#235 Changpeng Zhao: The Meteoric Rise of Crypto Exchange Binance

Transcript

[Music] this episode of epicenter is brought to you by shape-shift oh the easiest fastest and most secure way to swap your digital assets don't run the risk of leaving your funds on a centralized exchange visit shapeshifter IO to get started hello and welcome to the epicenters show which talks about the technologies projects and startups driving centralization and the global blockchain revolution my name is Brian Fabian crane and I'm ahead Roy today we

have a very special guest on the show Chiang Khong so who is the CEO of Finance so many of our viewers and listeners probably have traded on Finance which is a cryptid to crypto exchange and we'll talk to seesee as he is called about his story and founding violence how it grew and the challenges and opportunities for the future seesee welcome to the show hi guys very pleasure to be here so yeah tell us a bit about how you got to be involved in the blockchain space and how you entered this space sure I think that goes back to mid 2013 a friend of mine his name is Ron Chow he

asked me to look into a big coin and said it was kind of interesting and he also asked me to look into repo at the same time so he's the institutional investor into big BTC China one of the oldest exchanges that actually recently stopped operations so that's when I that's how I got into this that's how I got exposed to the big coin industry back then and that's what it's called and even back then I was kind of interested to do a first idea was of course for most for many people was to do the exchange and I think back then it was like magog's I think trade he'll probably just stopped so he was a bunch of very early sort of very very early

exchanges and but somehow I joined blocks in Dalian flow because I'm bumping to Roger ver at the time so that's kind of the early start and then so that's kind of how I got into the industry so what was that like working at blocking it in for what was he role there and what we're kind of the things he learned about this industry from that experience sure actually there's some really valuable experiences from that experience so I was the third person in there was Ben reefs who's the founder there was Nicolas Kerry who was who was the CEO and that was myself so I was a third person again Ben reefs is a very smart guy and he but he's a young kid

that just want to focus on technology he he's not a very social guy he doesn't want to talk he doesn't like to talk too much and blogs and info back in those days has some very interesting properties it's a decentralized team so when we had about 18 people they were spread out in my car I forgot like a dozen countries they don't have no office at back then they also don't have a bank account so everything is done in crypto in 2013 so that's kind of a everything was done in Bitcoin back then basically I think you through him what wasn't even started so so that that that was probably one of the very unique companies back then and

it kind of give a very interesting exposure to be a pure crypto company a company with no bank account no offices fully or it was relatively decentralized so we actually have adopted some of those philosophies into balance even today so I mean this is definitely one of the topics I'm gonna speak a lot about like how finances run but when you think back to blocking of info how well did this work this you know the centralized company and crypto only and was enough the pros and cons of that sure I mean basically you know decentralized fashion they are especially when the team is decentralized there are some disadvantages and there's some advantages the advantages people can

even hire people from all over the world you're not limited to your own talent pool but there's some very interesting disadvantages everybody is in a different time zone just trying to get a meeting together takes a Pyxis like takes a few e-mails back and forth and then usually take a day to organize a meeting because people are spread around all different kind of time zones so the efficiency actually does go down and especially if you have to make decisions discussions or stuff like that it'll be difficult and there are ways to overcome it basically you gotta you gotta have you got to empower the people so each individual can make relatively large number of decisions and they can their that can be siloed off so their

different trade-offs and different ways to sort of run this kind of know operation and you also need guys who are like very proactive with self motivators who are very proactive so you want to find guys who are really into you who really like what they do we're really into doing this stuff so they don't need to be asked what to do they don't need to be told what to do they were just finding stuff to do on their own so there are there are some there's a lot of challenges so it's not a very simple straightforward thing so do you feel that worked well at blockchain no info to be honest I think I belong send out info at the beginning when we had a smaller team he walks by well but when the team called larger I don't think he

worked that well so I think basically when the team got larger if you don't get a if you when a team is small when the early funding teams are all all very hardcore crypto guys so they they shared a vision they understand the vision they kind of worked very hard around it but when you get a larger when the team becomes larger it's kind of hard to main well I shouldn't really comment but I think so in the last couple years blocking I didn't really follow blocking that info very closely but I think the speed of progress is a little bit slower than I expected to be honest so what was the decision for you to leave blocked in

your info how did you make that decision how did you know it was the right time well actually so for me it was so I was I've always been working on trading systems mostly like trading systems for brokers for exchanges for so I've been I spent like the I've been working for about 18 to 20 years now so I've always on the I've always been on the trading side and blockchain thought info is a block is plural plus a wallet and it wasn't it wasn't really where my specialty is I mean the technology is okay and so in 2014 my current business partner she joined okay coin first actually she recruited me in she said

hey would you wanna you want to work on exchange and so I joined okay coin as a state as their third co-founder so that's how I that block and our info so your experiences on the technology side to build technologies for exchanges at Bloomberg fusion trading it's it's always been on that side on the technology side yeah yeah so even when I was an intern I worked at a company in Tokyo who got like basically who are working on trading systems related to the Tokyo Stock Exchange so even in the early even before I graduated I was interning I was I was writing software mostly C C++ code

for trading systems for in the Tokyo market so and then when I graduated I took the same job I went back to the same company and then later on I went to Bloomberg in New York I was in charge of the Bloomberg trade books futures and development team so I was work managing a relatively sizable development team for a beautiful futures trading systems and so I've always been while working on the trading side of things and I've always been I was a developer I was writing code and then later I moved into management of Argos in Bloomberg and then I went in Toronto in 2005 I went back to Shanghai to start my own company

with a couple other guys and we were doing trading systems for brokers as well so I've always been in this kind of field so it took 20 years basically yeah yeah so so then you were at ok coin and you were CTO there and and then you you you work for ok coin for around a year and you then left on on some differences tell us about that experience so one of the key differences I think I can explain that a little bit better now which is in a place where this very when regulations change very quickly and there's like very basically very high degrees of regulatory uncertainty people

are relatively short sighted they would just want to make quick money basically if you have a ten-year plan and they were glacial changes every three to six months and that's that's a high degree of certainty that 10-year plan usually didn't work very well yeah so people are forced to have a short to have a shorter term vision when you coach more and more short-term vision people are more into short-term gains and they get into sort of questionable gray areas and that's not that's kind of different from the valley V or the values that I've been brought up to you from the International from morphing a national exposure so I didn't agree with a lot of the value prop a lot of the ways that the values are

