Binance - Product Analysis (1/100)

1 Product Name

Binance

2 Overview

2.1 One-Line Product Overview

Binance, the leading centralized exchange with the widest business coverage, holds the top market share.

2.2 Basic Product Data

• Registered Users: 140 million
• Monthly Active Users (Q1 2023): 69.67 million
• Market Share: Market share increased from 48.9% (January 1, 2022) to 64.1% (December 31, 2022), maintaining the top position.
• Spot Trading Pairs: Futures Trading Pairs = 1380 : 284
• Spot Trading Volume (Q1 2023): 15.5 trillion
• Futures Trading Volume (Q1 2023): 44 trillion
• Spot Trading Volume: Futures Trading Volume = 26% : 74%

Data Source: TokenInsight

2.3 Product Financing History

3 User Minds

Binance resembles the class leader in school—proficient in self-promotion and presentation, well-liked by classmates, and garnering support from over half of the class. Simultaneously, it excels academically by consistently maintaining the top position, displaying expertise in nearly all subjects, and showcasing versatility.

User Profile of Binance:

• Conservative in nature, they tend to adhere to tradition and embrace a cautious approach towards risk. Upholding personal reputation is a priority.
• Emphasis on security. They are extremely vigilant about the potential risks posed by exchanges, especially the threat of exit scams. They opt for reputable and secure platforms to ensure comprehensive fund protection.
• Prioritizing convenience, they seek an all-in-one platform to meet diverse needs. Binance, as a comprehensive exchange, offers trading, asset management, and more, catering to their convenience-oriented mindset.

4 Product Architecture

5 Binance Evolution

• 2017: Establishment
  • Launched BNB and introduced Binance exchange, achieving the position of the world’s largest cryptocurrency trading platform by trading volume in December.
• 2018: Building the Ecosystem
  • Exchange: Binance Uganda
  • Ecosystem: Launched Binance Info, Binance Academy, Binance Charity, and Binance Research. Began developing Binance Chain (BNB Chain).
• 2019: Expansion
  • Business Lines: Introduced Binance Futures, the over-the-counter (OTC) trading desk, Binance Brokerage Program, Binance Staking, Futures Market Maker Program, Margin Trading Service, and allowed crypto purchases with Visa/MasterCard credit and debit cards.
  • Exchanges: Launched Binance Jersey, Binance Australia (beta), Binance Singapore, and Binance US.
  • Ecosystem: launched Binance Chain, Binance DEX, BUSD stablecoin, Binance Podcast, Binance Earn, and Binance X.
  • Partnerships: Simplex, CipherTrace, IdentityMind, Elliptic, Koinal, HTC, TravelbyBit, Advcash, Paxful, Settle Network, Papara, Bugcrowd.
  • Acquired: JEX, WazirX, DappReview.
  • Investments: Marsbit, FTX.
• 2020: Peak. Estimated profit: Trading volume of Futures + Options + Spot margin = 17 trillion USDT (trading fee revenue of 170 billion).
  • Business Lines: Launched P2P Merchant Program, Binance Options, Liquid Swap, Binance Launchpool, Innovation Zone, Binance Earn. Introduced Isolated Margin on Binance Futures.
  • Exchanges: Launched Binance.KR (South Korea), Binance Australia, and Binance TR (Turkey). Binance Uganda was shut down.
  • Ecosystem: Introduced Binance Cloud, Open Platform, Binance Widget on the Brave desktop browser, Binance Card, Bitcoin mining pool (Binance Pool), Binance OTC Trading Portal, Binance Access, BNB Smart Chain (BSC), Binance Bridge, and ETH 2.0 staking service.
  • Partnerships: Gitcoin, Chiliz.
  • Acquired: CoinMarketCap, Swipe
  • Investments: Tokocrypto, 1inch, DODO, MATH.
• 2021: A Dark Night. Faced with regulatory challenges, Binance ceased operations in multiple countries during the peak of the bull market.
  • Business Lines: Introduced Binance Lite and optimized KYC processes.
  • Exchanges: Delisted EUR, AUD, and GBP margin trading pairs; stopped futures and derivatives trading in Germany, Italy, and the Netherlands; restricted derivatives in Hong Kong; halted trading of the Norwegian Krone; removed the Norwegian language from the website; and ceased operations in Singapore.
  • Ecosystem: Launched Binance Pay, NFT marketplace, Binance Gift Card, and Binance Fan Token.
  • Investments: NFKings.
• 2022: Compliance and Transparency (BTC’s Price Halving)
  • By working collaboratively with regulators worldwide, Binance has secured registrations and licenses in 14 jurisdictions as of the end of 2022.

6 Business Model

Revenue (Q1 2023): 3.35 billion (20% of quarterly revenue used for BNB buyback and burn, 23rd BNB burn amounted to approximately $670 million)

Seven major profit-making businesses：

1. Spot Trading Fees:
   1. Regular users: 0.1%
   2. Using BNB for fees: 0.075%
2. Futures Trading Fees:
   1. USDS-Margined Contracts: Regular users: Maker 0.02% / Taker 0.04%; Using BNB for fees: Maker 0.018% / Taker 0.036%
   2. COIN-Margined Contracts: Regular users: Maker 0.01% / Taker 0.05%
3. Options‘ Trading Fees
   1. Regular users: 0.02%
4. Margin Borrowing Interest:
   1. Daily Interest Rates: BTC: 0.0046%, ETH: 0.006%, USDT: 0.014%
5. Loans Interest
   1. Hourly Interest Rates: BTC: 0.000145%, ETH: 0.000194%, USDT: 0.000364%
6. Deposit Fees:
   1. Fiat: Fee rates vary from 0% to 3.5% depending on the method
   2. Crypto: free
7. Withdrawal Fees:
   1. Fiat: Fee rates vary from 0% to 2% depending on the method
   2. Crypto: determined by blockchain network congestion

7 Core Business Processes

7.1 Product Interfaces

Six client interfaces: iOS, Android, MacOS, Windows, Linux, and API.

Desktop usage accounts for over 50% of total users, while mobile access represents 21%.

7.2 Core Business - Spot Trading

8 Distinctive Features

Binance Coin (BNB) stands out among other platform coins like OKB (OKX), HT (Huobi), and GT (Gate) due to its extensive influence, higher prices, and relatively complete ecosystem. In this analysis, we will explore BNB from two perspectives: its technology and use cases.

8.1 Technology

Initially launched as an ERC-20 token on Ethereum, Binance Coin (BNB) conducted its initial coin offering (ICO) in 2017.

However, in April 2019, Binance launched its own blockchain called Binance Chain and conducted a token swap from the ERC-20 BNB tokens to the native BNB tokens on the Binance Chain. The migration from the Ethereum network to Binance Chain was done to provide more scalability, faster transactions, and greater control over the token’s features and functionality.

8.2 Use Cases

1. Trading Fee Discounts: Using BNB on the Binance platform offers trading fee discounts (25% off for spot trading with BNB as fees, and 10% off for BNB-based fees on USDT-M Futures). This reduces users’ trading costs.
2. Participating in Liquid Swap: By providing liquidity for trading pairs, users can engage in liquidity mining to earn rewards. For instance, providing liquidity for BNB/BTC pair earns BNB rewards with an annualized yield of 0.6%.
3. Small Asset Conversion to BNB: Convert tokens with amounts below the minimum trading limit (10 USDT) into BNB, helping users aggregate scattered assets and unlock their greater value. For example, if there are 10 tokens with a total value of 5 USDT each, which cannot be traded individually, converting them to BNB would result in a total tradable amount of 50 USDT. Conversion is limited to once every 6 hours for assets with a valuation of less than 0.0012 BTC, and certain delisted coins are ineligible.
4. Participating in Launchpad: Binance Launchpad is a platform for crowdfunding new projects. To participate, users need to hold a certain amount of BNB and apply for the token purchase before the lock-up period. After the token sale concludes, successful participants are randomly selected, and any remaining BNB is refunded to those who were not selected.
5. NFT Trading: Enabling users to trade non-fungible tokens (NFTs) using BNB
6. Binance Card Payments: Users can deposit BNB into the Binance Card and use it to purchase goods and services, such as booking hotels and flights on Travala.
7. Payment Applications: Apart from Binance Card, BNB is accepted as a payment method by some merchants.

9 Summary and Insights

1. The evolution of Binance from a mere exchange to the expansive Binance Group signifies its wide-ranging influence in the midstream and downstream sectors of the blockchain industry. Beyond exchange operations, the group engages in charity, investments, academia, research, podcast, labs, staking, liquid swap, launchpool, launchpad, and mining pools. This diverse array of services has transformed Binance into a comprehensive blockchain service provider.
2. Binance boasts multiple global trading platforms, including the flagship Binance platform, as well as Binance Jersey, Binance Singapore, Binance US, Binance Australia, and Binance Korea. This extensive presence caters to diverse market needs across different regions.
3. Exchanges are well-established applications in the blockchain industry, with trading fees as their primary revenue source. Estimated at approximately $3.35 billion in Q1 2023, Binance’s revenue is projected to reach $13.4 billion for the entire year. Even smaller exchanges with a 1% market share can anticipate revenue of around $210 million, leading to significant profits.
4. Binance hosts an array of dynamic operational activities both online and offline. Online events include trading tournament competitions, community vote, Ask-Me-Anything (AMA) sessions, and fee discounts. Offline activities consist of project roadshows, meetups, and hackathons. These activities not only boost user engagement but also enhance Binance’s influence within the community.
5. The app version undergoes weekly updates, with minor versions receiving updates twice a week. This rapid iteration pace empowers Binance to promptly introduce new features, enhance user experience, and meet market demands, ultimately contributing to its remarkable ascent as the world’s top trading platform in just five months since its inception.