CZ’s FAQ 6 - What Makes Binance Successful
This article is a part of the “CZ’s FAQs” series. Opinions expressed here are personal opinions and do not represent Binance’s official position. It is not financial advice. And could be totally wrong.
Now Covid is a little bit in retreat, I’m able to get out more and meet people face-to-face, which I love to do. I get asked many questions, but one of the polite questions people often ask me during a conversation is what makes Binance so successful?
Of course, there is a lot to unpack, so I wrote it down.
Let’s start with getting a few common misconceptions out of the way.
“You grow big by being crazy or the wild west.” I hear this a lot, but nothing can be further from the truth.
When you are about to deposit your hard-earned money with an exchange, the last thing you want is a crazy platform, right? What do you do? You research and find an exchange that other people (and yourself) can trust. Being trusted by users is the best and only way to grow.
Other overly simplistic views include “you grow big because of X”, usually just one thing. While that one thing probably contributed to the growth, there are usually many other factors as well. There is no single magic pill for success. Even in this article, I will only be able to allude to a small number of our success factors.
For something to succeed, you need to do 1000 things relatively well, plus a lot of luck. For something to fail, you just need to do one thing poorly, even after you did the other 1000 things relatively well.
Having said that, the world is not that complicated. I believe the 1000 things can be largely grouped into three categories: Users, Service, Product. While these are not unique to Binance, they certainly add up to our USP.
Most platforms say they protect users. But values are not something you say, it’s something you do. Users are smart. They figure it out. So, let’s start with a few examples of what Binance did (that others didn’t)?
After raising about $15M USD equivalent in an ICO in Shanghai, Binance launched on July 14, 2017. A mere month and a half later, on Sept 4th, 2017, the Chinese government announced no more crypto exchanges or ICOs allowed in China, and further projects that held ICOs must return the originally raised funds to users. Luckily, BNB stood at 600% of its ICO price. No one wanted to return six dollars for one dollar back. However, Binance did facilitate four other ICOs on our platform, and all four were below their ICO price.
Those project teams didn’t have enough reserves to make their users whole. Our team did some calculations. The gap was about $6m USD. We had a quick team call. I was on a moving train. Within 10 minutes, we all agreed that Binance would use its own cash reserves to make our users whole, even for those other projects.
To this day, this represents the single largest percentage-wise spending for Binance. It was more than 40% of all our cash reserves. We were an eight-week-old startup. Not profitable, burning money fast, hiring, and growing. It was costly, but we held to our ethos of protecting users. No other exchanges had ever done that before (or after, to the best of my knowledge). As soon as we announced it, we got overwhelmingly positive feedback from the community. Users flocked to us. We protected users and got more users.
Second example. Through our balance reconciliations, we identified extra GAS tokens in our wallet. We were worried. Was there a bug somewhere? After some thorough checking, we learned that if you hold NEO in your wallet, it generates GAS, which is another token that also has value. At the time, if you hold your NEO on an exchange, none of them gives you the GAS tokens it generates, until Binance. We said, let’s calculate the NEO holdings of users on a daily basis, and then distribute the GAS tokens that were generated, and give it back to them. It’s not our money, it’s our users. Guess what? Most NEO users moved their funds to Binance.
In the same vein, Binance was the first platform to support exchange-based airdrops and forks. Before that, you had to withdraw your coins back to your own wallet, wait for the airdrop or fork to happen, and then get the second coin before you deposit your coins back to an exchange. At Binance, we said, we will save you all that trouble. We will handle the fork or airdrops and just credit it to your account. Not only did this save trouble for some, but it also allowed many non-tech savvy users to enjoy airdrops and forks. This retained users so well that other exchanges copied us shortly afterwards, making the industry more consumer protection oriented.
There are numerous more examples. Binance is the first exchange to help users retrieve non-supported tokens they sent by mistake (which is a very expensive operation to do effort-wise). Binance helps users to track funds even when they don’t use Binance exchange such as DeFi. And most recently, Binance covered user losses due to technical glitches at a data center. The list goes on and on. But you get the point. Protecting users costs time and money, but we believe it is the right thing to do and is the best way to attract and retain users. We encourage other exchanges to do it as well.