generated in there so I left I didn't get this there's a lot of decisions I didn't really agree with I won't get into the details but I just said look this is not really for me and I left yeah I remember at the time reading about your departure because there was a lot of discussion around it I think was there also a hack at that around then I remember there was something where there was a lot of discussion around ok coin and then kind of your departure as well came so the discussion came three months afterwards over a contract between Roger Vere and okay koi it's a contract that I facilitated when I was at okay coin but

basically when I left the contract was reviewed by both parties and was fine and three months later it came out of nowhere saying a bunch of a bunch of debates and so it is what it is so after okay coin you started your own company right and the company is as far as I understand it was to focusing on building a change technology so can he can you walk us through like what was the decision-making or the thinking behind starting that company and how did it turn out sure so that company is called BG attack and so in that's early 2015 and I thought about building in exchange again and to be honest before I

first thought about building a Bitcoin exchange like I see a two Bitcoin exchange that's what most exchanges are back then and I looked around I was missing I had a couple of tech guys who actually pinned me and wanted to do something together and so we had the tech team a very small team like a three people team and back then but then we were missing the marketing and operations and customers poor side of things and when we were building it was a while it's kind of it's gonna be quite hard for us to build this exchange just only having attack Tech's strengths so and when we were talking with a couple other guys who were a couple of other people who either already have exchanges or were planning to build exchanges and

they said well hey champion why don't you just build a technology platform and we'll buy from you and so that's that gave me an idea I said hey we could sell that platform just as a technology platform so we kind of morphed the business into that only within a couple months and we were selling systems and then something happening July 2017 where there was a lot of other what we call cultures exchanges in China they're basically trade stamps are antiques and all these other crazy stuff and they had a very archaic systems very slow and they said hey champion you have this really fast system can we can we can use can you adapt your system to our

needs what's that fine that's kind of what we did and we adapted that so and so in China there was like Dale and peek there was about 2000 of those type of exchanges so over the next two years we stood about 30 copies of our exchange system and it's always provided as a platform as a service so people pay a monthly fee and they they get an exchange the system and we provide the backend the front-end and the mobile apps and everything so we we did that for two years had 30 clients and so that's the exchange system we built we built from scratch but when we build it we wanted that system that system to be very high performance

so everything was engineered everything is engineered now like a script from like the first cut of a prototype it was always if if it's something that's really advanced that's really difficult but can improve the performance we always took the longer route so it took us a good two and a half years to build out our system we actually stumbled on many problems during that two and a half years so and then at the end of two and half years actually what happened is Changi the Chinese government shut down all of those coaches exchanges so most of business dried up what I said well now we looked at Poland a poly neck was pretty big when early 2017 we said well now that our mark is quite big we could

do that and so that so that's how bonus was kind of conceptualize Wow so like what must have seemed like a disaster like the Chinese government changing regulations or don't know to be a blessing in disguise that happened to us a few times actually so we got lucky a lot of places okay so that's that's many like you you hit on the idea of cryptid to crypto exchange now like a crypto to crypto exchanges are actually pretty old like they've been around since 2014 2015 2016 didn't you feel in 2017 that it was like too late to start a crypto X equal to crypto exchange so we actually so in turn was 13 even impact in a block hint

or the info we had discussions about a crypt at the crypto exchange so we said the CI to crypto is the bridge and once you need to crypto you can do crypto - Krypto and so that that concept was waived like what's back five years ago so we discussed that of course the market wasn't quite there they're mostly outs at that time wasn't really was trading so there was really only Bitcoin I guess repo was there people were using it but so in 2015 we actually looked at looked at that as well and that's when I think Polonius was just starting and they were quite small we said well the volumes not that big and in 2017 though we looked at we looked at it again which

I want the they're making a lot of money they're making millions of dollars a day which is very impressive but we look at the system we said well we can we can definitely improve on that and I talked with a couple of other guys like including sent a kid who used to be who used to work at ok coin now works for fun and he said look if you guys build another crypto to exchange that's that's fast and that has customer service or decent customer service yeah we're gonna we're gonna switch very quickly so there was a that there was a lot of satisfy that demand in the market I think even today there's probably still unsatisfied demand I mean we're not perfect that there's we have a lot

of room to grow so I think this market still very new so it's never too late you just got a start and push forward yeah-yo often looks like that right there so that you know in retrospect you say actually this is very new there was still lots of opportunity but then at the times you know you see okay there's all these other companies doing it maybe I'm too late but you did you did like you know I mean I guess with your background and I'm having built exchanges and if you're always if you see that ok there's all of those things I can clearly do better maybe it was obvious that there was that opportunity there yeah well the way I've used things is actually a little bit different I always think there are more opportunities in the future than there were there have been in the past it's

just the opportunities may be slightly different so so we did a few things slightly differently so it is equipped with the crypto exchange but we made the user experience there's some there's a lot of difference there's a lot of small differences so for example we didn't just focus on English where politics and then some of the other established players are only had an English interface they pretty much only had a PC or web client so we said okay well we've got to do better right we're gonna we're gonna have multiple devices we're gonna have Android apps iOS apps we're gonna have native PC client native Mac client we're gonna do multiple languages so we get ten I think right now we have about

10 languages so we're gonna focus on countries that don't speak English or English is not the main language so there's a lot of different ways you can play and I at that time even even at the time I was pretty I was pretty confident this is this there's a there's a lot of opportunity so but but one thing I would say though I thought it would take us a lot longer to become the worst number one exchange even when we started and even only even like a week before we became the worst number one exchange I still thought it was going to take another another good six months so things some of the things were surprised yeah I mean it's just something to point out here right we haven't really

highlighted this and and some some listeners may be aware of this but I'm sure many others are not so by Nantz is a company right so you talked about July 2017 in Bonn and started of course there was you know some work before that kind of accelerated this but still it's less than a year and in the last quarter you guys made profit of two hundred million dollars so they the quarterly profit of two and a million dollars in less than a year of operation I mean this is absolutely insane in a way and and I was a bit before the show us before asking you because I have never heard of a company that so quickly reached such a level of profitable so it seems this may well be you know

