Binance

Binance is a cryptocurrency exchange established in 2017. Since then it has gained an enormous popularity amongst crypto traders and investors, with millions of trade orders being executed on a monthly basis. In this post we will explore the expansion of Binance and developments that have led to the rise of the tiger.

Strong Leadership

ZHAO Changpeng

Leadership is amongst the key factors that many seems to overlook these days. Its CEO and leader, Changpeng Zhao, did not just jumped right into the creation of Binance. In 2005 he also founded Fusions Systems, that concentrated on the development of high-frequency trading systems for traders. Later, in 2013, Zhao joined Blockchain info wallet team. He also had some experience at OKCoin, though it wasn`t long. But the experience and knowledge of trading mechanism and cryptocurrencies intertwined between each other, leading to the idea of Binance.

However, it is not just the idea of cryptocurrency exchange establishment. It is the vision, approach and customer experience that were amongst the most important factors embedded in Binance.

It is also important to note, that Binance, like any other company, had its difficult times as well. In 2017 Binance had to move its headquarters and servers out of China in response to cryptocurrency clampdowns. Regulatory supervision and interest from governmental bodies, like any other bureaucracy, is another factor limiting growth of any entity, taking into account that Binance serves clients worldwide. KYC side of business is a major headache, given that all countries regulate cryptocurrencies differently, sometimes providing absolutely zero guidelines. But what if a client is engaged into fraud? What is the best recipe so the company wont fail and prove itself incompetent to verify its own clients and remain law compliant? The answers for these questions had to be found immediately.

Somehow, Binance found its way through. Was is Zhao on his own or a team of his experts suggesting him the right thing to do- this is beyond our knowledge. But the fact is- leadership is on of the main determinants of the success of Binance.

Consumer choice

When you go to Binance the first time, it may look a bit scary when you see all the different trading pairs and crypto-assets available for trade. The choice is really huge. Binance has all the major cryptocurrencies on sale, such as Bitcoin, Ethereum or Litecoin. It even has some rare ones, which you`ve probably never heard of, such as WIN or GTO.

Choice is a really important component, as it gives traders and investors a great variety to choose from when it comes to a long-term investment or trading, such as "riding a wave" and flipping one coin for another to boost your wealth. Not all cryptocurrency exchanges are able to provide the same variety, and this gives Binance a bonus point. Risk-loving traders can also find their preferred instruments at Binance. Margin trading is open for some cryptocurrencies.

Reliability and trust

It is vital we stress reliability and trust of Binance. There are several reasons that hugely contribute to this fact:

  • Funds are SAFU- term invented by Changpeng Zhao when it comes to describe that all crypto assets are safe, and Binance did not lose any funds due to a hacker attack. Binance invests a lot to improve and monitor its security (however it is still advisable to keep all your funds off any exchange). However, even if a hacker attack is successful and funds are stolen, then there is a "Safe Asset Fund", which will cover the loss.

funds are safu

  • A hacker attack that happened on the 7th of May 2019 led to a $41 million loss. However, the funds were reimbursed out of the "Safe Asset Fund", proving the viability of this fund.
  • On the 15th of April 2019 had delisted Bitcoin SV from its platform. It came after Craigh Wright proclaimed himself "Satoshi Nakamoto". The community did not like this, so did Binance. In a way it is a plausible fact as it shows that Binance does not support "shady" projects, the leadership of which delivering misleading comments.

Binance P2P platform - LocalBitcoin and Paxful Killer?

Do you remember the times of LocalBitcoins? In short, it is a Finnish p2p platform, where sellers sell their BTC via various payment methods, such as cards, gift cards, wire transfers and other. Each seller charges a certain fee for his service. Buyers select their preferred payment method to buy Bitcoin and then find a seller. There is another platform that works in a similar way- it is called Paxful, yet is has a fresher design and functionality.

Both platforms were very popular back in the day. However, times do change and thing quickly shuffle around.

LocalBitcoin has failed to provide any updated functionality to its platform. We have experienced LocalBitcoins both from the sellers and buyers viewpoint. Reviews can be left for any trade, even for an unsuccessful ones, and competitors do use it regularly, which negatively impacts honest traders and reduces their rank. LocalBitcoin support cannot do anything about it. When it comes to a dispute, it takes weeks for a moderator to join a dispute and help decide who is right or wrong. What is evident, the number of sellers and buyers decreased substantially. Waiting time to receive a single "Buy" order for some exchanges has become too long.

Paxful is a slightly different beast. It is designed better and options are located in a much more comfortable way for both the buyers and sellers. However, if you have noticed, when you go to Paxful, on a front page there is a link ( Paxfuls own referral link) you can use so you will be redirected to buy Bitcoins from Binance. Does it mean Paxful has given up, so it decided to cooperate with Binance via a referral partnership? The announced statement on the 12th of December explained this it was a "Strategic partnership enabling 167 Fiat currencies". It is quite difficult to measure who would ultimately benefit as a result of this partnership. It is quite unlikely that those trading at Binance would swap it for Paxful just because they could purchase Bitcoin via their preferred method. Simply because it is times more expensive. If it is an extravaganza currency that is not traded worldwide or an unpopular payment method, you would have to pay at least 10% in fees to the seller. Economically it would not make any sense. Other currencies such as EUR or USDT are already enabled at Binance. So what is the point of using Paxful anyway?

Binance is now providing its own p2p platform and may users are currently using it already. Yet it has its own disadvantages, as there is still a limited number of payment options, as a result it is not a complete substitution for Paxful or LocalBitcoins. Nevertheless, given the technical advantage and vision of the Binance team, it looks like the p2p platform will be improved in the near future.

