Cryptoverse Weekly #4: Binance CEO 'CZ' speaks, BNB token appears attractive

Binance CEO ‘CZ’ Interview Notes

Binance CEO ‘Changpeng Zhao’ (CZ) spoke in an interview with Bankless. We summarize his most important comments below:

We [Binance] don’t want to become a (JP Morgan) bank nor Facebook, we don’t want to hold people’s cash, or their data; in 5-10yrs decentralized exchanges will be bigger (than centralized); trust wallets are very heavy investments of Binance; we want to be like Google but for Web3 world in providing a number of tools; Google is way more than just a search engine.

Binance wants to be the infrastructure tools provider while other exchanges seem to want to be a trading house, just making revenue from commissions; we will not be providing stocks trading, we are a Web3 tools provider.

We don’t have debts, we are still profitable, even today; markets go in cycles, we understood this and have fairly large cash on hand; stablecoins account for 25-30% of our income; we like to save the industry but not all projects are worth saving; no good money after bad money; we help during a liquidity crunch, currently we are talking to 50 companies / projects; we are globally focused; lots of lending protocols being launched in the US last few years.

By the next bull run, we should be able to help billions of people in providing access to financial tools; we want to sponsor more projects to develop more on the BNB chain; need to take more steps to solve scalability; DeFi and gamify are the two heaviest use cases for BNB chain; getting the users in is key; if there are use cases for chains, then there is value.

Decentralization prevents a single person / entity from turning evil; it’s a good prevention measure; decentralization itself is not the goal, we want to develop technologies that give people freedom (including permissionless), ease of use and low fees; we want that other exchanges exist so the industry can grow faster; we as humans are genetically engineered to help others.

In the future, people will be using blockchain with different applications without mentioning it, like the internet now; it should all become natural.

Now is the best time to hire talent; now is a very cheap time to buy (not financial advice); focus on small number of projects you think that will survive; industry is not going away; there are many 4yr cycles (bitcoin halving, US presidential, US stock market, etc.); war, inflation, political division are all supporting blockchain adoption; expected BTC to go much higher last year.

In the blockchain world, it’s not so difficult to achieve 10yrs of runway for companies; Binance coin $40bn market cap, our team portion was double-digit billion dollars; many crypto companies could sit on this very large cash reserve; our reserves will last us many years.

Half of the people we hire are engineers but also in customer support; 6k employees currently but want to have 8k by end ’22; bulk of our revenue is a trading fee; the rest is tiny.

I take work seriously but don’t take yourself seriously; want to retire within 5yrs (10yrs CEO is long enough); structure within Binance is very dynamic.

The Binance Ecosystem is Growing

In the beginning, the BNB token was used to reward loyalty through discounted trading fees and for running a validator node while the BNB token now backs the Binance Chain (implement the vision for a decentralized exchange) and the Binance Smart Chain (modified proof-of-staked EVM blockchain).

The Binance Chain (rebranded as BNB Beacon Chain) was developed to optimize for high transaction throughput for a decentralized exchange experience while the Binance Smart Chain (rebranded as BNB Smart Chain) introduced additional smart contract functionality.

Both blockchains merged in Feb ’22 with the Beacon Chain becoming the Governance layer with a trade matching engine while the Smart Chain became the EVM consensus and execution layer. Validators receive rewards from the gas consumption of transactions, not in the form of new issuance as other blockchains reward their validators.

BNB Chain (BNB) currently has a market cap of $35bn while the network counts 252k average daily new unique addresses with 5.2m average daily transactions. Year-to-date, total revenue stands at $285m and with a circulating price-to-sales ratio of 104x.

From a pure ‘valuation’ perspective, BNB appears expensive vs. Ethereum (market cap: $136bn, average daily new unique addresses 95k, average daily transactions 1.1m, total revenue $3.7bn, and price-to-sales ratio of 51x).

Binance does around $10bn in trading volume per day vs. FTX $1.5bn. Binance has a broad network of 9.1m Twitter followers, compared to Coinbase 5.2m, FTX 660k, Bitcoin 5.4m or Ethereum with 2.6m.?

BNB tokens can be staked, vote on governance issues, participate in token sales on the Binance platform, provide liquidity (Binance Liquidity Swap) and pay transaction fees. Binance has also evolved so that BNB token holders can make credit card payments as well as process payments for travel and use them as collateral for loans.

BNB has also introduced an auto-burn mechanism (initially 20% of the quarterly profits were used to buy back BNB tokens and burn them, therefore removing them from circulation).

Therefore, the BNB token offers various use cases, appears to be ahead of the Ethereum Merge with its implementation, offers a deflationary burn mechanism and with the recent ‘macro-economic/central bank rate hike’ correction, the current price level appears to offer an attractive entry price.

State of the Digital Asset Market

The global crypto market cap today is $0.95trn, a +3.9% change in the last 24 hours and -3.4% during the last 1 week. Total crypto trading volume (24h) was $73.8bn (decrease of -17% last 1 week). Total Value locked (TVL) stands at $75.2bn, this is an increase of 2.17% (24h) and -0.8% over the last 1 week. Top 3 stablecoin market cap ($139.6bn) is in the 0%ile range, coin volume ($55.2bn) is in the 43%ile range (last 3m), WoW -0.2% or $-0.3bn. The NFT market cap (top 100 projects) stands at 3.78mln ETH or $4.33bn, a decrease of -1.2% over the last 1 week.

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