the fastest company you know in the history of all companies to reach that level of profitability in you know such a short time and then of course also in terms of company growth I think your two or three hundred employees at this point may be already more in in such a you know less than a year so it just completely insane growth in an insane business that you've built in in a incredibly short time yeah I think a lot of that is surprising to us as well I think but there's a lot of factors contributing to it though I think basically companies will continue to go faster and faster because now the technology the internet is their

e-commerce is there so and then crypto is there so there's a lot of things that facilitate there's a lot of things other people have build which which which ensures much higher freedom and the foundations are much more solid so companies will continue to become fast and faster but I think also one of the things we were lucky on is basically we our exchanges is a very special type of business where we we're kind of in the center of value exchange and we got we got lucky a lot of places I think our product is superior and we have services decent and we also value our value

proposition our current value system so like what we believe in kind of rings very true with the community I think that helped us that helped people to understand what we do why we do it and they'd agree with our mission with our principles so they agree with why we do it and so that kind of helped people to be more loyal or more to us as well so there's a so there's a there's a combination of different factors that helps but I think there's a lot of luck too so I think we just started doing the right thing at the right time and the market exploded so if everything starts over again I'm not sure if it's gonna be the same result to be honest super

interesting so you you you mentioned in your previous answer value system what is the value system that you focus finance at all sure I think basically our value is to spread the freedom so I think basically the crypto offers a different level of freedom in terms of investments exchange exchange of value and holding different assets so it's this it's this freedom that we think are very beneficial to the society and it's spreading this freedom that's our core mission so so this is what we focus on and we actually haven't really talked about this a lot in a lot

of detail to our users and we have always emphasizing protecting user benefits so this is something that we don't really say but we actually do and people people people understand it so people actually a lot of our users tell us that ok you guys to really take our interest you guys you guys really understand how you guys are really working hard to protect us so I think that kind of mess that kind of stuff helps it's very important to build a very strong community so I think we probably have one of the most loyal and most supportive communities in of any business so we have guys working we have a lot of guys working for us basically

for free on volunteer basis we just give them recognition and we give them access to our team and that's all and their and actually most of them are financially free and some some of them are financially free because of us because they buy the body into the bynars coin early on so we now have like financially free wealthy people working as volunteers helping our other users so it's a very unique it's a very unique situation but I think that's only part and other people try to copy that model but you can't copy that model unless you have that kind of mission you know unless you have that kind of value system so I think that's kind of unique right now so you mentioned right this

focus on spreading freedom and on protecting the users but you said you guys didn't you know actually talk so much about this but so can kitty give some examples of decisions you made you know maybe one could have gone a or what could have taken the decision to you know in favor of freedom and protecting user benefits you know that actually created that culture like what were some of the critical decisions that you had to make to create this sure yeah there's some very clear decisions that when I look back so for the first one came about two months or a month and a half-ish after we went live so back then so this is literally so this is September early September

Chinese government said any ICU projects you return the funds to the investors to the extent basically possible they didn't say how you do it but so because of the news the price of most icing coins actually dropped and so now the investors are actually losing money and now they we now got to return the funds to the investors most projects don't have well because the coins dropped in price they actually don't have more money to to make up the difference so for the ICS that we facilitated during that time we there was five five projects we actually said as a platform not as a not our own coin like this is other people's coins so we said we will

cover the differences for to return that to the investors we calculated how much it will cost us at that time it's gonna cost the it costed us actually about six million u.s. dollars in total and this is back when we were one more than half old so we didn't have as much money as we had today so we we were so we looked at our financials we raised 13 million you have 15 1 5 million u.s. dollars in the ICO we spent quite a bunch of it already and we now got we now had we had we had I think we had about I don't know some we had some money we were able to cover it but it was 6 million a big chunk of this of the savings we had but we said ok no we got to protect our users we're gonna make up as a difference we will

cover the cost will cover the differences even for coins that's not related to our project so when we did that the channel and this isn't mostly in China back then so the Chinese community loved us that would like they were everyone was saying we were studying the GU standard the goat the new standard for how to protect users and when the other went the other exchanges in China got shut down and all the users guess where they went they were all came to us so you actually worked out in the long run it worked out very well in the long run but at a time was a really really tough decision and if things continue to go bad we could be out of business right so we didn't know it to check what how the regulations are gonna play out so so

that's a very clear example of how some of the difficult decisions have been made but we always follow our principle so we have a principle and we make the decisions according to that principle no this is amazing yeah I can imagine that that decision right let's say you raise 15 million you spend three years something like that and then you give 50 percent of your money you know because okay this is you feel like the right way and obviously at that point if it goes wrong you also have the people who invested in your token sale in your i0 right they would then also suffer so that's yeah very impressive and I can see that would be a very powerful decision to also establish that culture and community yeah and also what so

today we make a lot of those the kind of decisions without my involvement anymore so once you have the mission and value system established now the team knows what - what decisions how to make decisions so they just make decisions on their own according to those kind of values so a lot of times if there's kind of decisions they just make it on their own this episode is brought to you by shape-shift the world's leading trustless digital assets change quickly swap between dozens of leading cryptocurrencies including Bitcoin ethers e cash gnosis manera golem or cur and so many more when you go to shape-shift dot IO you see if I select your currency pair give me receiving adders sent the coins and

boom shape-shift is not your traditional cryptocurrency changed you don't need to create an account you don't need to give them your personal information and they don't hold your coins so you are never at risk from a hacker or other malicious actor shape-shift has competitive rates and is even integrated in some of your favorite wallet apps like Jack's so you can swap your digital assets directly within your wallet just as easily as putting on your slippers whenever you see that good-looking Fox you know that's where shape-shift is so to get started visit shape-shift yo and start trading and we thank shape-shift for their support of epicenter so you did at ICO to fund by Nance and you raised 15 million so

presumably in this episode you yourself would have been required to return that 50 mil 15 million back to your original investors so how are you able to spend 6 million when you yourself for returning 15 so so that's another lucky break we had by September by spire so a month and a half later by September Li September our coin actually went up 10x already so we sold half of our coins and we still had we still had half a 40% of our point and the coins we had actually and we also collected trading fees in our own coin in the biased coin and the coins we

collected and the points we had which we actually ended up never touching went up 10x so now instead of the 15 million we raised and in theory the 15 million we had in sort of cut our own coins roughly the 50 million in balance coins we had is now worth 150 million so it wasn't completely that we were okay but but the the we decided lakh like all 80 million of our coins so we decided lock or place a 100 percent of our coins we didn't really touch it so we have some leeway but we were it was a bit easier because the balance - coin price already when I have 10x so so what happened was that the Chinese said okay you have to return

