Binance: The Fastest Profitable Unicorn to Date

When most people think of billion dollar tech startups, everyone thinks of Uber, Airbnb, Snapchat, Twitter etc. However, not many people know about Binance. Binance is the fastest profitable unicorn in history. Now that’s a big statement. However, the centralized cryptocurrency exchange went from zero to two billion while profitable in less than six months.

Graph of some of the earliest unicorns that reached 1 billion valuation in less than 6 months

Yes, there are a handful of startups that reached unicorn status in their early funding rounds. However, none of those startups proved profitable in their early days of operation except for Binance. Binance is a unicorn among unicorns.

Less than six months the value of Binance Token (BNB) hits $10. The company hold 199 million BNB tokens

Binance At A Glance

Binance, founded in mid 2017, is one of the largest cryptocurrency exchanges in the world. The centralized exchange holds 10+ million users and a 1.4 billion daily trading volume.

Binance burns 20% of its profits by buying back BNB. Therefore, BNB is deflationary and will appreciate in value as Binance grows, further attracting investors

CZ and Team Members:

“When a great team meets a lousy market, markets win. When a lousy team meets a great market, markets win. When a great team meets a great market, something special happens” – Andy Rachleff

While the entire team is among the most impressive and of the highest caliber in the industry, I want to focus on Changpeng Zhao, also known as CZ. CZ can be described as a Steve Job figure in the cryptocurrency exchange industry. CZ was born in China, and immigrated to Canada with his parents. From a teenage burger flipper at McDonalds to young coding wiz to Bloomberg’s lead futures developer to successful entrepreneur, CZ has proven his incredible grit and ability to innovate prior to Binance’s dynasty. After hearing about bitcoin from a game of poker with his venture capital buddy in 2013, he eventually decided to join the cryptocurrency industry full time. In fact, in 2014, he sold his house as he put poured all his assets into Bitcoin. Jumping around crypto projects, CZ joined Blockchain.info as the third member of the cryptocurrency wallet’s team where he met Roger Ver, known in the community as “Bitcoin Jesus”. Ver stands as the CEO of bitcoin.com, the formal website to find Bitcion’s whitepaper. Later, CZ joined OKCoin, one of the top 3 largest global exchanges today, as CTO for a couple months. It wasn’t until mid 2017 when he dropped everything to create Binance.

Key Advisors:

A quick glance at Binance’s advisors shows an all star team with some of the industries most influential figures. Aside from the mentioned Roger Ver, Binance has Matthew Roszak, Da Hongfei, Jun Du, and Vincent Zhou serving as advisors. Roszak is the co-founder of Bloq, an enterprise blockchain solution partnered with Citi, Fidelity, Barclays, Foxconn, Deloitte, and Microsoft, founding partner of Tally Capital, and Chairman of the Chamber of Digital Commerce. Hongfei is the founder of NEO, the “Chinese Ethereum” with a peak of $20 billion market cap. Jun Du is the CEO of Huobi.com, the number one exchange in China. Vincent Zhou is the founding partner of FBG Capital, one of China’s most successful blockchain investment firms.

The Binance Advantage

There are a couple reason why Binance became so successful: timing, transaction speed, customer service, global strategy, and token metrics and utility. A blockchain project can have a public token issuance to raise funds to finance their activities. In 2017, Initial Coin Offering (ICO) trends became so popular that it mirrored that of the internet bubble. CZ saw the opportunity to raise sufficient funds, and hosted his ICO. The issued BNB token bootstrapped initial token holders to the Binance trading platform. The ICO and cryptocurrency trading craze would continue for another 6 months as it propelled Binance into billions. Another two reasons users chose Binance was due to its 1.4 million transaction per second execution speed, and their 24/7, 12 language live online customer service. The BNB token was also made gave Binance an incredible competitive edge. While other ICOs boasted their token’s high expectations, Binance made their token simple and useful. Holding a certain amount of BNB could cut half you trading costs, and the token had the deflationary nature of having the firm use 20% of profits to buy back and burn BNB tokens. BNB was able to hold value as it became historically uncorrelated with the Bitcoin and Ethereum, the two coins with largest market cap. Binance also screened ICO applicants like Harvard’s admissions. Less than 1% of blockchain projects that requested to ICO on Binance were approved. As the crazed for crypto died down mid 2018, Binance offered its account holders to convert small token to BNB. Binance has future plans of using BNB as a voting ticket for future crypto listings as the firm become a decentralized exchange.

