Interviews

Interview with Multicoin Kyle Samani on CZ, Binance Chain, and Binance Blockchain Week

In this episode of the podcast, we are sharing a replay of a conference call with Kyle Samani that we held for our Premium subscribers. To learn how to become a premium subscriber, check it out here

Kyle Samani is a Managing Partner at Multicoin Capital. In mid-January, Kyle went to Singapore and attended the first-ever Binance blockchain week. In this call, Kyle shares his conversation with CZ, Binance employees and the companies that he met there. Additionally, Kyle talks about his thoughts for Binance chain and his observation of general crypto sentiment in Asia.

What will 2019 look like for Binance as they kick off with the strategic investment and partnership with Vertex ventures to create a fiat to crypto exchange in singapore? Will this city state going to be a new home for Binance permnanetly?

Held in January 2019, Binance Blockchain Week was Binance’s first conference in Singapore and one of the largest public event held by the exchange.

We last spoke with Kyle at World Digital Asset Summit in December and shared it in a podcast with our readers. Other recent, notable writings from Kyle include Questions from the Crypto Idea Maze and What P2P Markets are Better Decentralized

Conference Call Transcript

Joyce Yang

For everyone’s information, the call is recorded. If you’d like to ask a question or you like to have your question asked anonymously, you can email me at joyce@globalcoinresearch.com and I would come ask the question for you. I want to point to participants who are in a listen only mode, later you have time to ask the questions. So it’s my pleasure now to start our conversation with Kyle Samani,managing partner of Multicoin Capital. So Kyle was in Singapore last week at Binance Blockchain week which was the first Binance Blockchain event that took place in Singapore and arguably the largest public event held by the exchange. So Kyle, if you could start off by introducing yourself quickly and why don’t we go right into what you saw at Binance.

Kyle Samani 

Yeah, happily Joyce, thanks so much for having me on. I’m excited to be here. So quick background on myself, I launched Multicoin Capital in October 2017. So I’ve been running the firm for 15-16 months now, managing about 18 million dollars or so. I’ve got 13 employees, they work with us. We are a hedge fund structure, so we do participate in secondary markets, we also do some venture-style deals in the primary markets as well. We are pretty technical and pretty familiar with some of the crypto landscape, and we’re pretty well-known for our blog and all that.

Joyce Yang

So let’s dive right into Binance Blockchain week. What were you doing there, what did you wanted to accomplish by going there and maybe some high level takeaway for our listeners right now?

Kyle Samani 

So my primary motivation in going was to learn more about the Binance organization and kind of meet the team and really know these people are how they operate. It’s been our view for quite some time that Binance is really the most systemically important organization in encrypted ecosystem. They are by far the largest exchange for Bitcoin as well as most top coins. They in our view are generally probably the best operated exchange. Their rise has been pretty mediocre, and over the course of 2018 as the market have cooled down, Binance generally been consolidating in terms of increasing its market share, taking market share from competitors. The Binance team although they are pretty globally distributed, both of the employees are in Asia, and so we’re already rather close with most of the major US exchanges. So it was kind of my admission to go learn about kind of all kinds of nutty gritty details about the firm that are not you know clearly visible to the public and to build relationships with the Binance organization. So that was my primary motivation and going. They did ask to speak, so obviously that was the kind of nice thing and just kind of a good catalyst to build a relationship. I think that was part of your question Joyce, I don’t remember the second part.

Joyce Yang

Just quickly on kind of your summary of the top takeaways and then we could try to dive into the details a little bit more of it.

Kyle Samani 

Yeah, so I said the biggest takeaway is actually how committed the Binance employees are to the organization. So Binance provides employees options on how they want to receive their salary, not just like equity in terms of Bnb but actually how they receive their salary. And they have the option to receive salary either sub partially or entirely in Bnb tokens. And I was shocked at how many of the Binance employees I met, could take 100% or near 100% of their salary in Bnb. Now, I’m sure they’re liberating some of that to pay the bills because I obviously probably can’t pay rent in Bnb tokens, but the fact may be that these people are taking 70, 80, 90 percent of their salary in Bnb, tells you they’re keeping a lot of it in Bnb. 

