What crypto startups is Binance investing in?

In just a few years since Binance was launched, it has evolved from an ordinary cryptocurrency trading platform into a full-fledged ecosystem and a flagship of the entire industry. Currently, Binance ranks first in terms of daily trading volumes. In addition, the company’s investment arm actively invested in and acquired a number of crypto startups, gradually building its own infrastructure. Today, we will take a look at Binance’s biggest and most well-known acquisitions in the crypto industry.

Changpeng Zhao and the launch of Binance

Binance is a cryptocurrency exchange that facilitates the largest daily trading volume of any cryptocurrency trading platform. The exchange was founded by Changpeng Zhao in 2017. Prior to this event, Zhao, commonly known as CZ, went through a thorny path and worked at a number of financial and cryptocurrency companies.

CZ was born in China in 1977, but his family had to emigrate to Canada three years later. Zhao majored in computer science at McGill University in Montreal and went on to create trading terminals at Bloomberg. In 2005, he founded Fusion System, a company that developed tools for exchanges and traders. Zhao left Fusion System in 2013 to focus on the cryptocurrency industry. An interesting incident preceded the move: during a poker game, Changpeng was prompted by Bobby Lee, founder of the now-closed BTCC exchange, to launch his own crypto startup.

Bitcoin’s potential attracted CZ so much so that he sold his house for a million dollars and spent all the proceeds on buying BTC at an average price of $600. In an interview later, Zhao recalled that he still hadn’t spent those coins. However, the creation of Binance itself was still a long way away — the ICO of Binance Coin tokens (BNB) did not happen until 2017 after Changpeng saw the success of the Poloniex exchange, launched in 2015.

The 100 million BNB offering was scooped up by investors in 24 hours, raising a total of $15 million for the startup. Eleven days after the ICO ended, Binance officially launched. According to Zhao, the fact that the startup team had spent the previous two years developing all the necessary systems helped the project in its infancy.

The rapid rise of the exchange

BNB launched on July 25, 2017, and within a couple of weeks, the token had fallen in price by 20%, much to the disappointment of early investors. CZ did everything to keep the exchange afloat: holding regular Q&A sessions, buying tokens with its own funds, increasing marketing efforts, and so on. Success came after Yi He, the former commercial director of the OKCoin platform, joined the company. By taking BNB’s marketing strategy into his own hands, he increased the value of the token by nearly 1,800% in just a couple of weeks.

The exchange’s success quickly drew the attention of Chinese regulators. In addition, back in August 2017, rumors surfaced that local government agencies were preparing to ban all cryptocurrency-related activities in their jurisdiction. As a result, CZ decided to move Binance’s headquarters from Hong Kong to Japan, and by early September, the move was fully completed.

The late 2017 crypto market bull run made Binance one of the industry’s most popular platforms. By the end of that period, the total daily trading volume on crypto exchanges reached $60 billion, with Binance accounting for $10 billion of that amount.

The success of the exchange quickly attracted the attention of Japanese regulators as well. In March 2018, the Financial Services Authority of Japan required the company to obtain a license to continue its operations in the country. CZ had to move again — this time, the choice of a new location for the headquarters fell on Malta, a flexible jurisdiction when it comes to digital asset regulations. Many believed that Binance was based in Malta, until in February 2020, local authorities made an official statement that the exchange did not operate in their jurisdiction. Concurrently, Zhao himself stated that the platform’s employees work in more than 50 countries on a decentralized basis.

Binance acquiring crypto startups

The Binance ecosystem includes a venture capital arm, Binance Labs, which invests in crypto startups, provides scholarship programs for promising developers, and distributes educational materials. In this section, we will list the companies that Binance acquired over the years.

Trust Wallet

Trust Wallet is a mobile cryptocurrency wallet that allows you to conveniently store tokens on the Ethereum blockchain, Binance Chain, and Binance Smart Chain. The platform was launched in November 2017 and quickly gained popularity in the cryptocurrency community. Its native TWT token is used to provide discounts on DEXs, access the NFT market, influence project development decisions, and receive bonus rewards.

The purchase of Trust Wallet by Binance took place on July 31, 2018. The takeover allowed integrating the wallet into the trading platform system and creating a convenient bridge for coin deposit/withdrawal. The Trust Wallet team continues to work on innovations and is preparing new software products that will soon be available to Binance customers.

JEX

JEX was founded in 2018 and is headquartered in the island country Seychelles. Before the takeover by Binance, it focused on trading cryptocurrencies and cryptocurrency derivatives, including futures. The startup now belongs to Binance and is called Binance JEX. The native JEX token was distributed to exchange users in 2019.

WazirX

WazirX is an Indian crypto exchange founded in 2018. In two years after its launch, it has become the largest cryptocurrency trading platform in India. In November 2019, WazirX was integrated into the Binance ecosystem to expose the exchange to the Indian market. Now, thanks to this acquisition, local customers can quickly exchange crypto for national currencies.

It is worth noting that such bridges between traditional finance and the crypto market play an important role in the rapid development of the latter. The integration of WazirX was a very profitable part of Binance’s global expansion, as the exchange quickly reached a huge influx of customers in a country with more than a billion people.

DappReview

The DappReview platform provides services in the form of decentralized applications’ data and trend analysis. DappReview’s activities cover more than 4,000 dApps on dozens of different blockchains. The Beijing-based startup was founded in February 2018 and, almost nine months later, officially became part of the Binance ecosystem. Under the agreement between Binance and the startup’s founders, DappReview remains independent in terms of technical development and operations, while Binance provides it with support for marketing campaigns and new business ventures.

