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How to face the awkward moment of Web3 today?

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He Yi around Binance recent situation and market investment and other topics to share.

Wang Feng: How to Face the awkward moment of Web3 today?

MarsBit

On January 10, the "POW'd Hong Kong Web3 Innovators Summit" was held in Hong Kong, sponsored by MarsBit and co-organized by Hong Kong Innovation Industrial Park Cyberport, G-Rocket Kono International Accelerator and element.

At the conference, Wang Feng, founder of MarsBit and a member of Element's core founding team, joined Binance co-founder & He Yi, head of CMO and Binance Labs, discussed the recent situation of Binance and market investment.

Wang Feng:Binance has long been the most high-profile company in the crypto industry. Just past 2022, Binance also has two things caused widespread concern in the industry.

One is that Binance Labs founder He Yi has taken the helm of a $7.5 billion venture capital fund, which I read last summer. Previously, on Binance internal senior personnel reshuffling rumors, for a period of time, we outside also do not understand the Bianbian like personnel adjustment.

At the end of the year, FTX and Binance fought against each other. FTX was defeated and the market was flooded with blood, and the founder SBF was eventually prosecuted for criminal charges. However, the market immediately triggered the question of whether the digital currency trading platform should be regulated more strictly and solve the transparency.

So, our conversation today is half about Binance and half about investing. Thank you, Yi He, for joining me at the POWER Web3 Innovators Hong Kong Summit.

In a word, what's your busiest thing right now?

He Yi:At present, the management team of Binance is most concerned about how to build a "sustainable" system. In this process, two problems are being solved: business health and organizational health. If the business is healthy, there will be no failure of the platform even if there is a war of words. Second, the health of the organization. Currently Binance team consists of 8,000 people. We need to coordinate to ensure that everyone understands the corporate culture and has the same behavior and goals.

Wang Feng:While you're marketing the world's largest digital currency exchange, where you have at least two-thirds of the market share, you're running a multi-billion dollar venture capital fund. These two aspects are the management of money, people and affairs, if you want to do well, in fact, neither of them is good.

As far as I am concerned, the former attaches importance to taking the lead in battle. The external environment of the industry and the internal market of the digital currency trading platform are full of variables, risks and challenges. It is necessary to study both users and market rivals (enemies). The latter tend to look far away, do the VC people are holding binoculars, looking at trends and opportunities, research entrepreneurs. Moreover, the investment opportunities in the crypto market, mainly in the underlying technology architecture and the next application field, require more time to study the technology trend. So,How do you balance your time?

He Yi:It's common to have 16, 17 meetings a day. I'm more concerned that my time is spent more on solving problems and learning about user needs in the community. When it comes to responsibility, not everything has to be done by hand. We want to follow the principle that "professional people do professional things".

Binance team has been expanding, mainly in two directions, one is to recruit top talent in the world, find suitable candidates to manage the team; The second is to look for young people with potential and in line with Binance values. The most basic requirement is to look for integrity, followed by ability, enthusiasm and way of thinking. Only by building a complete management team can we ensure the healthy and long-term development of the organization.

Wang Feng:Is the working time of marketing and Labs divided 50/50, or which side is more important?

He Yi:These two parts only take 1/6 of the time, because if the team is professional enough to make the right decisions, they don't need to spend too much time themselves. I would spend more time nurturing young people.

Wang Feng:The division of labor between you and Zhao Changpeng, what things do you not touch? What does he not touch? Is there anything very important that neither you nor he touches?

He Yi:CZ and I focus on essentially the same things. It's basically the two broad directions I just mentioned: the first is organizational health, and the second is business health. When the volume is larger, there will be more business, and when there is more business, the organization needs to coordinate. Because he is the CEO, he must be in contact with a lot of things and people.

Wang Feng:2022 will be a tough year for the Crypto market. It is hard to imagine that many trading platforms/institutions would collapse, both from the perspective of market participants and individual investors. Did you anticipate the market's decline, or do you think it's a foregone conclusion?

He Yi:Not really. Sometimes people think we are like a lone Wolf, the main reason is that Binance is more of their opponents, in the process of constantly PK with their own. In fact, every industry has its cycle, just like the development of the Internet industry, it has to experience explosion, bubble, trough and recovery. Binance mainly hopes to find the right direction in the industry and help more ordinary people.

Wang Feng:Did you see the FTX ending before it collapsed?

He Yi:I didn't think FTX would be this crazy. Initially, we saw the Coindesk article, which presented information that was highly negative for FTX, but really didn't expect to misappropriate user assets. At the time, I also thought back to my friend who said that a nice CEO of FTX US had abruptly left and that this was not a good sign. Because of the transparency on the chain, as soon as we started sorting out the assets, people on Twitter started asking, "What is Binance for?" . At the time, CZ thought there was a need for warning, so he posted the tweet without thinking.

Wang Feng:I think Binance is a conservative company.

He Yi:Binance is a company with a strong sense of risk control. Although the regulation varies from region to region, we have been self-regulating. If Binance team members are not allowed to speculate in coins, they must HOLD assets for 90 days after buying them before selling them.

The internal audit of Binance is very strict, from top to bottom, and no matter the level of the staff, the requirements are consistent.

Wang Feng:"Too big to fail" does not seem to exist in the Crypto market. What advice would you give to someone who comes from the Internet and wants to start a Web3 business?

He Yi:Back to the beginning, I think it's important to know what the essence of business is. In fact, there are three reasons for the success of any business/project: increasing efficiency, reducing costs, or finding new applications.

Uniswap, for example, has a remarkable record in the market. It succeeded because it invented an automated market maker model that greatly increased efficiency and reduced costs. So if you innovate enough, improve efficiency and reduce costs, you have a chance of success, which requires you to really solve the problem from the essence of the business.

Many people think that making money on Web3 is easy. In fact, whether it is public financing, or attracting users to buy coins, its essence is to overdraft personal credit, credit for money.

Some people only see the present, do not see the future of the sea of stars. It is impossible to run away with the cash burning mode of Web2 market, and it is also impossible to run away with financing and retirement. In this industry, we should have a long-term belief, do a good job in products, innovation and problem solving. The more solid it is, the more successful it will be in the traditional sense.

Wang Feng:There was a buzz word in the market last year: Rug, which translates to "run." I've observed that this usually means small companies. At present, there is "FUD" in the market again, mainly referring to large enterprises. I observed that some time ago, there was a "Binance FUD" in the market, and users were also worried about the safety of their assets. I want to ask,Does Binance have a mirror in its own world? How do you see yourself?

He Yi:Binance has a word in its corporate culture: Humble. If you look at past developments in business markets, global companies that could be called "giants" suddenly collapse, perhaps because of poor management, strategic errors, or too much pride. Our team is mainly focused on self-improvement, humility, awe of the market, openness to new things, and self-reflection.

Another word in Binance's culture is "user-focused," which really understands User feedback and voice. In fact, through the FTX event, we also reflect through the voice of the market. At present, there are three types of people in the market who oppose Binance. One is from the traditional financial sector. They think that Sam's people are "good children", and since the good children have fallen, Binance is "bad people". The other is from anarchists who oppose any agreements/projects related to centralization. Binance, as the head platform in CEX, is the natural target of their "criticism". Finally, there are the supporters of SBF.

In general, Binance insists on learning and growing from events and believes that time will tell. Binance has never misappropriated user assets. I have previously suggested jokingly that "all trading platforms can take turns to be tested by the market, and users are welcome to withdraw coins", or set a fixed withdrawal day. In this way, users can see who are the unruly players in the market.

Wang Feng:Binance was seen as too successful to become the largest trading platform in the market in five years. BNB Chain ecology is also good. You've won battle after battle. You've won two big places. I read earlier in The Innovator's Dilemma that some big companies win every war, only to stumble in the end. Do you think it is possible for this to happen to the Bianchan?

He Yi:The example you bring up is similar to the Kodak situation. In fact, Kodak was the leader in the film market. They invented the digital camera, but they just didn't promote it, and in the process, they lost the market. So from two aspects: continuous innovation (also can be said to be micro innovation) and disruptive innovation issues.

For Binance, whether it's CEX, DEX, or unmanaged wallets, Binance is a bet because our logic is bullish on the sector. Since we are optimistic about the industry, we should participate in the main track of the industry, whether it is investment, acquisition or doing it ourselves, we are going hand in hand. In the past, when Binance launched new businesses, it would require teams to compete with each other, innovate and challenge themselves through the internal horse-racing mechanism. Through such methods, continuous innovation can be guaranteed.

Disruptive innovation needs to come back to investment. In the case of FTX, we invested in it, even though it was considered a competitor. It must be taken into account that only the whole industry can "the water rises", we can "the ship rises". That's our big decision logic.