Revenue Model and Numbers:

General Binance Fee Structure
Wrong dates on top, starts from 2017 to 2018 not 2019

As cryptos hit a bear market, we see Binance’s profits decline last year. However, still racking up $400+ million in 2018. Binance’s revenue may be declining due to slowing trading volume, but the company’s talented team has established itself as an industry leader, and will lead the industry into the future of decentralized exchanges.

Competitive Landscape

Coinbase’s strong presence in the US compared to Binance will continue to stand as Binance’s top competitor. While Coinbase only provides trading services for 5 coins, Coinbase provides the industries leading customer experience in the US market. OKEx and Huobi are incredible platform for altcoin exchanges; OKEx is known for its margin trading and low trading fees; Huobi has one of the best user experiences. CZ was the CTO of OKCoin which is the parent company of OKEx. My personal favorite is Huobi as its the user experience and low cost are unrivaled. All three exchanges mentioned above are shifting to decentralized exchanges where user will no longer need a two authentication trading account, and be able to trade directly from their wallets.

The Notorious Sequoia Legal Case

So how could this possibly tie back to the companies we’re visiting in Silicon Valley? In Sequioa’s eyes, Binance was the one that got a way. There’s been an on going legal case between the two. Binance had a funding deal fall through with Sequoia Capital as the exchange may have breached the exclusivity of their deal. CZ was accused of talking to IDG Capital of higher offering. To say the least, their relationship is complicated.

Binance Today

Binance plans to stay a head are currently manifested in Binance Labs, Binance Launchpad, Binance Info, Binance Chain, Binance Uganda, Binance Charity Foundation, Binance Academy(coming soon), and Binance Research(coming soon). Worth noticing is Binance Labs and Binance Launchpad. Binance Labs is a 1 billion dollar fund with investments all made with BNB, and has 20+ prestigious projects under incubation. Binance Launchpad serves as a advisory and token offering platform. Allowing users to use BNB to exchange for new token issuance. Think exclusive ICO with exclusive BNB purchase. Finally, the Binance Blockchain will transform Binance into a decentralized exchange.

My Thoughts on Binance

Ironic! Blockchain, a technology that boasts its core principle of decentralization, is being widely adopted through centralized planning and developing. Exchanges are successful because they have superior customer service, and general user experience, all centralized aspects.

While the mainstream media puts the ICO craze in a negative light, it did allow for companies like Binance to emerge and push blockchain technology to common users.

CZ was successful due to his previous experience, his incredibly early move into blockchain, and his high caliber technical background.

Binance will dominate the decentralized exchange space in the future, given its retained user base.

Binance is another incredible opportunity of a successful model of a platform business.

Blockchain startups that begin generating healthy revenue early on tend to have a higher survive and thrive rates than projects with overblown expectations with heavy funding. (heavily debated in the industry)

5 thoughts on “Binance: The Fastest Profitable Unicorn to Date

  1. Great post! After reading so much about the mechanism how blockchain and bitcoin work this week, it is interesting to see how a company focusing on cryptocurrency actually operates and profits. I especially like the quote from Andy Rachleff that perfectly summaries the relationship between market and the team. From my research of Sequoia, they tend to partner with companies that chase a promising market (something they can’t control) and supply them with a great team (something they can control). Would love to hear more about the legal case with Sequoia

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  2. Great job on this post! I find cryptocurrency to be confusing sometimes, but you did a good job explaining this concept. I think it’s very interesting that only about a year and a half after creating their BNB coin, they are able to finance billion dollar projects such as Binance Labs. I wouldn’t have thought that the value of a cryptocurrency coin would reach a billion dollars in a shorter time span than the value of a business such as Snapchat or Airbnb.

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  3. Despite the confusion that surrounds blockchain and cryptocurrency, CZ definitely had it down. I am not familiar with Binance but have experimented with things like Coinbase. I am interested to see if Binance does any further work with VC firms in the Bay area. I also wonder if this a topic worth bringing up to Sequoia.

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  4. I’ve never heard of Binance before so this was an interesting read. You are right though it is somewhat strange that a decentralized technology is being dominated by a few massive companies. I think just like most tech industries we will be seeing the dominance of a few key players. The good news is with blockchain it doesn’t sound like they can abuse that power as much even if they tried because it is so hard to change it.

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  5. After our discussion of cryptocurrency in class last week, it was really interesting to read about a company that’s making the concept a reality– and a profitable one at that. Given your description of their uniqueness, however, I think it’s worth asking if their profitability live up to expectations. I know we talked earlier in the semester about the risks startups run with attempting to expand too quickly, and Binance’s early success could lead to risks down the road, as more companies enter the cryptocurrency market. Great post!

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