IOSG Founder: Cool Reflections Amidst the Explosive Success of Binance

Author | Jocy@IOSGVC

Self-regulation is needed in an unregulated era, to ensure a continuous flow of fresh resources.

The lives of Binance and OKEx are filled with countless wealth creation myths on Twitter, igniting passion among community users, as the industry enters a fast-money mode.

Behind Alpha's success, out of 326 launched projects, less than 10%—only 32 projects—are listed on spot. This means that 90% of the projects launched on Alpha this year ultimately turned into platform fuel. In an unregulated industry, exchanges have strong influence and high dominance, and the failure of projects seems to have no necessary connection with exchanges. However, in an industry lacking regulation, if platforms cannot self-regulate better, it is equivalent to administering a strong drug to the entire industry. The success and collapse of liquidity can happen in an instant, with wealth creation myths flashing quickly and then falling rapidly.

Hyperliquid has achieved great success by leveraging the concept of on-chain Binance, while Aster has gained a share of the Perpdex market by recreating trading volume. It seems the entire industry is moving towards decentralization and more promising directions. However, in reality, futures and derivatives have always been the most profitable tools for exchanges in this industry. Countless exchanges use various methods to get their users to start using their Perp products. Yet, futures and derivatives are essentially a zero-sum game, where retail investors can amplify their gains and losses with leverage ranging from dozens to hundreds of times. Therefore, the crazy subsidies from Hyperliquid and Aster have led users who have never engaged in derivatives and futures to start trading futures, driven by airdrop incentives. Even if the final user conversion rate is only 10%, these users may become addicted to futures trading in the following six months. PerpDex is particularly good, but excessive incentives and interventions to turn more people into futures gamblers lose sight of the original intention and may easily backfire in the future.

What values should be prioritized in the competition and game between exchanges in the crypto industry? Many exchanges control capital liquidity and platform traffic, so starting meme wealth creation myths can better achieve a leading position, attracting countless people. Competition is bound to be brutal, but in an unregulated industry, should industry leaders seriously reconsider what kind of horse racing mechanism to establish for the industry, and what direction to lead the retail investment wave? As crypto practitioners, we have witnessed the rise and fall of bubbles in past cycles, and we have seen the maturity of DeFi/stablecoins/infrastructure. If leading players can find ways to focus on long-term value tracks and do more difficult yet correct and long-term things, countless industry practitioners will regard them as driving forces and memorable figures years later.

During Trump's cycle, the crypto industry enjoyed numerous benefits and regulatory leniency, but such an unregulated era demands a sense of industry responsibility from top entrepreneurs, helping the industry achieve more breakthroughs in this cycle, attracting more powerful entrepreneurs to join, and creating countless companies that can rival ByteDance and Pinduoduo.

I call for exchanges to exercise more restraint in internal project innovation and liquidity flow competition, and to ask themselves one more question: what value will the current actions have in three to five years in the industry? The best entrepreneurs often do not only focus on the present; they work together to create a broader future for the crypto industry.

Tips: Of course, it is difficult for many to refuse such lucrative opportunities, and countless rapid wealth creation myths make everyone yearn for them. However, please remember the three principles of investing: preserve your capital, participate as little as possible in numerous opportunities to minimize losses, and place big bets to earn big money in your area of expertise or strengths.