So these people are really committed to the Binance vision, they see the vision, they understand it, they’re bought into it. And that also means that CZ and the leadership team have really done an amazing job of articulating a vision to their employees to get them to buy in. Relatedly CZ mentioned very publicly that when most of the employees who joined take a pay cut to work there, which for a company that’s generating as much free cash flow as Binance is that it’s intuitive, but again the fact that they’re doing that tells you they are self-selecting for employees who really do believe in the vision. Much in the same way, the altcoin base says their vision is to kind of decentralized the world’s financial system or something to that effect. Binance really is working towards the same general vision, they don’t quite use the same terminology, but it’s very clear after spending time with their employees that that is their vision, that’s what they’re all building towards.

Joyce Yang

Yeah, that’s really interesting. And these employees actually hold their token or do you think they sell it upon receiving it?

Kyle Samani 

So Binance does offer employees the option to take salary in fiat. And so if you were going to like you know, taking Bnb coins just so you can sell them, it’s just kind of stupid. You would only do that if your intention is to hold Bnb tokens. You might sell some of them if need to pay rent, but my suspicion is that most of the old employees are keeping as much of their compensation in Bnb as possible and not selling it.

Joyce Yang 

These are employees who are at a senior level as well as kind of lower level. I assume it will be expensive to hire someone like this CFO who recently joined and if you request everything in Binance coins, that’s something that might be very challenging.

Kyle Samani 

Yeah. So the CFO is not one of the employees that we spoke about that particular subject. In general, I would actually pretty confirm that the CFO was taking that much of either his competition in Bnb. Because CFO is the one position you generally want to see a lot more conservatism and given how much I think just general risk Binance takes, I want to see a more conservative figure in the CFO role. But certainly for a lot of general employees, Binance labs employees, the other developers and customer service staff, driving the full… I spoke of employees cost kind of made every major division and the general enthusiasm for buying the company division and the token was quite clear.

Joyce Yang 

Interesting. Presumably, you are the CFO and you see all the great numbers coming in quarterly from the billings and the profits. It’s a very conflicting thing I’m sure to be in his position.

What was the sentiment like for the conference? We were at WDAS together, the World Digital Assets Summit in December and that was closing in and we were going towards Christmas and we’re kind of entering a bear market. So generally, it was relatively quiet compared to the rest of conferences we saw during the year. What was it like going into January now and looking at Singapore and being there?

 Kyle Samani 

So this event that went substantially better turned out than the WDAS event in San Francisco. The room probably held 500 people; the main boardroom, and it was mostly full for most of the sessions. My guess is over the course of 2 days, around 1,500 people came by. So definitely in much larger attendance, the important people were generally attentive so that was good. 

Binance really limited number of people who could come in set up booths and kind of talk about their assets and what they’re doing and so it didn’t feel as empty as a lot of other crypto conferences I’ve been to myself, which was great. I think they kind of flips out of that is it felt like there was less energy because generally the ones who were trying to sell you stuff are also the ones who you know they just come with energy. So because they limited that I think it also kind of limited the energy around there but the attendance was certainly I think much better than that I anticipated given kind of current state of market conditions.

Joyce Yang 

Got you. So the folks that you saw there or the limited selected number of companies over there are primarily partners of Binance or locally, but the first company that ironically they came up in mind was TRON, who you know who had a huge presence there actually which is very surprising and they actually have been very aggressively expanding outside of China this year with their conference in San Francisco and what they’ve been doing in Binance in Singapore. 

 Kyle Samani

Yeah. So Alameda researches had a booth which… they say out research is in the name, but I actually think they’re a hedge fund which is just rather confusing so they had a confusing…

Joyce Yang 

Yeah, they’re quite strategic in a lot of… working with a lot of funds in the US so I don’t think everyone knows about toggle who can fund them.

 Kyle Samani

Honestly, I still don’t know anything about them. didn’t even say hello. I just remember seen their booth.

Joyce Yang 

Okay. From my understanding is that they do a lot of OTC deals and then they also do a lot of relationships and businesses in Asia, but that’s the extend of what I know as well so hopefully, if someone knows more about them, feel free to share with us at the Q&A. We would love to hear about this. So did you talk to the Binance folks about Binance chain? I think that’s something that’s really interesting as well and that people have been talking about it in the last few weeks and months.

 Kyle Samani

Yeah. So CZ did speak about Binance chain both in his opening remarks and closing remarks and the Binance chain is definitely a subject of personal interest. And so I spoke to a lot of employees about it there. There’s a lot we know now, but there’s still a lot more we don’t know. What would you like to dive into Joyce?

Joyce Yang 

What were your top takeaways? What surprised you there?

 Kyle Samani

Honestly, nothing really surprised me about Binance chain. To be fair, we had done quite a bit of homework going in and so we kind of knew what to expect in terms of technical, how it was going to operate. We learned a couple of key tidbits, so I guess it was just a summary of what we definitely know. So Binance chain is going to be Tindermint –based, so they basically took the main Cosmos chain and forked it. They are going to inherit all the benefits of Tindermint which is fast and safe. The one particularly important feature for DEXis that the chain will offer instant finality so every single transaction, the moment it is confirmed, will be finalized. You won’t have to wait like ten blocks or whatever for the transaction to be finalized which is clearly beneficial for trading applications.

CZ confirmed that the Binance chain will support the same level of aggregate throughput as the centralized exchange will. Now there will be a little more latency because trades will only clear once every second instead of like I think on the current centralized exchange trades can clear in 10 milliseconds or something. So there’s a little more latency, but average throughput is still basically the same. So then the other big thing is that the Cosmos chain will support the interoperable Blockchain communication standard, otherwise known as IBC. IBC was invented by the Cosmos team and so Binance is going to make it as easy as possible for people to move assets from other chains on to Binance chains so that they can be traded on Binance chain. 

So these are all in my view very good technical decisions on how to structure the chain for maximum efficiency and throughput. So I kind knew that going in and the Binance team confirmed the above. 

The other kind of cool tidbits we learned where that in order to list new currency pairs on the exchange, you’re going to have to propose a vote and then Bnb token holders on…. In order to validate transactions on the chain, you’re going to need Bnb and you’re going to stake the Bnb. And so Bnb holders are going to be the ones who actually decide which assets get listed. I think this is super cool because that means Binance can truly say like hey, we’re not actually controlling what assets trade here or don’t trade here. It’s going to be truly a community effort. Besides that, they have not confirmed what fees are going to be, they have not confirmed how many validators there are going to be on the chain, they have not confirmed if there’s going to be inflation for Bnb holders who are validating. So there are still a number of economic questions that are open, but the major technical strategies are in place and I say the main parameters in terms of like how they’re going to lift asset and performance. Those are all now reasonably well understood.

Joyce Yang 

Did they talk about any timeline around that?

 Kyle Samani

Yeah. The CZ said in the closing remarks that they’re expecting to launch a public test net in 2-3 weeks and then mainnet so they’re moving quickly.

Joyce Yang 

Yeah, that is very interesting. And taking Bnb to something that we haven’t seen. Which is another interesting use case with Bnb tokens and value?

 Kyle Samani

Yeah. I think it’s very compelling I mean right now if you hold Bnb, you can go to discount on your own trading fees, but now if you hold Bnb, you’ll actually be able to write as a validator in the Binance chain, you will actually be able to generate revenue from other people’s trading fees. So that’s really fundamentally a new form of utility, but I think that’s very exciting.

Joyce Yang 

Yeah. What did you get like the general reception of that among the folks who attended the conference? I assume all of them will start getting involved given that Binance is already such a large player in Asia.

