Cryptocurrencies have taken a spot near center stage for investors seemingly overnight. The exchanges that handle the volumes of cryptocurrency trades are no different.
Back in July 2017, Binance conducted an initial coin offering that raised $15 million in their own BNB token. Today, just over a year later, Binance is the world's largest crypto exchange with a daily trading volume of around $500 million (compared to CoinBase's $40 million) and its token has a market cap of over $1 billion.
True to form in the cryptocurrency space, Binance's growth has come at breakneck speeds. And it's only getting bigger.
Binance is purportedly one of the only exchanges that has never been hacked, despite regular reports of other exchange breaches and cryptocurrency wallet thefts. To build the industry, Binance has also launched this year a venture investing arm, research division, education portal and charity foundation.
Binance has raised $100 million to support the UN Sustainable Development Goals with the launch of a blockchain-based donation portal, and is also working to increase adoption of crypto through an investment in travel startup TravelbyBit and the creation of a fiat-to-cryptocurrency exchange in Uganda. Far from just an exchange, Binance has become an ecosystem for cutting-edge initiatives around global blockchain tech and crypto adoption.
TheStreet recently connected with Binance's founder and CEO, Changpeng Zhao, to discuss the latest announcements and what he sees Binance becoming in the future. What follows is a lightly edited transcript of our discussion.
In the last year, Binance has evolved into much more than a cryptocurrency exchange. What's the best way to describe Binance today?
Right now, Binance is still a major cryptocurrency exchange and many people view us as that, but we are building the ecosystem. We want to be the infrastructure services provider for the blockchain space, so we have a number of different initiatives.
Most of them are still quite small, including the exchange (I think if you compare us to traditional [market] exchanges, we are still quite small). I think the best way to describe Binance right now is: we are trying to be the infrastructure services provider for the blockchain industry of tomorrow. Right now, our ecosystem is made up of the Exchange, a wallet, Labs, Charity, Info, Academy and more. We hope some of them will become the infrastructure for the industry.
How would you summarize what happened in 2018 for Binance?
The year was off to a hot start from the beginning. But then the cryptocurrency market did trend down a bit, both in terms of trading volume and the number of people participating in the industry. But I think 2018 has also been a year where we keep our heads down and we build.
We are working very hard to build our services, so we've made a lot of improvements in our core services; we've acquired wallets and added a lot more services for our customers. So I think 2018 is a build year.
We were actually quite lucky that the market was trending down a little bit. If the market kept growing like that, we would not have been able to keep up. It actually gave us breathing room to build a more solid fundamental base. Now, when the market takes off again, we'll be ready.
You keynoted the recent World Investment Forum in Geneva. What was the main point you want the audience to take from your talk?
The main takeaway is: I personally believe if we make charity 100% transparent by using blockchain technologies, the charity space and the social good space will be 10 to 100 times bigger. Right away. And we can do a lot more good things.
We're seeing an influx of institutional funds coming into crypto as of late. What is your take on that trend and how will it impact the blockchain industry and crypto markets?
Generally speaking, increased institutional participation is a very good thing. If you look at a large fund family like Fidelity, they alone manage over $2 trillion. In contrast, the entire crypto market cap is only $220 billion.
The fact that Fidelity is moving in to the space (by launching digital asset trading services last month) suggests the crypto market cap will grow a lot more. When the market cap grows bigger, the price is going to go up; when the price goes up, it's going to attract a lot more people in. It's basically a very net positive.
Also with increased market cap and with institution participation, there will be improved stability. When the market cap gets big, it will not fluctuate as much, and we will also see increased adoption. All of this I think is very positive. It's just a matter of time. I don't know how quickly it will happen, but it will happen.
Where is the institutional capital currently active in crypto coming from?
In traditional finance markets, the U.S. has the largest volume of institutional money. Even in crypto today, it's roughly the same allocation. I think the U.S. has the most. But the U.S. also had the strictest regulations. We're seeing faster institutional adoption in Europe, for example, and oin Singapore. Singapore is one of those countries where it's quite easy to go there and register a trading company. They're quite open about it.
Unfortunately in China, there are nearly zero institutional investors participating in cryptocurrency markets. Even in the broader stock market, there's not a whole lot of institutional investment. Everyone manages their own money. That's kind of the rough split that we see.
What goals are next on Binance's agenda?
We don't really plan a year out. We have a ten-year strategy, but when we actually make plans, we really only plan for three months ahead, as a maximum. Usually like two weeks ahead. Overall, our 2019 will just be to increase cryptocurrency adoption. That's not just for Binance's coin or Binance as a platform but more broadly we want to increase adoption for crypto. Anything that helps the industry get bigger will be good.
We'll try a number of different things but I can't lay all of what we're going to try in 2019. If you ask me the rest of 2018, I might give you some ideas, but even then, those ideas change very often.
What would you say is the core strategy behind Binance startup investments such as TravelbyBit? What is Binance looking for in startups in the space?
We look for teams who share our vision; who want to build infrastructure for ten years down the road for this industry. If you see a guy who believes in this industry -- who's willing to hunker down for the next ten years and build a solid service -- those are the types of teams we want to invest in or acquire.
How do you want people to think of Binance?
Eventually, I want people to think of Binance as a verb. Just like Google. Google used to be a name; now I "google" something. It should not really be thinking about Binance; it should just be thinking about something you do, and that should be automatically Binance.
An infrastructure services provider -- that's our ultimate goal. Today, if you drive on the road, you don't think about driving on a road; you just drive. You find a road and you drive on it. We want to be the road.
The author holds stock in investment holding company, Leucadia, and is a partner in an emerging technology marketing firm, Notability Partners. He holds no positions in cryptocurrencies nor in any companies that invest in them.