the money and then so people have the coin and they go back to money at least the Chinese people that they spent on the coin as I correct well no they have to return the tokens that they bought with and then the project is supposed to return the BTC or ETH the day they purchase with then purchased with okay so basically the Chinese said okay every project that didn't I say oh they have to give the choice to the people that they can either keep the coin or they can be turned the coin and get the original money back it was that what happened well that's I think the Chinese government didn't say there was a choice the Chinese government wanted to say everybody has to return everything but

then a lot of for the coins that went up in value nobody actually wanted to give it back right and you can't force users you can't force individuals that way you can force platforms and project teams because they're kind of well more identified entities but for example abandons coin he went up 10x in value nobody who really wanted to return it and if they did we said fine we'll just buy it back a market value which is five for us so but the government forced the projects and the exchanges but then they couldn't force the individuals super-interesting so of course like this this sort of brings back the question of why did you go for an ICU in the first

place why not venture capital so when we first saw him I think we kind of conceptualized - in the end of May in 2017 early June so when so at that time the first person actually the first outside person I actually talked to is Tahoma say the founder of Neal he's a very good friend of mine been my girlfriend for like a few years and we were early block Chandler's in the sort of Chinese community scene so we known each other for quite a few years so he was actually the trusted so he's the first guy I spoke to you and they said look Jose I'm gonna I'm thinking about doing this exchange krypter krypter exchange I think that's pretty much all I said and he said okay

I wanna invest and so he he was the very first investor in our organization in Barnet and so he so at the time he we were thinking about going to scoot through the VC route but then at that early June I saw another project could do you an ICO in China and I know the founder quite well and he raised 15 million dollars in ten days and then mid-june I went to I went to a potluck dinner organized by one by Chandler Gore Inchon Chain in China and every everybody there is talking about I see everybody there said see CZ u gotta do night you should do the ico instead of doing vc funding and when

I saw the the other IC o---- done in early June in ten days I know the funder really well I thought to myself wait a second if this guy's if this team can raise fifteen million dollars in this period of time I'm relatively confident I could as well I mean from a reputation for my execution from all just from all around I think I'm no worse now than that team would you say it was a relatively easy IC o---- for you to do and easy to raise the the 15 million so IC o---- process was looking back was all relatively smooth to be honest but I wouldn't say it's easy it was one of the

most demanding two weeks of my career I think so just give me your idea I lost about six kilos in that two weeks so that's just my body weight so I didn't I didn't sleep at all and so what happened is basically on June 14th on the potluck dinner everyone's like okay season you gotta do now I see a set of fine I'm gonna do now IC o---- so after that dinner I made a call to my team who who's losing a different location and I just said okay we're gonna do an ICU and let's start writing the white paper now and we need both Chinese and English versions and it was I think that was about 11 p.m. and we

kind of continued until like 4:00 p.m. or 4 a.m. and as and then we continued the next day for the next two or three days we were just writing this thing and we were writing the English and Chinese version at the same time but you by June 17th those three days later we had both versions ready and without the devisor section so and then I started emailing diverging out to all my initially advisors I think I got about 20 of them in about 24 hours they they basically all said fine up I'll be your advisor and then we started doing our IC o---- and we did five sessions each session lasted about 10 to 15 minutes so in total we spent internalist the fundraising time it took us about

really literally a 6 an hour-ish in total time to raise about 15 million but it was spread out over two weeks but we wanted to raise most of money our own platform so we actually program that platform we we we measure people who register our platform first we'll get the ICO and occasions so we did a lot of programming we did the initial site with a user database and everything else doing that two weeks we actually had a look at a couple hiccups as well and originally I thought about doing a around the world tour like going to San Francisco New York to do like row shows going to Shanghai Shenzhen Tokyo we ended up not doing a single row show so we studied off I

stayed in the office the whole time so instead we did a few like live streams so we just used the internet basically so we didn't really sleep much and there was a lot of just so much stuff to cover we had we started with a so we had a team of about 30 people enough for like 35 36 people so we used that team to do this thing but then there were so many questions from users we created I think we created about 10 WeChat groups each group holding above only 500 people in about three days and there were just like so there's just so much there was just so much going on so that was a from

a demand from a workload demand perspective I think that's that that's one of the toughest periods in terms of workload no just so much going on in that two weeks but the good thing is in two weeks you rs.15 mailing you're done and so you at least you now work you're not too worried about money anymore so it's a very intense experience but I think for any serious entrepreneur who is serious about that project that experience definitely worth it so you basically went from potluck dinner people talking about ICO and you're like okay I want to do that and there was that do that the next day or the same day and then three days of white paper writing and then and then the ICO or like and so they did time from dinner to

to ICO actually running was how long so I got I go back to the hotel about 11 p.m. and I called the team said we're gonna do that we're gonna do the ICO and to be honest some of the team members said what's Nicaea and actually so before this before our own I feel I've never participated in ICO I've never done one I've never done a device one I've never I've never bought ICO coins before so to me like it was new but I kind of at least kind of knew what I see oh yes but to some of the team members like who said how can please by the police contribute to the white paper they said what's the ICO said well better read the body quickly so so but we got started on

this we got we got started on the same night and we just worked on till morning and it was really honest three days later after about seven iterations of the seven major iterations of the white paper we kind of we were happy with both the English and Chinese version so and then so that was so the potluck dinner was on July on June 14th and we finished the IC on July 2nd so that that's the whole process from the from the from the minute we decided to do it to like having 15 million u.s. dollars equivalent of crypto yar in our wallets and there's actually a couple guys who who are very influential in that decision-making so I met Chris mana the

founder of Monaco in on the potluck dinner on June 14th in turn do in China I did I did not know him before then so that's the first time meeting him he said he's been here he was in the middle of his IC o---- he's already raised about 50 million u.s. dollars Hey I think his target was 20 and he said look you from his decision to execution it was 10 days so he said you can definitely do it in 10 days I was like seriously so that was like evening that was like optimal evening on June 14th 2017 so and he said no seriously you can do it and I talked to a bunch of other people they all said you have let's do