 Kyle Samani

Yeah I think that there are still most people that still has not clicked for them, all the implications of what this is doing. The Binance team has not laid all of this out yet in a very clear way. You can form the pieces together and I obviously spent the time trying to put all of the pieces together, but they haven’t yet painted that picture clearly for the public. Right now basically, they said chain is coming, here are some technical details and you have to figure it out on your own. But I think as chain launch approaches, I think they will put together a much more comprehensive communications plan because obviously, Binance wants to encourage people to stake their Bnb on Binance chain.

Joyce Yang 

That’s very interesting. I remember just reading something CZ was saying which was that you think the future will acquire a decentralized exchange and there will be separate use cases for the centralized exchanges so they’re kind of paving the road there, but it’s definitely coming very quickly it sounds like. Are we expecting that the change to be primarily for the decentralize exchange and that’s to the extent of it?

 Kyle Samani

Definitely when the chain launches, it’s going to be focused on just decentralize exchange of asset. I think they have a larger vision over time. I don’t know what that is. I think there’s just a lot that we can know what happens, but I would generally expect that they’re going to want to add more features and functionality over time so long as it does not impact the performance of the trading engine.

Joyce Yang 

Yeah Got it and I have one last question before we could open up for Q&A. Did you get any senseof the regulatory attitude there? You know if you spoke to any folks who are from the Singapore Monetary Authority or anyone who seem to know what’s going on there in the regulatory front.

 Kyle Samani

I didn’t speak to any regulators there. I don’t know if there were any who were there, but I did spend the time get talking to some of the Binance executive and I actually feel quite good about what Binance is does right now. They are operating up a Fiat Exchange in Singapore. If you’re opening up a Fiat exchange, that by definition means you have quite a bit of buy-in from the local government. You know vertex ventures which is an arm of the Singaporean sovereign wealth fund is now an investor in Binance, so they pretty clearly have lessons there and support, so I’m not super worried about anything on that funds. I think Jersey just launched a few weeks ago, Uganda launched, they’re seeing up major uptick in terms of growth in all these funds so it seems like they have found a regulatory arbitrage strategies wording and I think overall, they’re at a pretty good spot.

Joyce Yang 

Cool. Awesome. So I just want to quickly make an announcement at this time for the audience if you’d like to ask a question, please press *6 from your phone and it will be queuing up the questions in a bit. So that’s *6 on your phone. And in the meanwhile while we’re queuing up the questions, I have some questions from our readers who couldn’t make it to the call. And one person asked what are some projects that stood out to you besides Binance?

 Kyle Samani

I’ll admit I really didn’t spend much time on looking for other stuff. Oh there’s one. It’s a company that actually went through the Binance accelerator. It’s called Torus. And basically, they’re providing a pretty interesting solution for decentralized applications. If you want to have a login function right now you can use Metamask, so whatTorus does is it basically allows you to say sign-in with Google. So you can use your existing Google credentials or Face book credentials or Twitter or any of those credentials and generate a private key based on your Google account or based on your Twitter account or whatever. And so the power of this is that consumers can use an existing service they know and love to log on. They basically get to have a forgot password function like in terms of Google providing that function for them, but they still can login to decentralized applications. So I thought that was a very cool service.

Joyce Yang 

Yeah that sounds like it will make it a lot easier too for the general mass to adopt something , metamaskobviously has some hurdles even though they try to make the expenses easy as possible. And another question that our reader had was that they saw about Justin Sun was at the Binance event. And they’ve seen some of the events they’ve been hosting throughout the US, primarily in San Francisco. So their question is TRON really embraced Asia and I’ll love to see what your observations there were if you had any.

 Kyle Samani

I still can’t really tell what I learned from them. I don’t know. If it is being embraced in Asia, it’s probably more in China than it is in Singapore. And I understand… 

Joyce Yang 

You know Binance has just launched their research on BGP Hogan. That’s one of the few tokens that have a holistic on Binance research.

 Kyle Samani

Yeah I mean it’s part of like Binance is doing the launchpad as well with BCD. So that doesn’t surprise anybody. Yeah admittedly, I literally don’t know much about Tron.

Joyce Yang 

Okay, so we have some questions from folks and we’re going to call folks off by the last digits of their phone numbers, to make it easier so it’s a listener from the number 8585. Can you pose the question?