Payment methods

Binance is also expanding in the payment methods vertical and now accept various fiat currencies for payment for cryptocurrencies, partly thanks to fiat gateway from AdvCash, which Binance partnered with back in 2019. It includes EUR, USD, GBP and other major ones. The most popular payment method to the crypto wallet is by using credit and debit cards. Binance is now able to accept almost all fiat currencies of your local market. On the good note, Binance is not the only one in this vertical. Bit4.Sale is able able to do exactly the same job, as it is the main specialisation of this exchange. Assets such as Bitcoin, Ethereum, Litecoin and many more are available if you wish to buy them with Visa or MasterCard. Over 13 fiat currencies are accepted, not a bad comparison! Additionally, we`ve already compared Bit4.Sale to other prominent exchanges and marketplaces, such as Paxful and BuyBitcoinsWorldwide in our previous post. Bit4.Sale as a whole is indeed a great cryptocurrency exchange!

Staking

Binance currently supports staking for TOMO, EOS, TRX, KAVA, LISK, TEZOS and many more cryptocurrencies. Staking represents a way to make passive income if you just buy and hold these coins. In a way this makes your life easier because there is nothing else you would need to do.

Taking TRX as an example, if you wish to stake your coins off the exchange, you would need to do your own research, read about the SR`s, their policies, how often they do the payouts, possibly use TokenGoodies to calculate your expected return on staking, then freeze your TRX and vote. Quite difficult if you do it the first time.

The same goes for something known as "Savings crypto" service from Binance. This refers to BTC, USDT, ADA and a few more assets you could "freeze" on the platform to obtain a reward.

However, both Staking and Saving on Binance have their own disadvantages. Taking example of TRX , staking is meant to be a community of independent SR`s voting for proposals. But there is no single SR which is bigger than Binance. Therefore, Binance becomes the largest SR with most of the votes. As a result, voting for key proposals may be biased with Binance pushing their own interest of the interest of the community.

Another downside of Staking and Saving is that Binance accumulates large amounts of cryptocurrencies. In the event of a successful hacking attach, which we hope will never happen, Binance may lose a lot of its funds. This may have a profound effect on the price of Bitcoin and other affected cryptocurrencies. The story of Mt.Gox should not be forgotten.

Corporate support

Binance provides timely response for all customer enquiries. This is the case not just for individual traders, but also for institutions. Institutions represent an important integral part for the cryptocurrency industry, some of them are multi-million corporations.

Whether corporates exchange cryptocurrency on their own websites or provide OTC- Binance reacts quickly in response for their applications. This goes in contrast to exchanges like Bitstamp, Kraken, Coinbase, and a few others that also have a renowned reputation. Currently, if you submit a corporate application with Coinbase, the response time may take a week or longer, depending how busy they are. If the same application is submitted to Binance, you`re most likely to hear back within a few working days, if not less. This could mean that Binance is in active search for new clients, hence the response rate is quicker. Or it could mean the support is rather more active and effective. Either way, corporate support is much better at Binance. There is an incentive to apply with Binance, knowing that help is always round the corner.

Competition with "dinosaur" exchanges

The days of Bitstamp, Kraken, Coinbase and alike are ending. These "dinosaurs" have stopped their development and failed to upgrade themselves to a newer level.

There are several reasons contributing to this fact:

  • Client support is sluggish;
  • Fees at times are higher;
  • Order book is not that liquid (if we exclude the market for fiat to cryptocurrency markets);
  • Very few cryptocurrencies on sale.

Name a single feature that Bitstamp, Kraken, Coinbase and other can do but Binance cannot? There is one that we have already mentioned: fiat to cryptocurrency order books are more liquid, this is true. If we compare, for example, the BTC-EUR on Coinbase to BTC-EUR on Binance, there is a stark difference.

This is the reported volume at Coinbase on the 1st of June 2020 the 24-hourly volume, BTC-EUR pair:

Coinbase volume BTC/EUR

The following volume is equivalent to 9,700,000 EUR volume.

The following is the reported volume at Binance on the 1st of June 2020 the 24-hourly volume, BTC-EUR pair:

Binance BTC/EUR volume

Volume at Coinbase is 29x more than at Binance.

This is not just for the EUR market, but also for GBP, which at Binance is absent. As a result, this may be a unique feature of the "dinosaur" exchanges that may help differentiate and keep them afloat. The questions is: "How long it will keep them afloat?" With the growth of rate of Binance, it looks as if the ground will be slowly but surely moving away from them.

On the 1st of June Bitstamp in their Twitter account announced that they will add new crypto-assets to their platform:

Later is always better than never, but this is nothing compared to Binance.

Conclusion

Many of us tend to take things for granted when saying "Binance is super effective and popular and it`s always been like that". The answer is no, it has not. It started in 2017 as a "start-up" cryptocurrency exchange really led by its leader Changpeng Zhao. It had same same chances as any other exchange. Chances to either succeed of fail.

A number of factors that contributed to Binance success are:

  • Leadership
  • Corporate and individual client support
  • Staking functionality
  • Variety of payment methods
  • P2P Platform
  • Consumer choice
  • Reliability and trust
  • Competitive services

In the post we have outlined a few very specific factors where Binance is lucking development, such as volumes for fiat to crypto exchange or early days of P2P platform. Nevertheless, Binance has put an extraordinary effort to develop and maintain its services. Binance has the right to proclaim itself the lion of all cryptocurrency exchanges, at least for now.