it I think this is a little bit of the answer to like how did you manage to grow a company you know within like less than a year from nothing to you know 200 million revenues hundreds of employees is like that speed of execution and decision making is just absolutely insane extremely impressive to like you know so quickly make that decision move quickly no time loss on on anything so yeah hats off that's Inc that really as something right yeah so I can elaborate on that a little bit if you interest it basically so one of the things that I think is very critical is

we really don't don't waste a lot of time on decision-making we spend most of our time on execution so one of the unique structures in our team is people did give me a lot of respect and so you basically usually when I make a decision people just execute so and they're very strong in execution so they get things done and they infusion so much faster than usually when they say I am done with something it's usually before I think they could be done with it so they they usually they're very strong and the execution side of things so we have a very simple decision-making process and we don't really dwell on it and once we decide we just execute so that has

always been the the bynars model the other thing that's very important is there are a lot of times when we are not exactly sure what - whether something we do will be beneficial or not but we would experiment we will just do it and and then some and then some a lot of times good things happen so I'll give you another example for example when mota is a country I'm actually not too familiar with before but we heard good things about about that and it's quite far away from Asia so but people recommended I fly there and meet a bunch of guys and fight to find things out but to me it was like a faraway things are unclear I don't really know anybody

there but I flew there to meet the guys and find out and that turned to be a route that turned out to be a really good decision that helped us like literally a month later so there's a lot of those kind of things where you just you just have the X key so that's kind of what we do you mentioned you guys use a very simple decision making process what's that decision-making process so basically I tell all my team if you're very comfortable with a decision you have to make if you're relatively cuffed and about that decision then just make it and just execute if you're not if you're not even not too confident about that decision then ask two or three people beside you whoever wherever that is he might be a colleague he might be your boss he might be your subordinate that's

it doesn't matter and if you're really not sure then ask me and I have a decision-making philosophy that I if I make like eighty percent good decisions is usually okay as long as as long as the 20% decisions are not fatal major decisions so when I make major decisions I usually consult somebody but we also avoid large team decisions so I I specifically say look if you if he if your decision process involves more than like four people that's usually that's usually not good that's usually not a good way to make decisions now you feel like we never have like 10 20 people in your room trying to make decisions that

usually that's usually bad it wastes a lot of time and you make decisions that are usually compromises so we are very so we keep our decisions process very simple and sometimes hey look if you make a if we make a not-so-good decision more technical side ways and all we gotta do is make sure that we come back to our main trunk quickly enough so that's kind of what we do so now like going back to this I co-financed actually took a very unique model with the with the ICO because in some senses at that point you were building a centralized exchange and and

generally we tend to think that coins fit decentralized networks better than no centralized exchange businesses so you bridge the gap using a special model so tell us what what the model for the banners Network token is so I think bonus the bynars coin is one the first one the first token that I know of that's used for a centralized business and and it's used in such a way that we it's not so much a blockchain business no it's not it's not is our token is just the ERC 20 token so far and it's used he has been assessed tied to our project

and actually initially some of our some of the people that I consult is say you probably cannot do that I see all of this because you're not doing a block him strictly it's not a blockchain project you'd build in a centralized exchange which is different I cannot ignore that as a look if you have a digital block chain token that people can trust and if it's associate if it has association with your project and your project as well and this token what rising value I think that model will work so we tie the token with utility on our platform so basically if you hold that okay I need when you use the token to pay for when you trade on a platform we can't deduct our trading fees from

your token reserve and you'll get a 50% discount so we we adopted an early model and later on when we build it when we actually build it decentralized exchange like a blockchain based exchange and we can convert that token onto the native token on that blockchain so we did that and it was a relatively novel idea at the time but I to me the economics makes total sense some people got it right away some people asked a lot of questions but I think so far it kind of worked out pretty well and now a lot of now a lot of people are copying our model which is great we want them to copy like from our token economics model we want people to copy as much as they can yeah and and one thing that you haven't mentioned here in terms of tomorrow

right is that finance the company right balance company makes profits and those profits first of all alike unrelated to the token although I guess some of them are that you directly rate earn revenues in token because people pay less fees if they pay the fees in the token and then every quarter you spend twenty percent of the profits in buying the buy and stokin and destroying it I mean that's also very interesting model why because it's almost like a dividend at least economically of course it doesn't have to downside of a dividend which is dividends is probably like taxable income for the recipients whereas this would be a capital gain paying more and

and so yeah and of course it directly ties the value of the token to the success of the company which is clearly very powerful so yeah I think the token economics make make a lot of sense of what you've created yeah so actually a lot of people didn't understand the burning part so that's a very interesting aspect of it because the advance people the advanced users or they blocked the savvy investors understand it right away but there's so much misconception around it the burn so every quarter we use 20% of our process and we burned that equivalent value in banos coins so as you said that removes

a lot of the problems like the taxation the distribution mechanism we have to pay network fees transaction fees so when we destroy a portion of it but financially it should be identical to distribute that dividend to other people but then we are mechanically it's not a dividend so we are we of course always free to destroy our own coins anybody can destroy their own coin if they if they wish to when you destroy it your total supply goes down and the balance coins still have to represent the value was you was representing before so this is the exact opposite when you print more money right so when you do quantitative easing you're literally

basically taking money away from everybody's people every person's bank account oh and if you did bad people complain but when you print more money people don't complain for what up for whatever reason which I kind of don't understand yeah so that's kind of our mechanism to spread the benefits of our profits to the to the user but without actually doing any good without doing it the actual sending of money we just burn what we have and that works out quite well so I'm surprised not more people have copied that model many people copy the buy back but they don't burn which is kind of cheating so but to me this raises an interesting question so presumably like you have your company

and that has shareholders and then you have the token and then there are token holders and ultimately in your model it's like if $1 is big is coming into your company as profit this dollar must now be split into two communities the token holders and the shareholders right like 20% right now was the token holders and like presumably 80 percent goes to the shareholders but in reality for the shareholders is reinvested in things like that so now you have basically like these two communities and their interests might not always be the same so doesn't this model like create the basis the fault line for a future conflict between these two communities

there's two points here I kind of want to touch upon one is the shareholder versus coin holder situation so the coin holders hold the coins and we use our the profits go into the company and we use twenty percent of it to burn and we which basically destroy that which benefits the coin holders in an indirect way but very financially applicable right but for the shareholders they retain the other eighty percent we retain the other eighty percent in the company and we either reinvest into the company development or later or at a later stage we may actually do a dividend payout so which the shareholders will get directly and also

