In the space of a little under half a year, Binance has firmly established itself as a major player in the cryptocurrency exchange market. The service has risen to become the crypto exchange platform with the highest trading volume for platforms that don’t offer fiat trading. There are basically two types of crypto exchange platforms; the ones that offer fiat trading and the ones that don’t. Binance belongs to the latter category and they’ve had an amazing six months, racing to the top of their category. Binance isn’t just the top crypto exchange platform, it is also among the top 400 most popular websites in the world today.
Understanding Crypto Exchange Platforms
A cryptocurrency exchange platform is a service that allows customers to purchase, trade and exchange cryptocurrencies. Users can trade one cryptocoin for another e.g. Bitcoin to Litecoin or exchange a cryptocoin for fiat money e.g. Ripple to USD. There are a number of crypto exchange platforms all over the internet with each one striving to offer something different to the market. Some platforms offer wallet services as well but it generally isn’t advisable to keep a large amount of cryptocoins in online wallets. This is because they are always at the risk of being hacked. Apart from Binance, some of the other notable names on the market include Coinbase, Kraken, Coinmama, and GDAX.
Charting the Meteoric Rise of Binance
At the start of the year 2017, no one had even heard about Binance as it wasn’t even in existence yet. To imagine that an exchange platform that should still be in its infancy is already ruling the market is beyond impressive. Here is a look at how Binance has risen through the ranks.
In July 2017, Binance, a then start-up crypto exchange platform decided to finance their platform via an ICO. 2017 was the year of the ICO and many start-ups were electing to use it as their crowdfunding vehicle rather than more traditional venture capital routes. While ICOs were common last year, it was a bit odd to see a crypto exchange platform decide to use an ICO. Binance has always seemed to relish being unique and to offer something different to the market.
They created a token; Binance Token (BNB) and had their ICO in July. They sold 100 million BNB and raised about $15 Million. This 100 million BNB represented half of the total BNB supply cap of 200 million tokens. The big question was why a crypto exchange platform needed a native token. The answer is quite elegant, really as the tokens are used as payment for trading fees, as well as other sundry transaction fees. This model generates a lot of revenue for the company.
China ICO Ban Setback
In September of last year, Chinese authorities banned ICOs as well as exchange platforms. The cryptocurrency world was immediately thrown into a short-lived panic which saw the prices of many cryptocoins fall significantly. Binance was one of the platforms that was most affected by the ban as a significant portion of its customer base was domiciled in China. As a result of the ban, Binance could no longer service a large percentage of its customers and it faced a monumental reduction in revenue.
In addition to and a direct consequence of the ban, Binance faced a lot of competition from many of the much older exchange platforms. Many of these crypto exchanges had a more diverse geographical distribution as far as their user base was concerned. With Binance forced to spread it proverbial tentacles wider, they were going to need to come up with creative ways to succeed in the market.
Resurgence and Growth
Binance initiated a robust referral program which paid out up to 20 percent in commissions. Such is the popularity of their referral program that a customer has accrued about 76 Bitcoins just by being a part of it. The incentivized nature of their operations doesn’t end there as they regularly launch promotions and giveaways. One famous promotion of theirs ended up with a lucky customer winning a 2018 Lamborghini Huracan.
Binance also offers a large variety of trading pairs which makes it distinct from some of the more selective exchange platforms. The platform also even offers trading pairs that feature a number of the Bitcoin-fork altcoins like Bitcoin Gold and Bitcoin Diamond. This helps to materially increase their customer base especially for users who prefer to trade the more obscure cryptocoins.
The growth of the Binance has been so phenomenal that they regularly run out of servers. According to Zhao Changpeng, the CEO of Binance, they have a guy whose only job is to provide upwards of 200 servers on a daily basis. Changpeng also admitted to the company having to limit its weekly account opening limit to a few million users. On January 10 this year alone, the platform opened its registration portal for just an hour and north of 240,000 users signed up for the service.
With the level of growth experienced by the platform, Changpeng isn’t ready to get comfortable yet. There are already plans to move the platform to Tokyo and to obtain a license from the Japanese FSA (Financial Services Agency). Changpeng believes the conducive environment that exists in Japan as far as cryptocurrency operations is concerned will help to boost the growth of Binance even further.