Binance: Background, History & Significance for the Crypto Market

All those interested in the opportunities for investments in the global crypto market quickly come across some big names in the industry. The company Binance is without question one of these providers, which within a few years has gained a reputation as a good service provider for trading cryptocurrencies such as Bitcoin, Ethereum and many other coins and tokens. Today, the company is considered the number 1 among the globally active trading platforms. As always, however, despite or precisely because of the enormous success, the saying applies: Where there is light, there is also shadow. Either way, the success story since the exchange was founded is unparalleled. Many imitators are represented on the market; but only a few can measure up to the portal that the computer scientist and businessman Changpeng Zhao with Canadian and Chinese roots brought to life (with his co-founder Yi He) and turned into a real global brand against all odds.

Binance Quickly Found its Way to the Top of the Crypto Exchanges

CZ, as the founder is also called, himself became an early figurehead of the industry. Like his company, however, the CEO is not undisputed. In the following, we will look at the historical background and address the question of how influential the exchange is today. This naturally also includes addressing negative aspects. For example, Binance has been repeatedly attacked by hackers. Changpeng Zhao, in turn, has been repeatedly criticized by various industry experts, while on the other hand he knows a large fan base behind him. The truth is: The company belonged early after the market launch. Binance was, in a way, in the ideal place at the right time. The fact that there have been scandals and minor scandals again and again during the company’s history is partly due to the nature of the matter.

Especially so-called mainstream media, which are only slowly recognizing the advantages of digital currencies and crypto exchanges apart from the supposed risks, like to report on difficulties such as hacker attacks or technical problems in general. However, the crypto world as a whole has had to struggle with such negative reporting to this day.

Repeated Attacks by Hackers on the Binance Platform

It should not be concealed at this point that there are also crypto experts who have repeatedly criticized and continue to criticize the platform, which is now based in Malta. The relocation to the crypto-friendly European country was not the first move. Due to increasingly strict state regulations in the People’s Republic of China, the company saw itself forced to relocate its headquarters to the less rigid Japan just a quarter of a year after its opening. It should not be the last hacker attack. In the spring of 2019, criminals once again succeeded in a masterpiece – they were able to steal Bitcoins worth about 40 million US dollars at the time. Unlike many other affected exchanges, Binance reacted calmly again. While some competitors left those affected to their worries, Binance chose a different approach.

For a period of about one trading week, the company closed its doors. Even more important, in order to avert damage to its own reputation, was the quick announcement to compensate for any damage incurred on the customer side. It becomes clear, however, that even the big names among the crypto exchanges are not immune to such incidents.

Binance Founder Entered the Crypto Market as a True Believer

Let’s take a closer look at the history of the company. The foundation for Binance’s success began in the summer of 2013. At that time, the computer scientist Changpeng learned about the leading cryptocurrency Bitcoin during a poker event and decided a little later to make his first Bitcoin purchase. He was so convinced of his investment that he sold his property and invested the capital he earned in Bitcoin. This happened at a time when the BTC price was at a level of about 600 US dollars. This was nothing less than the basis of a billion-dollar fortune. Not even four years after his first investment, “CZ” launched the Binance exchange. Like many competitors, the platform struggles in many countries with unclear regulatory uncertainties, scamming reports and the aforementioned attacks by hackers burdened the exchange several times in the following period. However, these complications have so far only been a short-term obstacle to the committed expansion course.

From ICO with 15 Million USD to Market Leader with Billions Balance Sheet

The bad headlines could not stop the rise of the exchange (and its founder). The profitability of the company has been achieved by only a few other exchanges in the cryptoverse to date. In 2019, it was said for the first time that the exchange’s profit had broken the sound barrier of one billion US dollars. Beginners who are wondering how these high revenues are generated should be told that Binance does not only generate profits through fees that users of the platform pay for trading. In addition, there are revenues from the inclusion (“listing”) of new coins and tokens in the company’s portfolio. The handsome profit only four years after the opening of trading is remarkable insofar as Binance had received “only” 15 million from investors in the course of the Initial Coin Offerings (ICO) in the year of its foundation. Although there are other start-ups on the crypto market that have started their business with far less capital.

