Key facts:
According to Changpeng Zhao, “It is important for entrepreneurs to issue their own cryptocurrency.”
Several examples show that investing in these currencies, many times, is not a good deal.
There are currently more than 8,000 cryptocurrencies and tokens. For Changpeng Zhao, CEO of the Binance exchange, that number is not enough and he considers that there should be millions.
This was stated by the businessman (better known by his initials “CZ”) in a publication on the company’s official blog bearing a Tolkien-inspired title: “One coin to rule them all or millions of coins?”
CZ himself answers the question at the top of his text: «I think people will continue to create new tokens for their projects. And there will be millions of tokens. Like startups, most will fail. But those who are successful will be very successful and will create a lot of value for the world. “
Chagpeng Zhao not only imagines that this will happen, but he wishes it to be so. For him “it is important that entrepreneurs issue their own currency” and he ensures that he is in charge of explaining them to them when he speaks with executives of other companies. “Once I explain it to them, they usually have a completely new perspective on cryptocurrencies and why it is important to their future economy.”
3 benefits for companies that issue their own cryptocurrencies
The 44-year-old Chinese-Canadian businessman argues that there are three benefits to a company creating its own token or cryptocurrency.
The first of these is the possibility of raise money at launch. Through initial coin offerings (ICOs), coin issuers manage to receive large sums. In return, they give low-priced coins to early investors.
As a second benefit, CZ mentions the coins the team is holding. These are sometimes sold later if the price of the crypto asset increases. Thus, the issuing company obtains economic benefits.
Finally, the CEO of Binance describes that, with your own token, you can create a new ecosystem that can retain users.
The Binance Coin (BNB) token is an example of the latter. Within the exchange it is used to pay commissions, to participate in launchpads and to obtain interest (paid in the same currency) if it is left blocked for a certain amount of time. Outside the exchange, BNB is the native token of the Binance Smart Chain blockchain and there are numerous decentralized finance platforms (DeFi) and play-to-earn games in which BNB plays a leading role.
The metaverse development teams, so fashionable lately, also understood that. To make life in Decentraland, for example, it is required to have the mana token, which is the currency of that virtual universe.
All that said, Changpeng Zhao advises entrepreneurs:
You can’t do this with fiat currencies. It just doesn’t work. You can’t do this even with bitcoin. You must create a new token for your platform or ecosystem; otherwise, you can’t create a symbiotic growth environment with its users. “
Changpeng Zhao, CEO of the Binance exchange.
Binance, founded and led by Changpeng Zhao (photo), is the cryptocurrency exchange with the highest volume of trade. Source: Piergiorgio Borgogno / YouTube.
Launching cryptocurrencies is usually a good deal (buying them, not always is)
There are no flaws in your logic. Indeed, for issuers of tokens and cryptocurrencies, the launch is usually a good deal. It is also true for Binance and other exchanges that list these crypto assets. The commissions for trading and withdrawals report million-dollar profits to the exchange houses.
Investors who manage to enter pre-sales (if the project is not a fraud), in general, also manage to make a profit.
The problem, possibly, is to assume that these projects (and their tokens) will continue to appreciate in the long term. Those who have been in the bitcoin and cryptocurrency world for years know about the numerous fashions that arrive from time to time and attract all the attention.
But they are usually just that: fashions. The Royal Spanish Academy gives two possible meanings for this word and in both its passing and changing character stands out.
«Fashion: 1) Use, mode or custom that is in vogue for some time, or in a certain country. | 2) Collective and changing taste when it comes to clothing and accessories. »
Dictionary of the Royal Spanish Academy.
For example, one of the fads that hit the bitcoin universe was “ICO fever” in 2017 and 2018. Dozens of initial coin offerings were launched daily. Thousands of bitcoins were collected by the issuers of these assets. Almost 5 years later, most of these projects – which seemed extremely promising at the time – failed to transcend. With few exceptions, their prices, when measured in a hard currency like BTC, have been trending down since then.
It can be named, among other failed projects (from the point of view of investment in their currency), to EOS and IOTA. Also cardano (ADA), despite the fact that its price in dollars has increased, it still does not exceed the figure in BTC reached in March 2017.
The price of ADA, Cardano’s native cryptocurrency, failed to exceed the all-time high reached in 2017 (if its price is measured in bitcoin). Source: CoinMarketCap.
Bitcoin: «the old reliable»
In this context, bitcoin (BTC) continues to present itself as “the old trusty one.” With its monetary policy defined since its genesis; its supply limited to 21 million coins; its issuance rate, which is halved every 4 years; and the support that the market and the miners give it; The decentralized money that Satoshi Nakamoto created has been going strong and going for 13 years.
Possibly bitcoin won’t make you rich overnight. You may even have to wait long hours of “hodl” before seeing a monetary gain measured in fiat money after investing in BTC. This is not a problem: bitcoin was not created to make you rich but to give you complete financial sovereignty as an individual (a possibility that centralized cryptocurrencies do not offer, with a company or foundation that determines the progress of the project and its use cases).
In the long run, the increase in the price of bitcoin left most hodlers in profit. Source: CoinMarketCap.
Anyway, the historical graph of the price of bitcoin shows that – in the long term – the first cryptocurrency has not disappointed anyone who has understood its properties, and has decided to use it to protect their capital.