CoinMarketCap

CoinMarketCap is the largest and most popular service for tracking cryptocurrencies and exchanges. It was launched in 2013 and has since become the most visited cryptocurrency-related website. CMC has its own mobile app, and the platform’s data is often used by other major cryptocurrency platforms.

The purchase of CoinMarketCap became one of the largest deals for Binance in particular and for the entire cryptocurrency industry as a whole. The purchase amount of $400 million may have seemed extravagant at the time, but today appears to be a justifiable expenditure. At the time of the merger, CMC had almost twice as much traffic as Binance. Therefore, Binance CEO Changpeng Zhao bet on the popularity of CoinMarketCap among retail investors and turned the platform into his own marketing tool.

It is noteworthy that before Binance, CMC had no financial problems, it hadn’t raised funds since 2013 and has remained fully independent. With the merger, CZ promised that the platform would remain independent, but de facto CMC became a gateway for referring new clients specifically to Binance, as the exchange now occupies the first place in the ranking of the service’s trading platforms.

Swipe

Swipe is a platform focused on convenient ways to convert traditional currencies into digital assets. Swipe’s own wallet can be connected to a Visa or Mastercard, mobile app, Google Pay and Apple Pay. Swipe customers can get the startup’s debit cards to spend their cryptocurrencies on real purchases around the world conveniently. The project has a native SXP token used for staking and provides all sorts of bonuses for cardholders.

Binance struck a deal to buy Swipe in July 2020 and listed the SXP token almost immediately after the agreement took effect. Being a part of the Binance ecosystem, Swipe now operates in 31 countries, mostly in Europe and North America. It’s worth noting that Binance representatives never disclosed the purchase price of this acquisition.

Binance investments in crypto startups

The list of Binance’s direct investments in other projects is much wider than the list of the exchange’s mergers. Here we have highlighted the most important investments by the exchange.

FTX

The history of FTX began in 2017, when the future CEO of the exchange, Sam Bankman-Fried, founded the investment company Alameda Research together with the programmer Gary Wang. A year later, FTX Trading LTD was founded. Since then, the trading platform has become one of the industry’s major players, and today it ranks fourth by daily trading volumes according to the CoinMarketCap platform.

FTX managed to gain such wide popularity by providing traders with handy tools in the form of options and futures contracts on a wide range of coins. Along with FTX, Alameda Research manages a portfolio of digital assets and is also a market maker for BitMEX, OKEx, and other major platforms. The exchange has its own FTT token, which has shown impressive returns of over 6,000%.

The first news about the strategic partnership between Binance and FTX appeared in December 2019. It later became known that on top of investing in FTX, Changpeng Zhao’s platform also opened long positions in the FTT token. In turn, FTX has begun to help develop products in the Binance ecosystem, in particular the OTC trading platform.

Terra

Terra is a blockchain-based payment network with a set of stablecoins tied to national currencies for use in e-commerce. These stablecoins are algorithmic, and they use a pool of tokens controlled by smart contracts to maintain a stable value by utilizing the LUNA token within the ecosystem. For example, if the price of a stablecoin pegged to the U.S. dollar (UST) exceeds $1, the algorithm will use LUNA to issue more UST and lower its price. If the price falls, it will exchange UST for LUNA to push it up.

Binance Labs announced its plans for Terra in April 2019. The exchange’s blog noted that Terra could become one of the leading algorithmic stablecoins projects and even an alternative to popular stablecoin projects like Tether.

Polygon

Polygon (formerly known as Matic Network) is an Indian crypto startup focused on building Ethereum blockchain-based networks to streamline transactions. The creators of Polygon aim to solve the problem of high transaction fees for decentralized applications, which hampers the growth of scalability of the entire Ethereum ecosystem. The key component of the project is the Plasma sidechain, set on top of the main Ethereum blockchain.

Matic Network funding was launched on the Binance Launchpad platform in April 2019. Since then, the project has received continued support from the exchange.

1inch

Sergey Kunz and Anton Bukov founded the 1inch platform in 2019 during the ETHNewYork hackathon. 1inch is a decentralized exchange aggregator for finding the best deals on DEXs. 1inch obtains liquidity from various exchanges using smart contracts, which split single trade transactions across multiple DEXs, allowing users to optimize and customize transactions. 1inch has already integrated support for leading DEXs, including Uniswap, Kyber Network, Airswap, Oasis, Bancor, Balancer, Curve, and many others.

The surge in the popularity of decentralized finance in 2020 has made 1inch a major player in DeFi. Last August, Binance Labs announced a $2.8 million funding round for 1inch. Exchange officials said that Binance would continue to support leading DeFi startups.

Perpetual Protocol

The Perpetual Protocol is a decentralized, perpetual contractual protocol for derivatives trading. It is implemented through the Virtual Automated Market Maker (vAMM), a new kind of automated market maker first created on the Perpetual Protocol. The main difference between vAMM and other AMMs is that it does not rely on liquidity providers to determine the price curve of a particular market. This allows vAMM to be used to handle leverage, short positions and provide lower slippage than other AMMs.

Binance Labs invested in Perpetual Protocol during a seed round in August 2020. The crypto startup received a total of $1.8 million in investments from Three Arrows Capital, Multicoin Capital, Mechanism Capital, and Alameda Research at the time. After that, the PERP token began to proliferate and was soon added to Binance as well.

Conclusion

Understanding the flow of funds among the investments of large cryptocurrencies is very important to determine future “gems” in the industry which have the potential for exponential future returns. It doesn’t end with the investment alone — Binance continues to support projects within its ecosystem, and this produces a positive effect on their token price, financial position, capitalization, and more. Big brands in the cryptosphere have a good idea of new trends that will shape the industry for years to come, so it makes sense to follow their strategies and investments.

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