the shareholders get a few different things for example balance is a company and if we if the company evaluation goes up the shareholders are benefited the coin holders they hold the coins if the coin value Rises up so there so there's a couple of different dynamics right so basically for example if the platform is doing well and one of the key metrics of doing well is the number of users so let's say the number of users increase quite a bit so now the Trading Commission's that's that's there has to be sprint and there has to be spent on the platform increases which increases the utility value of the balance coin the bynars coin price will go up when

the balance point price goes up the the amount of coins that the team holds will go up so the value to the increase the value to the company for the shareholders the platform value also goes up so there's another there's another benefit to that so there are different dynamics at play but the shareholders don't have the liquidity of the coin holders so the shareholders they cut because we're a private company and they don't have that kind of liquidity where's the coin holders they can pick and choose to sell that coin said at any time on our exchange so there's some interesting dynamics people still don't really quite understand and to be honest I think we're still in early stages in this cut in this type of structure

the in terms of balancing the benefits I think that's a very simple thing we very clearly promised what were the benefits of the bynars coins are and we we honor that very strictly so we got we got to make sure that we honor that and usually probably a bit more so we give incentives to our coin holders very often the basic part of it is obligation right so we make a promise we've got to keep it that's just integrity credibility that's very very important and then we all we overtime we do other stuff to you to sort of help our community grow that's you can consider that as marketing dollars or helping the community have

recall it including the amount of money that we said we're gonna cover the differences for the ico returns the six million dollars so but that's a decision that as a company we as a company operation we will make a celebration team so how we spend our company money which affects our shareholder interests but that's a very common typical that's like that exist in any company that doesn't do niceö so for me the the separations are very clear and the different aspects of the balancing the the the benefits of the of the two parties are very easy to do so that's just you know our structure you know are the structures you may be a little bit different so we'll see

maybe maybe I can explain a situation and and see how you would how you decide so so in in any balance sheet right in the in any account statement so there's the account statement the balance sheet and the cash flow statement so that's true for your company now let's say it's the year 2020 and you're making your account statement so it's it's early on in the year and you're deciding you're making decisions that are going to impact the account statement for 2020 how much you are going to spend for research and development can determine what ends up as profit so let's say

let's say you make a revenue of right now it's eight hundred million dollars interval so let's say you make a revenue of two billion dollars and whether you decide to spend two hundred million in R&D or five hundred million in R&D is going to determine what gets left as profit and and then whatever gets left as profit twenty percent of that goes to the coin holders right so in some senses like you as CEO have have decision-making capability on R&D that is going to determine how much actually goes to the coin holders now the shareholders obviously want you to do more in R&D because that might

create a future product unrelated to the coin holder so let's say let's say you have a different product idea that is not related to the coin holders at all but that will benefit the shareholder so the shareholders want you to do more R&D but the coin holders rationally wanted you to do less R&D because that is greater profits so I think in that kind of situation what you described there is a very short-term revision for the short coin holders so well I think there's two things right so we should not be if we're spending the if we spending our profits on some other products unrelated to our coin and so that that benefits our shareholders later and that does not

benefit our coin holders that's not good so that's just unethical in my in my opinion so that's why you will see that we actually have included many other businesses in banners and all of them have used by us coin so we did not do another ICL we did not do so we actually have a media platform we have a ICO platform we have a so we saw all of our new businesses are directly tied to buy this coin so so I think basically you should you should not use the product we should not use our profits from from our exchange to do some other unrelated business that does not benefit our

platform now or basically our coin I'll call holders what you the second thing you describe is the coin holder just want the price to go up without any without a student any R&D work that doesn't really make sense because if we don't invest in our product if we don't we don't make new features we if we don't keep our products competitive and if we don't innovate over the long run the coin price won't drop right so basically let's say we just keep that platform with use we if we go to wine stream you'll be quite easy to understand let's say that we do no R&D that's not good for the coin holders so let's say we fire all of our developers and so now we can say we can save cost

so now our profits will go up but guess what we will not be competitive the balance - don't come we'll stay exactly the same we just keep the operation team and hoping that this way you will you'll give us the highest profit for this quarter but guess what happens next quarter our competitors gonna continue to improve and everybody's gonna go to them and let's say we we say what can no we want the maximum profits so we don't want to reinvest we still don't hire developers over like a couple months later nobody will be using our platform guess what's gonna happen to the coin price it will drop to zero so I think in that in that cut so in what you describe is just a long term versus short term gang and that applies equally to coin holders and shareholders

and if both of them wants the platform to be bigger but wants the platform to have more users are more valuable when the platform does that both the coin price will go up and the shareholder value will go up so I think that this is from ie in the current situation for balance I don't I don't I don't see we have that problem at all so so that's kind of my view on that issue that makes sense now we talk a lot already about bye Nance now let's move a little bit to some general topics now in particular one that's very interesting is the topic of regulations so you started in China right so regulations even early on shaped the company I think that it kind of shut down your customers

and then you decided to start finance so Kenny can you just run it through like what are the different ways that regulation has kind of shaped the course of fine finance up to this point sure I think different regulations affect us different ways basically we have always adopted a stance where we will not go against any government will not go against any regulation we will always be operating legally in any country any jurisdiction so if a country does if a country's regulation are shaping so that it does either does not allow cryptocurrency businesses or exchanges we will simply move we will

move to a different country so and we want we are looking for countries that have favorable regulations interestingly some of the negative regulations actually helped us a few times so when when the Chinese regulation said no more exchanges in China the shadow or the exchanges in China we luckily moved out right before that and that was a very lucky decision to be honest and when we stayed alive actually a lot of users came to our platform and that helped boost our initial initial user base and then recently this year we are seeing a lot more countries who are realizing that favorable regulations towards the

blockchain industry would encourage economic development and now this year we're seeing a lot more favorable regulations coming out so now exchange is a leak their legal exchange licensing in many in many countries now including the US including many other company including Malta including Bermuda including hopefully soon Taiwan so now we have more we have a lot more choices to go or including like Africa Uganda right so the regulatory space is actually very very important but I think we have come we have we have some past the point where different all countries review blog Chan or crypto as negative I think now a lot of countries realize