William

Hi this is a Question from William. Hi Kyle. Can you give a sense of the types of applications that were being developed around the Binance ecosystem besides that one you mentioned? What sorts of applications are being developed?

 Kyle Samani

So Binance chain specifically is really only for trading. So it’s basically getting going support to asset issuance and trading. From the best of my knowledge, it’s not going to really support anything else at least the private chain launch, perhaps a lot more features over time. So I don’t expect Binance chain to be supporting that many types of applications. Binance Launch pad and Binance the incubator are I say generally biasing towards projects that they consider to just be generally helpful for the ecosystem. So like the one I just described their Torus is a great example. It’s really not clear how Torus is going to make money, but it is very clearly a good service for supporting decentralized applications which is why I think that the Binance have agreed to take them on.

William 

Got it. Thanks.

Joyce Yang 

The next person we have is coming from the number 3687.

Chris 

Hi Kyle, this is Chris. I’m just wondering if what you thought of games. If there’s anything you know being in Asia as you mentioned Tron a little bit producing what that next year was our own games there.

 Kyle Samani

Yeah. So you know like Blockchains are really good for money more than most other types of other digital assets, so most of the games we’re seeing are pretty heavily financially oriented. So the easiest and most simple type of games seem to be gambling related. We’re starting to use a more clever types of games based on like hearts kind of things, but for the most part, the games are very directly money related so gambling is the obvious one. I think we will unlock new classes of games where money is an integral component of the game, but I’d say thus far, I haven’t seen anything like… the formula seems like it’s a super strong kind of feedback loop, and that’s going to drive real engagement. Having said that, there’s a large part of the EOS community and the drawn community that I’m not super aware of so I’ve been wanting toplay them, but I haven’t played them yet.

Chris 

Great. Thanks.

Joyce Yang 

Okay. So we have another question from a reader. Will Multicoinbe focusing more on Asia in 2019? It sounds like generally, the sentiment that you see in Binance has been pretty bullish. What’s you’re thinking there for going into 2019 and thinking about Asia overall as well? 

 Kyle Samani

We definitely want to spend more resources in Asia. We’re not going to do so until we’re ready I think, but we are interested. We are figuring out how to put our feet on the ground. If it doesn’t happen in 2019, it will probably happen in 2020.

Joyce Yang 

Yeah. It sounds like you definitely wanted to go, but what’s stopping you?

 Kyle Samani

I mean just focus. You know, like we need to have the organizational I’d say maturity and then like flows to if we’re going to have some on the ground, be ready to share information back and forth seamlessly, make sure we have people who we can trust who can actually get useful information and act on it and also just kind of like budget and I mean we are in a bear market. So we’re not going to go too aggressive with hiring until new market probably picks back up again. So we’re definitely interested in the Asian market. We know there’s a lot here. We know we have basically ignored historically because we just know we’re unable to compete, but we would like to and we’re slowly going to figure it out.

Joyce Yang 

Got it. And last reminder for listeners. If you like to ask you question still, please press *6 on your phone and we’ll open up a question to you. And the last thing was that I was curious about the trading environment there. You know, this is what we observe and would have written extensively about this which is that OTC trading happen in Asia as a growing trend in a bear market, but still be able to essentially have a viable business for a lot of the fun out there. Are you doing anything like that? And Binance actually just released or announced that they’re doing an OTC trading as well which is super interesting. So I want to see if you have seen anything or heard anything about that.

 Kyle Samani

Yeah. I met with the Binance OTC team while I was out there. Right now, I think they’re starting off pretty simple. Basically they’re all planning a way for people who just don’t want to go place orders on their own on the exchange, you can use the OTC service and they’ll basically do that for you. Binance OTC is not yet sourcing liquidity for anywhere other than Binance itself. It’s not clear to me if they are going to try and source liquidity from somewhere else, but for now, they’re not. So for now it’s just kind of a nice access point for someone who has a relationship to Binance and who wants to place an order without having to actually mechanically go do so.

Joyce Yang 

I think we have another question from number 3687.

Chris 

Yes, my mom calls me Chris, but I just want to get you comment a little bit on regulation I mean some people think of Binance always like okay, great team. Everything’s in place, but have they because of lack of attention to regulatory prevent them from moving forward. Just wondering if you saw any closer attention to that this time than maybe they’ve traditionally been having a path.

Chris

Yeah I was at Singapore. I guess it’ll be more like the approach to it and less about where they’re putting their regulatory focus on, but more of like… I think in 2017, there was not really any type of attempt to try to follow regulatory action. I’m just wondering if there’s kind of a change in sentiment amongst the Binance group in that regards.

 Kyle Samani

Yeah, so I actually feel pretty much better about their approached and stance to this. I had a chance to talk to CZand a number of others about this issue specifically, and they are taking it a lot more seriously than most people give them credit for. Binance has a perception of being very cavalier about variation, but actually I think at this point, they’re doing just fine. 

So it looks assertively in the US. So the first thing that you could theoretically say they’re violating it is you could say they are trading under unregistered securities. While that is probably true, like at this point, Coinbase is, Poloniex is, so is Kraken. and so I don’t think there’re meaningfully more egregious in that front, Binance hasn’t been proactive would be listing any assets that are scams or outright fraud. I don’t think as long as projects need to be proceeding forward in good faith, Binance seems to be okay with listened and I think based on what we’re seeing out of coin base, that seems to be the appropriate bar. So I’m not super worried about that. 

The thing that is a little more concerning is the KYCAML specifically for the free tier. I think Binance allows you that credit of account without any KYC, how much your cap with the withdrawal limit of 2 Bitcoin per day which is about $7000 per day right now. So you know this seems ripe for abuse. It certainly is possible that it could be. Again I asked about this issue very specifically and the Binance team made it clear. They said look, we offer this here because we want to support people who like or have oppressed governments or like their subject capital controls and this is their only way to get out. So their motivation in keeping the peer open is very clear for accounts that are not KYC that are under that limit. They do moderate very closely for any suspicious behavior and they do shut them if they detect anything that is suspicious, they will freeze those accounts. So they are keeping an eye on them and their goal is not to encourage any illegal activity. They just want to be able to support people who would not otherwise be able to use the exchange. But they know the tool and take this issue pretty seriously. Overall in those kind of  then you look at the rest of the world basically, Binance is working with governments around the world. They’re going to launch a South American exchange exchange soon. They are already in Africa, they already have Europe, they already have Asia, so it’s very clear that they’re working with governments as proactively as possible so I’m not super worried about other countries. In China, they’re just staying out of China. That’s kind of approach they’re taking on a lot less work than people think.

Joyce Yang 

Yeah that’s great. Thank you. This is a very interesting aspect and I believe you and I agree with CZ runs a very tight ship, he wants to be compliant product and service provider. I remember even before they launched in Singapore or during the time when they were looking at Malta, I was talking to him about a potential introduction to a friend in New Zealand who works in the regulators and he said you know, we’ll have this conversation if they allow us to have fiat or crypto trading or else this is not attainable. 

We’re talking to a lot of regulators right now and this is something that we care about the most and that’s our priorities. So hopefullyjust a few months now, we’re seeing these guys executing. So I think it’s a super interesting company to pay attention to and if you have any last takeaways Kyle with our episode.

 Kyle Samani

Overall, I’d say I’m just really excited about what Binance is doing. I think they have a great strong vision and awesome team and they’re I think executing much faster than people think and I think there are still some kind of regulatory risks. I think it’s much lower than most people realized. So I’m overall very excited about Binance and Bnb.

Joyce Yang 

Do you feel that way about other changes?

 Kyle Samani

Not as much.

Joyce Yang

Okay. With that, we’ll wrap up. Thank you everyone for listening and thank you Kyle for your time. I hope everyone has a great weekend and let us know you have any questions or thoughts on this call.

 Kyle Samani

 Hey Joyce, thank you so much for having me. I really appreciate it. Bye everyone.

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