Welcome to the next recap of Korea Blockchain Week 2022, which happened on 8th-9th August.
If you haven’t read our recap on what Vitalik mentioned about the future of Ethereum, you can read it here.
Another prominent figure that graced the stages of KBW 2022 was CZ, CEO of Binance, although he did not appear in person.
These were some of the things we learnt from his dialogue:
#1 Global liquidity is key for consumer protection
When users want to trade a certain cryptocurrency, there has to be liquidity in the market.
This means that there has to be both strong demand and supply to buy and sell the asset.
Otherwise, the price that you intend to buy or sell the asset for may be different from the actual price that you buy or sell it for!
Low liquidity leads to slippage, which may be a common term that you come across when trading on decentralised exchanges (DEXes).
CZ believes that having global liquidity is important, instead of splitting up the liquidity into different countries.
This means that on Binance, it is possible for you to trade cryptocurrencies with someone from another country. If there was no global liquidity, you would only be able to trade with people from the same country.
Binance utilises the order book method to match buyers and sellers on their platform. Lower liquidity may result in a thinner order book, especially for assets with a smaller market cap.
Since the crypto market is extremely volatile, it will be much easier to manipulate the price of cryptocurrencies.
As such, CZ believes that global liquidity is key to protect consumers from such price manipulation.
From our interactions, some countries want a segregated orderbook (liquidity). This is a BAD IDEA for a number of reasons.
Large liquidity is one of the best Consumer Protection mechanisms. It protects against market manipulation, volatility, and reduces liquidations.
— CZ 🔶 Binance (@cz_binance) July 31, 2022
Fun fact: have you wondered how Sam Bankman-Fried (CEO of FTX) amassed his wealth?
It was due to the Kimchi Premium, where the price of BTC was higher on exchanges in South Korea, compared to other international crypto exchanges.
This was mainly due to the higher demand in South Korea for BTC, accompanied with the insufficient liquidity in these exchanges to cope with the demand.
SBF took advantage of this by buying BTC at a lower price on other exchanges, and then selling it on these South Korean exchanges for a higher price, instantly making a profit.
This is also known as arbitrage trading.
The 28-year-old SBF has emerged as one of the most profitable entrepreneurs in the crypto industry, and it all began with a scheme to take advantage of the ‘Kimchi premium’. https://t.co/a2mgDhYGJB
— Cointelegraph (@Cointelegraph) February 4, 2021
This is one example of how prices of cryptocurrencies can differ based on the liquidity of the exchange that you’re trading on.
As such, global liquidity can be really important to prevent high price fluctuations!
#2 KYC is necessary
While CZ is advocating global liquidity, there are some concerns about the lack of Know-Your-Customer (KYC) regulations in some countries.
KYC is important to prevent users of Binance from using fake identities, as well as hackers from using the platform.
Identity verification or KYC is designed to protect users’ accounts against the misuse of financial accounts such as fraud, corruption, money laundering, and more.
— Binance (@binance) August 14, 2022
CZ mentioned that Binance has invested heavily in KYC technology that is localised to each country.
Furthermore, he claims that their methods are able to detect a user’s location, residence and nationality, reducing the ability of hackers to illegally sign up for an account on Binance.
This could be the reason why Binance announced the launch of their Binance Account Bound (BAB) soulbound token.
If you prefer not to have your trades scrutinised under such strict KYC regulations, this is where Decentralised Finance (DeFi) can help you.
DeFi does not require you to create an account to trade on a decentralised exchange (DEX). All you’ll need is a non-custodial wallet (like the Krystal mobile app) and you can perform swaps right away!
🔀 You can use Krystal’s SmartSwap platform to get the best rates with minimum slippage from 9 different DEXes on @FantomFDN
— Krystal DeFi (@KrystalDefi) February 11, 2022
#3 Tokens have value, particularly for community members
The standard way for companies to raise funds used to be via equity. However, CZ notes that with cryptocurrencies, tokens offer a way for the community to earn a share in the company as well.
Fan tokens, mainly those for football clubs, have become rather popular.
What's crypto got to do with football?@olliewjsmith learns how football clubs are making money from cryptocurrency and NFTs. He also speaks to @socios about fan tokens and hears from @WeAreTheFSA about its concerns around crypto in football.#crypto #football (📷: AP, Getty) pic.twitter.com/b4nRYjALoI
— The News Movement (@thenewsmovement) August 13, 2022
Lionel Messi's welcome package at PSG includes fan tokens – a type of cryptocurrency that allows holders to vote on mostly minor decisions related to their clubs.
Crypto & blockchain technologies will continue to further monetise fan engagement, attract sponsors &….
— KTA Advocates (@kta_law) August 20, 2021
CZ believes that token holders are able to forge closer ties with the company as they are users of the platform and want further growth.
This is in contrast to equity investors, who may not have the interests of the platform at heart.
As such, CZ mentioned that fan tokens offer a chance for users to benefit when the platform they are using grows in popularity. This allows them to benefit together with shareholders, which previously may not have been that feasible.
#4 Do this FIRST before issuing a token
While launching tokens seems to be the trend, CZ gave some advice to any projects that are looking at issuing one.
Ensuring product market fit is something that’s really important to get right first, before the token is issued.
Moreover, it is also important to lay out the token’s use cases first. While adding use cases in the future is good, changing the current use cases due to poor initial planning may affect current users.
CZ notes that token launches should be used to accelerate growth, and not for raising the initial capital required by the company.
If you are looking for a launchpad for your new token, you can reach out to us. Our Initial Dex Offering (IDO) launchpad, KrystalGO, has raised more than $3 million for 25 crypto projects.
🚀 Total raised funds is probably one the most important indicators of success for any Launchpad or IDO platform. Let’s see in our infographic which players in this section have raised $1M+ funds 👀
Find out all mentioned projects below in special thread🧵: pic.twitter.com/0gNCBG7rwy
— 💡 SMART LIQUIDITY (@_SmartLiquidity) August 14, 2022
Moreover, if you’re an investor looking for the hottest IDOs, you can check out upcoming projects on our platform as well!
Before crypto becomes mainstream, there are still many barriers that need to be overcome first.
Nevertheless, CZ has noted that even large Web2 companies have started making the pivot to Web3, such as Twitter allowing tweets to be converted into NFTs!
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