Wang Feng:Binance's ability to embrace innovation is well documented in the industry. I also want to talk about regulation. Do you think regulation will become a "mortal" threat to Binance? After all, you don't have headquarters, distributed management.

He Yi:If you look at Binance's public statements and attitude, we've been embracing regulation in recent years. We think regulation can help the industry grow, and we need to talk to law enforcement in each country to make sure they understand what virtual currencies are, what platforms are, not that all platforms are "bad guys." Binance, of course, has moved away from the digital nomads of the past by opening offices in many regions, mainly to meet the regulatory needs of each country.

If you really look at Binance's public information, we are the most licensed platform in 14 countries, including ABU Dhabi, Dubai, South Africa, France, Italy, Spain, Poland, Lithuania, Cyprus, Kazakhstan, Australia and New Zealand. We're much further down the road than any other platform. However, a licence is not the end game, we want to do business more in accordance with regulatory requirements. Currently, Binance's compliance team has 750 people who respond to and deal with anti-money laundering requirements of various countries and law enforcement needs of various countries and regions. Currently, Binance has responded to and dealt with law enforcement needs 47,000 times and conducted over 70 law enforcement training courses.

Wang Feng: Speaking of regulation and compliance, I wonder how open Binance's ideal transparency program can be?

He Yi:Binance wants to be highly transparent about users' money. Currently, users can check if your assets are in the wallet address corresponding to Binance, and we have published on-chain proof of reserves for nine currencies. We will strive to make most of the addresses on the asset chain public within two or three months.

Wang Feng:As we all know, disclosure of audit reports is the best way to be transparent and subject to market supervision like listed companies. Binance has said in the past when faced with audit problems that we are not a public company, and we understand that. But that was then. For example, can Binance be audited by the Big Four? I saw CZ respond on CNBC, but it seems a lot of people disagree.

He Yi:In fact, in the interview with CZ, the host confused two concepts, one is the verification of on-chain reserve assets, the other is the listed financial audit. Coinbase does financial audits because it is publicly traded. Binance is willing to accept audit companies for asset verification, but at present, it is not a question of whether Binance is willing to accept, but whether audit companies can do asset verification on the trading platform chain. One more AD: If any of the Big Four audit firms are interested in Binance on-chain asset verification, please contact us.

Wang Feng:After the collapse of FTX, market sentiment was so fearful that Binance set up an "industry recovery programme". What tangible action is being taken?

He Yi:It is not an investment or charity fund, but a recovery plan. Currently Binance is looking at two trading platforms and two big deals. Besides Binance, the total investment scale of other third party participants has reached about 130 million dollars. These funds are not transferred to Binance accounts, but to public addresses. If a project submits information that requires working capital, we share the information with other organizations participating in the program.

I'm not a big fan of the old "whoever steps up is the savior" argument, but Binance will still look at the Deal and really understand what they are paying for, whether it's team, market share, license etc.

Wang Feng: Will Binance become conservative in its investment strategy?

He Yi:In fact, Binance has been quite conservative, mainly looking at a few aspects: one look at the team, two look at innovation, three look at the long-term ceiling price. Sometimes the project is good, but the valuation is too high, we are not very willing to invest. If the team is not good, if the project is good, we won't invest. However, Binance is not affected by the size of capital and focuses on the logic of industry-wide layout.

Wang Feng: Is it too conservative?

He Yi:Binance Labs has a related incubation plan, if the relatively early entrepreneurs can apply for related projects, if the foundation is good, will also look at its own pricing, because we have our own judgment of the market.

Wang Feng: How to see the cycle?

He Yi:There are cycles in any business. For example, the periodic cycle of the stock market is usually four years, the currency circle is similar. The reason: When the stock market is volatile, virtual assets are called "safe havens." As traditional financial institutions moved in, the two markets converged, but when global financial markets fell, virtual assets were the first to sell off.

Wang Feng: Many people intend to enter the Web3 market, but there are different opinions about Web3. Who do you think will play Web3?

He Yi:From the data, among the world's 100 largest enterprises, 43 have entered Web3.

Web3 is a small community, but many large enterprises are starting to join Web3. It's like who used the Internet in 2000, but now anyone is a user of the Internet. Web3 will become an infrastructure, the only question is what form Web3 will take. It was hard to imagine in 2000 that you could join a meeting with a mobile phone today. So how Web3 will be implemented in the future is built by everyone's efforts at the moment.