Changpeng Zhao (CZ), the founder of Binance proposed 6 initiatives to restore order to the digital-currency ecosystem in the wake of the collapse of rival FTX. His own success depends on it. By embracing the role of de facto central banker for the turbulent and unregulated crypto market, Zhao helps Binance appear less vulnerable to the storms that have engulfed its competitor.
While financial watchdogs are concerned about further regulations, CZ has stepped in to protect the crypto investors who matter most. CZ also stated that he is collaborating with industry partners to establish a comprehensive recovery fund for affected crypto exchanges.
The first of the six major qualities of Binance-CZ was its risk-averse approach to user finances. Using customer funds as collateral elsewhere was FTX's biggest error. Risk aversion is the inclination to avoid risk. CZ asserts that user funds should never be traded or invested.
This leads to the second principle, which states that exchanges must never use their native token as collateral. Therefore, native tokens should not be distributed outside of the exchange blockchain environment. According to CZ, users must be able to securely rely on the native token that their preferred blockchain employs.
CZ's third commitment is publishing live proof of assets or proof of reserves. The company announced it was working on a "Merkle tree proof of funding," which would be shared with the community in the coming weeks.
Maintaining robust reserves is also essential for protecting users. With its $1 billion SAFU fund, Binance is a frontrunner in the sector. CZ encourages others in the business to commit to doing the same.
The fifth principle was avoiding excessive leverage and offering highly leveraged products on extremely volatile assets to unskilled retail traders. CZ adds that it is imprudent to incur debt to fuel expansion.
CZ stated that strengthening and implementing security procedures was crucial to achieving transparency. He stated that all exchanges should implement stringent KYC and AML procedures.