that this is positive so now I believe we will see more adoption of will see more regulatory adoption and more positive regulatory changes in this space which is going to be extremely beneficial for balance so for biomass we are looking for countries who have we always look out for countries who are extremely positive towards bloodshed so Malta extremely proud past and I think Bermuda will become very positive very very soon as well so yeah so I speak before there was always a risk factor to us like people kind of worry about regulations killing this industry but I think that worry can be pretty much that worry is gone right now the it's just a matter of speed how

fast each country adopts block share regulations that are favorable and I think that's good there's going to be a lot of competition among different jurisdictions so I think which will be very good for us so I certainly agree if you write that a lot of different countries will see this as an opportunity right to attract business and and so that we will not have that liking to the whole world and all the countries say no but if you look at the US where there have been a lot of attention around regulation right did the u.s. sound of interpretation tends to be very broad and now if you know they say like okay let's say somebody has you as customers you know US regulations apply to them and particularly if the ACC there seems to be clearly the trend that they will treat many if not you know the vast

majority of token sales asks you know securities and you know maybe down the line tokens can become you know non securities and tradable but you know of course securities means you know accredited investors registration all kinds of stuff like that so here it's like how do you how do you deal with that by Nance both regarding by Nance token but also regarding many of the tokens that will be traded on the platform you know they have that risk of you know potentially being classified as a security and then of course potentially having a regulatory risk towards finance the company sure so for the security aspect of it we take a very simple approach we just ask

projects teams to supply a legal opinion stating that they are not a security so we live we leave that legwork to the to their lawyers so they need to find a lawyer in whatever jurisdiction there there are operating or they teams are operating and they basically gotta have the legal opinions and they they're not a security even that can sometimes have issues because for example if they if the lawyers in one one location and sometimes a different jurisdiction different location may not honor that that lawyers opinion and then we were asked the project team to say hey look can you get a second lawyer's opinion if even need it so that have happened so

far that have happened so but that's a relatively easier problem for us to solve the your previous point about basically for example a lot of the regulations right now today are overly strict and overly complex I think what people do what people don't realize just yet is you can't just copy the existing regulations into crypto the abbé approach is almost guaranteed to not work well so it's a very simple analogy to it you don't want to copy how you run a postal office into how you run a email web or an email server alright so those

are two different businesses you can't just move one set of management practices into the next one so you can't manage internet business the same way as you manage a traditional say factory so but I think the different rig and different regulators are now slowly understanding this so I I personally believe that the regulations have to stop although the regulator's or the regulatory approach have to adopt a new industry so you can't just take the old one to the new one unfortunately there are different forces at play of course a lot of the regulatory bodies or the regulate the regulator's they a lot of them may want to retain their

power they influence etc so there will be some missteps in this in this endeavor not everybody is gonna be making perfect decisions every time but that's but I think enough people will make good decisions they ended and the competition will keep the industry going so that's just how I EV Ellucian works so I'm pretty confident at this point basically what specifically attracted you to Malta initially it was a it was it was one of our users or friends who ended me to go to Malta meet with a bunch of very firm relatively senior people so I went there but after going there it becomes very very clear mota understands the importance asked leading

the next FinTech revolution so they understand so Mota has traditionally been a financial hub they were very forward in terms of multiple financial regulations including the gaming online gaming industry which including the online poker gambling industry as well so they kind of understand that this type of industries and and this traditional traditional finance industries has been a little bit of a decline recently around the world and they kind of felt that that felt that as well and as a relatively small country with limited natural resources they kind of they understand they need to they need to leverage their own management leadership

or basically management of the country management of this rate of the industries well to be able to be able to compete so they understand this meant they have this mentality they need to service the industry so when I went there it was it was very clear from the prime minister down to the firm in partying you empowered to the opposition party and we were from to the Ministry of Finance to the Parliament secretary everyone wants to make this work everyone everyone knows the importance of Harper Lee house Lee grow this blockchain industry so they so when I went there different to many other countries there was zero education that I have to

do I don't have to tell them why what is a blockchain how how transactions work what is the token they understood all of this and more they know that this is important they know this is good so it was quite it was over it was a very easy conversation and after going there and seeing the the proposed bills that they had in place after reading that all the all the comments we I had to give them was - you gotta make this place a little bit stricter he can't be too loose here so they were overly easy actually on the regulation so he was it was quite a easy there was quite a easy decision afterwards very interesting so actually like this is the interesting piece that now with

bit by Nance I I hope by nan succeeds an order of magnitude bigger and and we actually have you know like a multi-billion unicorn company that came out of an ICU and so you know like because like these things will also set examples for for the future right so from that sense also I think as time progresses and successes like finance emerges may be the value proposition is easier to communicate to regulators as as well one of the one of the final topics we'd like to get into on this show is the topic of decentralized exchange and finances plans up there in so like many people think that in the

medium to long term at least in the cripton to crypto space exchanges between users will be decentralized rather than centralized as they're today what are your thoughts on on this topic and where the future lies or Kripalu crypto exchanges sure so just pick on back on our first point a little bit yeah I am very unlucky we to be to have - be the example people look and follow and learn so that's a really good thing so we're very happy for that to happen and I really want to see more and more unicorns going through this model and I think we will see that very very soon I think we're gonna see many unicorns

going through the ico model which may or may not be blocked and based project but the more start up the more unicorns they are the more the more quicker our overall economic our technology advancements are so I'm very hopeful to that in terms of decentralized exchange ins I think both centralized exchanges and decentralized exchanges well you could test for quite a while I think the centralized exchanges in concept is quite good but in in in practice or in print in real life there are some shortcomings in terms of Technology what the technology capabilities are and you will take a

while for them to fully eliminate centralized exchanges so for balance we we are doing both but of course we do the centralized one first so many so conceptually decentralize exchange have many benefits the exchange does not have the whole custody of the users found the user can stay anonymous the chance everything happens on the blockchain so there's no regulation or that's very there'll be little regulation so it's more it's free or is that this higher degrees of freedom but in reality the current when you have a blockchain that means there's a network computers that

need to synchronize with each other that itself by default will be slower than a single computer making a decision save save the results and you done so for the foreseeable future the centralized exchanges will always be faster and also from a competitive point of view say if we want to do a decentralized uber right so technically it can be done I think what conceptually can be done but guess what if we have a centralized uber right now if the decentralize wants kind of momentum that centralized one could say we're gonna run a campaign we're gonna rebate ten dollars to for every right before every ride you take and the decentralized one it's gonna be kind of hard to do that so he with a decentralized organization you have to

