type in most countries, even today, there were a few news headlines indicating regulators were paying more attention to crypto starting in 2019.
Bitfinex came under scrutiny in April 2019. And I set up Binance.US to specifically service the US market, in a fully regulated manner. Today, Binance.US has 43 state MTLs (Money Transmitter Licenses).
Globally, we have shown that compliance and innovation can exist hand in hand. We take pride in our licenses and registrations across 17 countries, a testament to our pro-regulation stance and the extensive efforts we have made in compliance and regulatory space. We believe that regulations, especially those aimed at protecting users and fostering innovation, are instrumental in the long-term success of the industry.
Regulation is a cornerstone of a robust, safe, and secure crypto landscape, and we are not just open but eager to collaborate with policymakers to shape the future of digital assets.
The First Winter
While we saw record user registrations in Jan 2018 (240,000 users registered in an hour), a few months later, the market was in decline. Jan 2019 marked the lowest point of the market. Bitcoin was around $3,000 (dropped from $20,000 ATH).
We were unfazed and continued to build. We launched Binance Launchpad in Jan 2019, and have continued the program ever since.
It was through this winter that we learned the importance of prudent financial management. This experience greatly helped us in conserving our cash (crypto) in the 2021 bull market, and sustaining the 2022 bear market.
The Second Winter
Fast forward a few years, and we have gone through our second crypto winter in 2022. This one was much more volatile than the one in 2018. Interestingly, Binance had minimal exposure to most of the “catastrophic” events in 2022.
Binance invested in Terra in 2018 and never actively managed this particular investment. When things started to unravel in 2022, our team asked me if we should sell the tokens. I said “no, let’s just hold”.
So, we saw our initial $3M investment back in 2018 turn into $1.6bn at Terra’s 2021 peak, and then down to close to $0 in 2022. Until today, the LUNA (now LUNC) tokens we received still sit on the address we originally received them on, never moved and never sold.
Binance had no exposure to 3AC (Three Arrows). No loans and no commercial relationships. They had an account with us but did most of their trading on FTX.
Binance invested in FTX early days and exited fully at an early stage. This was one and a half years before they crashed. This was also before most of their high-profile political donations. When FTX crashed, we tried to help.
We signed a LOI to do a deep DD (due diligence) but soon found we couldn’t get involved in the deal. That was the extent of our (non) involvement in the matter. I believe through the exhaustive investigations that must have gone into FTX post its bankruptcy, it should be clear Binance had no involvement in FTX, or there would have been many more headlines.
Even then, a few regulators or news outlets tried really hard to group Binance and FTX together. To that, I will just say: We are different. Not every investment firm on Wall Street is Madoff.
Binance also had no exposure or involvement with Genesis and Celsius. Binance.US (independent from Binance.com) tried to help out in the Voyager case and put in a $10 million deposit payment. Eventually, Binance.US was forced to withdraw from the bidding process and never got the $10 million back.
2023 So Far
In 2023, we saw the market starting to recover. But we also saw more regulatory scrutiny on the industry. This is not unexpected, given all that happened in 2022. And when regulators look at crypto, they look at Binance. It comes with size. And it is our responsibility to take the lead and work with regulators all around the world to move the industry forward.
Again, it won’t be all smooth sailing, but we will always do what we think is in users’ best interests. We will continue collaborating with regulators. We will also defend what we believe is right, even if we have to do it in court, to continuously protect our users and push for the benefit of the industry.
There are a few trends shaping up.
TradFi, the likes of BlackRock, Citadel, and Fidelity, are coming into crypto in big ways. This is validation of the technology and the industry. They will ease the institutional adoption of crypto. As institutional investors own the majority of the equity market, with hundreds of trillions of dollars, even a single digit % conversion into crypto will easily multiply the size of the current crypto market.
DeFi will continue to accelerate. Newer wallet technologies are making it easier for users to hold their crypto assets on their own. More people will use DeFi products and interact directly with blockchains. This also offers financial access to people where TradFi (or banks) have no penetration. It is my strong belief that DeFi will become bigger than CeFi in the next 6 years or so.
Regulatory clarity and regulated exchanges will continue to grow. As much uncertainty as there is right now, progress is being made at a faster pace in many countries to provide clarity for the crypto industry. The XRP ruling on July 13, regardless of the fact that it wasn’t through a normal industry consultative process, is an example of that.
It is absolutely clear that the countries that get this right first will enjoy a huge advantage over countries that don’t, for centuries to come. We are at a pivotal moment in history.
In the quiet moments before Binance came to be, we knew we were charting a course through unexplored territory. But what we couldn’t have anticipated was - the power of the community - that would rise with us, shaping and supporting our every endeavor. You - our users - have been the unwavering strength that continues to fuel Binance.
Every success and milestone we celebrate today is a testament to your commitment and dedication. Binance is not just our company; it's a vibrant, resilient community that believes in our mission - the freedom of money.
Our journey started with the user and continues to be inspired by the user. Each product we launch, every service we offer, and every innovation we bring forward is centered around you. Your trust in us is a responsibility we don't take lightly, it guides us, and it is the principle that has allowed us to disrupt the status quo and set new industry standards.
The relationship we share is symbiotic. Your candid feedback steers our course, nudges us in the right direction, and has played a monumental role in what Binance has become today. More than anything, it’s your passion and relentless pursuit for a better ecosystem that fuels our commitment to do better.
I am forever grateful to be on this journey with you. You are the heart and soul of Binance for many more years to come.