Exchange should Become a Trading Model for all Interested Parties

One reason for the rapid success was without question the elaborated business model. From the beginning, the operator relied on a trading environment that did not only appeal to professional crypto traders and investors – rather, the exchange also turned directly to beginners who were looking for an easy way to enter the market for cryptocurrencies. The concept worked, the number of customers around the world rose rapidly. And there is another important difference to some of the big competitors. While, for example, portals like Coinbase from the USA at least in the first time relied more on a manageable selection of digital currencies, Binance decided to include a broader integration of various projects. The range of digital assets is also constantly expanded or revised. At this point, it also becomes clear why Binance is so important for the market.

Binance the most Important Springboard for many Crypto Projects

The company was already the proverbial straw that broke the camel’s back for many crypto projects when it came to success or failure. On the one hand, announcements about the listing of new currencies often cause the prices of the assets (assets) to rise massively. “Delistings”, i.e. the removal of currencies from the portal, have already caused many formats to fail in the past. To this day, the inclusion in the Binance platform has been the door opener to crypto mass suitability for many projects, so to speak. When it comes to the speed of transaction execution, the provider has also repeatedly set standards within the exchange landscape. In its corporate reports, Binance points out that up to 1.4 million purchases and sales can be processed per second via the platform.

Multiple Attacks by Hackers on the Crypto Exchange

The first major setback came in 2018. At that time, Binance was the victim of a large-scale attack by hackers. These were able to unauthorizedly access funds from countless customer accounts after they had placed ads with the search engine giant Google. Behind this was a scam concept. Many users fell for the scam and transmitted access data to their accounts to the perpetrators. Although the company reacted by blocking withdrawals from the platform at an early stage to the impending. However, the Japanese authorities significantly tightened their regulations as a result of the incident. Due to the renewed change of location, Binance changed its business practice in such a way that today many employees – long before the global lockdown and home office measures – work for the exchange from home. The result was a distribution of the workforce to all parts of the world.

Platform Grows and Thrives from the Beginning

Binance was also an early example of the fact that exchanges are not necessarily tied to positive developments in the crypto market in order to be successful themselves. After, for example, Bitcoin headed for calmer waters after its last rally before the hunt for all-time highs in 2020 and prices had temporarily fallen significantly again, the leading exchange remained on its once embarked success course. The emergence of new digital currencies and associated systems (especially Ethereum as today’s basis for a large part of the booming DeFi sector) made Binance use to constantly expand and expand its position as market leader. Even if the competition is of course sleeping, the company still manages to make one or the other “big hit” to open up new directions for the crypto sector.

A Significant Step: the Launch of the Binance Coin

The increase in the number of users to around 15 million (according to Binance) not only benefited the exchange itself. Also its founder Changpeng Zhao became increasingly a real crypto pop star, who spreads his forecasts, criticism and praise for his own platform especially via social media like Twitter and can look forward to steadily increasing follower numbers. There were probably two important highlights of media attention for CZ and Binance. For the exchange, it was the launch of its own currency Binance Coin (BNB), whose issuance caused the company value to explode regularly in phases. At the end of 2020, the market capitalization of the currency is around 4.9 billion US dollars. Billionaire Changpeng even landed on the cover of the renowned Forbes magazine. Self-evidently deserve the

Binance and Crypto Market Benefit from each Other

How long the latest rise to record prices for Bitcoin and thus for many other currencies will last will certainly be a decisive factor in the future fortunes of the success-spoiled exchange from 2021 onwards. Once again, the ongoing boom in the area of decentralized finance (DeFi). These days, more and more normal investors are discovering the advantages of digital currencies. The Corona pandemic and the associated rescue programs and interest rate cuts by many central banks are weighing on the prospect of good returns in many asset classes that traditionally oriented small investors have previously preferred. Bitcoin is already considered by many experts to be the legitimate successor to the “safe haven” Gold. More and more institutional investments (e.g. funds, government institutions and foundations) are shifting assets towards BTC.

Leading Exchanges are Very Popular with Beginners

Many of the private and commercial investors decide when entering of course for leading crypto exchanges – Binance will thus belong in the future to the important profiteers of the industry. The logical consequence: The faster the Binance community grows, the stronger the No. 1 in the industry can as usual dictate the prices in the market. The fact that the enormous price gains of Bitcoin according to statistics had rather little influence on the crypto search queries in the known search engines changes little about that. At least for the time being. Because until the mainstream recognizes opportunities, it usually takes a certain amount of time. Binance itself reacted to the lively institutional interest among other things through its innovative service “Binance Research”. Anyway, the company has always expanded its radius of action in order not to concentrate solely on the core business of pure crypto trading.

Rumors about Unfair Business of the Exchange in the USA

That success is no guarantee for smooth growth and consistently positive media presence, was shown recently in the fall of 2020. Once again, the aforementioned magazine Forbes played a major role here. Forbes published in October a report that put Binance in a bad light. What was it about? Internal documents should tell of Binance trying to circumvent applicable provisions of US regulators and deceive authorities. Allegedly, according to the unofficial report, the exchange is trying to earn money from customers from the USA. But this is actually not allowed. Binance CEO CZ reacted immediately. He announced to achieve a lawsuit against the magazine. In fact, there is currently a trading offer for US customers; but this falls significantly “leaner” than the normal business model for customers in other countries. Not only with a view to the USA, problems have emerged in the recent past.

After accusations of alleged money laundering were made in the former home country of Japan, there was a lawsuit on the spot with a value of nine million US dollars. If you look at the price developments of Bitcoin since the existence of the exchange, one thing becomes clear. The price correlated again and again at least slightly – positively as well as negatively – with headlines around the leading crypto exchange.

Quo Vadis, Binance – a Small Outlook into the Future

It is certain that Binance will also set on expansion and even stronger market dominance in the coming years. Also and especially Europe with important markets like Germany has the platform in mind in the sense of its own growth course. German crypto fans can trade cryptocurrencies via Binance since the end of 2017 after the successful completion of the licensing procedure. The so-called Binance Deutschland GmbH has existed since the summer of 2020. The business expansion of the company increasingly strives for a connection of classic financial market products and the crypto sector. A current example is the cooperation with the credit card company VISA, from which the “Binance Card” emerged as a credit card. In this way, cryptocurrencies – especially the own Binance Coin – are to increasingly penetrate as an established means of payment in areas such as trade.

Other companies in the crypto world follow Binance with similar offers, examine comparable business models and explore application possibilities. Of importance for the further successes of the company and the competition will be when and in what form states implement crypto regulations.

Defeat of Crypto-Opponent Trump as a Signal on the US Market?

Also the question of how strict regulations turn out is relevant. The first reports from the environment of the new US government under President Joe Biden, for example, let many crypto fans hope that the USA will become a friendlier and more open country in the future for the now not so young area of cryptocurrencies and exchanges. The Binance officials will have followed the appointment of Biden’s transition cabinet (as with former CFTC chief Gary Gensler) with interest anyway. The fact that blockchain technology is gradually reaching fields apart from typical crypto divisions fuels hope. The more successful digital currencies like Bitcoin become, the sooner Binance will be able to take the next step towards the desired mainstream acceptance.

This in turn will affect the entire market. Because: Once a company has reached a size like the Binance exchange, it inevitably dominates the developments of the industry as a whole.

IPO for Binance?

With a size of Binance, the question of an IPO is inevitably obvious. But in contrast to the big American competitor Coinbase, Binance does not plan an IPO. Compared to the crypto magazine “The block” the officials and above all the CEO CZ expressed themselves clearly against a classic IPO for the procurement of additional liquidity. They want to continue the “crypto way” and since an issue of shares does not fit to it. Much more the strategists plan the expansion of the in-house “Utility Token” BNB and want to further enlarge the ecosystem around the token and come to success with staking, lending and Co.

One way or another: Binance is indispensable in the crypto market and the extremely successful crypto company will have a significant say in all developments.

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