Enter Changpeng Zhao AKA CZ. Web3: The controversy around it Jack Dorsey was the first to start itIt continues to rage. Crypto Twitter is flaming with Here are some hot take-offs and other killer replies. And it’s time for Binance’s CEO to enter the ring. It’s a loopy approach, as he defends entrepreneurs creating new coins. In fact, one could argue that he’s not talking about the subject Dorsey brought up. Web3’s core is made up of the issue of coins. And then, there’s the title.
The “Only One Coin can Rule All. Or millions of coins?” article clearly goes to the root of the debate. Do we want to live in multi-blockchain environments? Is Bitcoin the right choice or is Bitcoin the best option? CZ obviously favors millions of currencies. CZ’s Binance empire is dependent on trade; the more coins, the more transactions. But that’s beside the point, the real question is, can CZ make the case for coin creation? Let’s see what the man has to say.
CZ uses BNB as an Example
CZ is available right from the gate
“If you look at BNB, it raised $15m USD equivalent in bitcoin at the ICO, while that is a fantastic raise for a project at such an early stage, today, the total market cap of BNB is $90 billion USD, about 3000x.”
Whatever camp you’re on, the facts are the facts. CZ and his team have created BNB. This cryptocurrency is one of most profitable of recent years. But, this coin is very unique. It was created to be the Binance’s native coin.
Binance is more than just the largest global exchange; it has the greatest number of activities, features and things to do. BNB is the power behind all this. Is it possible to have so many coins that support this large of an ecosystem? What number of coins can be used in such a wide range of applications? BNB is a super currency that allows its owner to save money and gives them the ability to use Binance’s incredible powers. What other coins are capable of doing the same thing?
BNB price chart on Eightcap | Source: BNB/USD on TradingView.com
They Are Worth the Coins That The Team Keeps. But Are They Really?
The most difficult part of this article is probably the last. On the one hand, CZ claims it’s good to reward the team with coins:
“The second small benefit is the coins the project team retains. The team allocated about 40% of BNB’s coins. This amount is worth approximately $45 billion USD. While this sounds like a real sum, I’d dare say it is still just a small portion of the value you get from issuing a coin.”
And then, CZ claims that, in BNB’s case, the team will burn those $45B:
“Note, the team allocation of BNB was and will never be distributed to any members on the team. They have all been burned, making BNB an equitable launch coin. The tokens were not kept by the team. All the BNB our team gets will be earned through providing our services.”
What is the CZ for? This article was proofread by someone? In any case, he keeps talking to entrepreneurs about “the value you get from issuing a coin.” That’s not what the discussion is about. It is clear that creating money from thin air does not benefit the person who makes it. This discussion is focused on users, and whether investing in these coins puts them at greater risk.
But what about users?
“The real benefit of issuing a coin is it creates a whole new ecosystem, from user interactions to user retention, and development of the ecosystem.” Is that a benefit for the user, CZ? He claims that in the traditional model, “money flows one way only. From users to company to shareholders.” In the case of tokens, the users hold them, so:
“When the price goes up, the token holders, your users, benefit. This incentivizes them to use your platform and bring more friends to it. They become your best salespeople.”
Ok, that’s a benefit to users, but… isn’t CZ describing… a pyramid scheme here? Maybe he isn’t, but, he’s definitely still talking to entrepreneurs and entrepreneurs only. “It creates a positive virtuous cycle, a very sticky ecosystem.”
“You can’t do this even with bitcoin. You have to create a new token for your platform or ecosystem, otherwise, you can’t create a symbiotic growth environment with your users.”
You could say that the BNB growth has been symbiotic. BNB has many users who have made or continue to make a lot with it. But how many coins could be linked to a multimillion-dollar endeavor? What’s the risk to users buying into projects that don’t even have a product?
What about segnorage?
And, aren’t most of those tokens unregistered securities?
How about regulating them? Is that a good thing for the user?
To Be Fair, CZ Does Say You Need A Product First
Even if this article is for entrepreneurs, it should’ve taken the users into account. Because that’s where the debate is, user’s rights. However, credit where credit’s due, CZ did give this solid advice:
“I advise you to not create a token until you have product-market-fit. Once you have created something that people like, tokens can be used as an acceleration device. You can’t pivot your company once you have issued tokens. Your community must consent. So, it is not ideal for trials, MVPs (minimum viable product), or the experimental stages.”
How many entrepreneurs will take CZ’s recommendations, though?
Featured Image: Josh Appel on Unsplash — Charts By TradingView