really plan ahead how your ecosystem works and you can't do this short-term quick adjustments on marketing campaigns free gifts and a lot of this stuff so technology wise until the decentralized exchange it becomes fast enough they will not have the liquidity that's a centralized exchangers deal and liquidity matters a lot when you trade a high liquidity exchange where there's a very deep books when you have you can buy and sell very large quantities without moving the price and which will basically save you a lot of money so for the short term centralized exchange it won't be there and there were serve different purposes over the loan over the long run I think eventually

decentralized exchange probably won't become the norm when the technology gets better so and we were very happy for that to happen and we are making our own decentralized exchange yes so we have multiple implementations are very decentralized exchange and we're actually promoting other decentralized exchange different implementations as well so we want others to try to disrupt us and at the same time we're trying to disrupt ourselves so we'll see how that goes but I think that's gonna take a few years so this actually does kind of tie into something I wanted to ask about before but then then didn't didn't get her so you mentioned okay let's say you had a design choice uber then some of the decision-making let's say marketing

spend you know gets maybe more complex and of course there is the idea of having you know decentralized autonomous organization basic entire organizations where then coin holders can you know participate in the decision-making and do you think in the long run actually by Nance as a company will also move towards a more decentralized model so that you know maybe could be fully decentralized yes absolutely we are trying very seriously to turn finance in from a calm into a community so I but I think the transition will take some time so we first turn into from a pure company into

like distributed teams distributed people or working around the globe on violence the second step would be let's say we we would want our by nest chain they did our decentralized change imitate implementation to be lives first in the earlier cut in the earlier versions that some of the decision makings or governance of the development may still be live very heavily with the core team but over time we actually want to shift a lot of the governance out towards to the community so even today even our centralized exchange we rely on a very large number of volunteers will we call a balance and Joe's to sort of run our come to run our community and our ecosystem really so we are we are

exploring multiple ways both in the centralized and decentralized models to be more decentralized to be moral community based so I think that's gonna be a theme we will continue to push and in my in my mind I'm really hoping five five or ten years later it will be a fully decentralized thing where hopefully I don't have to do anything just hold my coins and do video interviews here and there and the whole thing bus itself I'll be very happy so that's kind of the ultimate goal so like you mentioned that finance might disrupt itself right like you might like invest on decentralized exchanges and

build some of your own do you have any thoughts on what the design for your decentralized exchange would look like sure so for so we encourage almost every kind of a centralized exchange and we'll list them we get we'll help them get liquidity we promote them but for the bonus chain my philosophy is quite simple we want to do a chain that issues tokens and trace tokens so those are the two main features we want to do so so from my perspective I think that's that's very important so our chain would not have a lot of complicated or

advanced features like a lot of this other chants have like really strong smart contracts different made-up made-up platforms sigh chants the demos demos its bells and whistles I think the bionis chain will be more focused on the actual exchange feature so we want to be able to trade one token against another but we want to focus more on performance and speed it is my belief that for exchange performance is probably more important than features I mean today even if you look at by net exchange we actually have less features than some of the other exchange platforms but we are fast and people like the fast faster aspects of it so

that's kind of you know not you know very at a very high level the design decisions that's driving our Chan design okay so you you actually see the a banana chained and also functioning as kind of an IC o---- chain where you can issue tokens you know maybe a little bit like need hearing me if a year C 20 standard which has been very powerful in issuing tokens in doing I see rows so if you could do that on the finance chain and I know you guys have done some work in helping people do I cos then you can issue them on there and trade them straight away so that's exactly the idea so with the etherium you can do a lot more other stuff the smart contracts solidity you can do a lot of other stuff

so our our m is more for more of a specialized chain where it's issue tokens and trade tokens and so we will not have all the bells and whistles of the etherium but we won't we probably want our blockchain to be faster in terms of a higher capacity in terms of processing capability well this is fascinating so let's let's do one last thing one last question kind of before we wrap up so what do you falter on on the kind of crypto markets like where do you see things going in next year do you think we're going to see a lot of grow for how is regulation gonna affect this like what are your kind of expectations for out of the space will evolve sure so I think in terms of regulations as I said

just a little bit earlier I think we'll see more and more countries adopting more and more favorable regulations and more and more and more smarter regulations or more fit regulations for the for the blockchain industry so I think this will be extremely positive for the entire industry development and progress from a echo from the ecosystem side I think we will see a lot more coins so I think more and more projects are gonna a lot more projects are gonna use I CEOs to raise money than traditional VC routes so as a result of that we're gonna see a lot more coins with a lot more coins we're gonna need exchanges to provide liquidity to all of this coins or change between the coins

so I think exchanges will continue to provide a very important role I think we're gonna see a lot more exchanges as well and the other thing that's in the in terms of the ecosystem we need we need to see a lot more wall right now I think there's still a lot of recruitments or room for improvement in the wallet space we need different type of wallets hardware software more secure industrial wallets that can handle millions of addresses millions of transactions in one installation so so we so that that aspect of it I think that we will see a lot more bullets I think mining is probably my name is an industry I kind of understand but don't

really know them in detail and it's a very big very important industry so I think people with things will continue to happen there but I'm not an expert we we should see a lot more payment gateways a lot more merchants a lot more merchants adoption so I think in all of this areas we'll see a lot more growth I think basically the current exchanges are gonna get probably a hundred to a thousand times bigger over the next few years so and I think that's mainly gonna be as a result of the industry getting 100,000 times bigger and when the industry does that the coin price is probably gonna do stimulus things so I

don't I don't really want to make any like sort of hard predictions on where the coin price is going to be but I think we have a lot of room to grow cool fantastic well thanks so much for coming on there was absolutely fascinating interesting conversation and loved learning more about finance and what you've built there so thanks so much for joining us today thank you very much for having me here it's a pleasure so of course we're gonna have show notes so links to buy Nance and and some of the resources around finance if people want to learn more use the platform and trade on that so there will be lots to check out and there thanks so much for listener for once again tuning in so we put out new episodes represented every week you can subscribe to the show on iTunes

SoundCloud your favorite podcast app or watch your videos on youtube.com slash episode a Bitcoin and yeah if you want to support show you can leave us night miss review and otherwise thanks so much for the quote being back next [Music] [Music]