Once you’ve attracted users to your business, you have to retain them, and I believe that Service is the greatest retention tool
Before Binance, if you submitted a support ticket on an exchange, you would be lucky to get a response in two weeks. A two month waiting period was not uncommon. And this is while your money (bitcoin or other cryptos) may be stuck on a withdrawal or similar. For Binance, we set out to change that. We said, maximum 24 hours response time. Ideally within an hour. Guess what? Our users loved it and flocked to us. Then the industry was forced to follow, so we like to think we helped to improve the service standards in the crypto industry.
Today, Binance supports live chats and users can usually get to a first response within minutes, in no less than 12 languages. Still, a lot more to cover, and we are working on that.
In addition to helping users with Binance, our helpdesk also helps users with non Binance related issues, to the extent we can.
Binance is the first exchange to help users recover coins they sent by mistake. This is operationally a very expensive task, in terms of man-hours that need to be done on the exchange side. It typically involves extracting a private key out of a secure environment and performing some custom operations on it. Very time-consuming, but it is worth the investment for us.
Even for DeFi rug pulls on Ethereum, Binance will help track the funds for users, even if they don’t flow to Binance. This means that sometimes people write headlines - like Squid Coin rug pull on Binance, even if we weren’t involved. This can hurt our reputation, but we do it for the users that have been affected.
Even when users get SIM swap hacked, Binance’s team was able to help users safeguard their crypto in many instances.
The list goes on and on. Not every user knows everything, but the little bits they know adds up.
When we were about to start Binance, many people told me “don’t do an exchange, it’s done to death, the market is saturated, you won’t replace the existing players…” the list goes on.
But when we looked at the market, we thought there is a lot of room for improvement.
Basic things, back in 2017, most exchanges offered a “novice interface”. You had to scroll up to see the chart (a very basic one at that usually) and scroll down to place orders. Given our experience in the trading world, this is not how traders trade. We thought we could do better. So, Binance designed two versions of the single-page trading screen. Everything you need on one screen, charts, order book, orders, click to trade, etc, all in one place. Both designs were copied extensively by other players in the industry afterward.
Speed. Performance is a product feature. Binance’s matching is faster than other exchanges, even today. When you place orders on Binance, you can notice a faster response even just by the human eye. When it comes to API performance, Binance’s APIs are the fastest and most stable in the industry.
Coins. The crypto exchanges that existed in 2017 were mostly “bitcoin exchanges”. They focused on converting local fiat currency into bitcoin. Even some major exchanges didn’t list ETH. Very few exchanges listed more than a dozen coins. And ICOs were all the rage in 2017. Many new coins were created. People wanted access to them. There were very few liquid marketplaces for them. Binance supported many coins and filled that demand.
Fees. Binance charges 10x lower fees than other exchanges when we started. Today, we are still the lowest fee exchange in the world. Many other exchanges spend a lot more money on marketing. They attract new customers, but eventually, those new users learn and come to us. In the future, we expect to further lower our fees.
International. There were two large exchanges supporting a decent number of coins in 2017, Poloniex and Bittrex. Both were ranked high in trading volume when we started in 2017. When we looked at the two exchanges, they were highly catered towards US users. They only offered an English interface, no other languages were supported. Both companies were based in the US. We wanted to serve the rest of the world. Binance supported nine languages within the first month and expanded to 31 languages today. Our Customer Support supports 12 languages today, far more than any other platform.
In summary, there is no secret sauce to building a successful exchange. You have to abide by your values, build a good product and service your users. To that end, I want to thank all of the Binance team, including Binance Angels for their hard work, dedication, and contributions they have made. Lastly, we are by no means perfect. We try very hard to abide by our values and are constantly improving our products and services. Please don’t hesitate to give us your feedback. And we thank you for your unwavering support and your company in our journey towards a world with better money.