Author: Jocy, Partner at IOSG
The entire industry exchange is switching and rotating. I started using exchanges in 2013, and the earliest was Huobi. From 2013 to 2017, many Chinese users liked Huobi very much. In every era, there are always one or two exchange founders who are willing to inject their feelings into the product. After 94 in 2017, people around me began to discuss Binance and BNB, about ICO/exchanges going overseas. In the past two cycles, under the leadership of CZ and He Yi, the Binance team went overseas, conquered cities and broke through strongholds, and now has become the largest exchange in the universe, with more than 300m users. Here we cut to the topic, about Binance's recent discussion on the listing fee after it has listed 19 early Launchpool projects this year.
1. Exchanges cannot guarantee returns
Let’s first look at some data. This year, the average ROI of Binance Launchpool projects is 2.13 times, the average valuation is 326 million US dollars, and the total financing in Launchpool is 929 million US dollars. These data are still very impressive.
Generally, retail investors will not blame Nasdaq/HKEx/SZSE for the poor quality of projects reviewed by them, which caused them to lose money, because everyone knows that the platform has no way to guarantee that trading users can make money. However, because users receive airdrops from new projects while holding BNB or FUSD, many users have very simple ideas. Some users do not care whether these projects are good or bad, but choose to sell them directly when they go online and exchange them for BNB. In this way, in the bull market, through the increase in the value of new projects and the wealth-creating effect, the project exchanges and retail investors holding BNB will be very happy.
2. Where do doubts come from? User mentality and investment trends
As the largest exchange in the universe, Binance has indeed borne a heavy burden that it cannot bear, because users will always have higher expectations of it. From the launchpad that started in 2018 to the past two cycles, Binance has never stopped exploring and listing new projects. In the long run, Binance and Launchpad projects are indeed mutually beneficial. Many people may have forgotten the ICO projects of OK and Huobi in the last cycle, but many of Binance's launchpad projects are still retained. Binance has therefore become the NASDAQ with the best liquidity. Most projects have been fully allocated and digested through Binance distribution, and can better resist the bull and bear cycles. In the past two cycles, many community users who have studied seriously admired Binance's investment and research capabilities, and even often chose to buy when it went online (such as this year's Ethena period). However, as more projects went online from the first day to the next day, the number of retail investors who bought in became fewer and fewer, and there was even a phenomenon of a single-digit number of new buying users for a certain project.
3. To Binance model and routine are taking shape
From the perspective of the participants, as the largest exchange, Binance helps its BNB users obtain free airdrops from the project party, further enhances the potential value of BNB, and enhances the trading activity of exchange users. Under the conditions of interests, BNB holders/users naturally believe that Binance has an obligation to help them find the best investment assets, and the tolerance rate should be very low. However, due to various censorship reasons, there are even professional To Binance model fake data projects and VCs on the market, which can provide one-stop packaging from user growth/data activity/TVL. When such cases become more and more common, people will doubt the professionalism of Binance.
There is even a trend recently, where some projects specifically look at the KOL accounts that He Yi follows on Twitter, and then bribe/sponsor these KOLs to publish project-related information in order to attract their attention. Because of the information cocoon effect of the Twitter platform, when you see more such content, more similar content will be pushed. I even wonder if He Yi is trapped in some kind of information cocoon when he is browsing Twitter, and the latest research and products of many industry innovators are drowned in the information flow.
4. How does Binance break through?
4.1. Information transparency and strict punishment measures for problematic projects
Binance's way out of the predicament has been moving forward, including the development of an unlocking information module for Launchpool-related projects, which has been well received. However, because of the biggest clear card at present, when everyone knows that He Yi is the final decision maker, all relevant interests and resource parties will take the initiative to send certain signals around He Yi, and even most of the introductions and understandings have become long-planned scripts. When the ton ecosystem is popular, the best game distribution platform is launched; when AI is popular, the social application with the most fake users is promoted; when meme is popular, the most web2 Instagram meme platform is promoted; then because these projects have been listed, when problems with the founders and teams are found, they cannot be removed immediately because this will harm the interests of exchange users, so it is difficult to get off the tiger, but if the most severe punishment measures are not taken against these projects, these projects will still harm more platform users in the future.
We can review the views of Western projects on the guarantee fees required by Binance in the last cycle and this cycle. A European team invested by IOSG around 2021 directly rejected Binance's listing fee requirements at the meeting. Of course, they must have regretted it in the past two or three years. In March of this year, we invested in an American team. As a serial entrepreneur, the founder mentioned the number of tokens that needed to be paid to Launchpad and the corresponding valuation and proportion that needed to be given to Binance's investment department. He said very firmly that no matter what, he would definitely pay the fee, because the market at that time was their best listing time, and Binance was the best distribution channel in the market, so this was a very happy deal, a win-win for the exchange and the project party. However, such an agreement went through two cycles, and it took Western founders three years to understand the true meaning of the listing fee. Is there any way to make such a deal more transparent? This kind of rule consensus, the conditions and fees on the list increase transparency, form a similar window guidance, open up channels for continuous correction, and avoid some first- and second-level arbitrage opportunities.
4.2. Isolate departmental interests and increase measures to avoid conflicts of interest
I think it is necessary for Binance to separate the two departments of listing and investment, because when there are terms of interest exchanges, the listing evaluation standards are prone to deviation. The listing department should not be reduced to a tool to help Binance's investment department generate income, but should be more objective and fair, helping users to better screen the best projects and protect their interests. Of course, it needs to be clarified that the recent statement heard: Binance Labs' investment projects have been deliberately built a Chinese wall in the listing department, which to a certain extent shows Binance's impartial attitude in handling listings. But this should not be just a Chinese wall, and Western teams investing in Binance should also have the same standards and requirements.
4.3. Careful due diligence, multi-faceted decision-making, and no to fraud
From the BD-Listing-, it will be decided as a regular process within Binance to increase the interaction between Binance Research and Listing Group, increase the research weight and disclose it regularly. Many of Binance's research reports are also very cutting-edge and professional. The Binance Research Group should have more guidance and discussion on the listing direction, and even regularly disclose what directions and projects Binance is interested in at a certain stage, and collect market feedback and questions in advance.
Referring to the IOSG investment process, we will have sufficient internal discussions and demonstrations. The materials are from Pipeline-Summary-Memo. Theoretical research and respect for facts are very important. Which users are real and which data are fake, and which revenue models can be sustained. I believe that anyone who has worked in traditional investment research institutions for three to five years has a set of rigorous due diligence processes and standards. Therefore, unless there is a conflict of interest, Binance should not tolerate and allow those projects that are known to have problems to be listed on the Binance platform. Internally, these theoretical researchers should have a higher decision-making weight, so that the overall evaluation process is more complete and the decision-making mechanism is more diverse and decentralized. In the upcoming bull market, the competition between exchanges has returned to a white-hot level. I believe that many exchanges will not pay attention to fundamentals for traffic and hype. In such competition, Binance will also face a dilemma.
Previously, a friend introduced the listing forms of Binance, Coinbase, and Upbit (see the appendix below). I still recommend that more startup teams should consider these three exchanges in this cycle. They are still the best choices in the current market. At the same time, with Trump's election, the next June to December will be the golden window period for project listings, and the competition will be extremely fierce.
Attachment:
