All-In Interview: w/ Binance founder Changpeng Zhao (Transcript)

I think it was 15.

CHAMATH PALIHAPITIYA: Yeah, we’re the same age, so it probably would have been 14. I don’t know what the… Do you remember what the minimum wage was in British Columbia at the time?

CHANGPENG ZHAO: I do. The minimum wage was $6. But McDonald’s…

CHAMATH PALIHAPITIYA: Oh, that’s incredible. In Ontario it’s $4.55.

CHANGPENG ZHAO: But at McDonald’s they pay $4.50. That’s below minimum wage because McDonald’s somehow had like a special exemption because a lot of young kids work there. So I think it was on my 14th birthday that I applied for the job. And then a week later I was flipping burgers there and it was the first income I had.

CHAMATH PALIHAPITIYA: You’re not like this precocious technical wonder kid who’s coding 24/7 and learning computer science, or were you?

CHANGPENG ZHAO: No, I wouldn’t describe me as that. I think I’m a technical guy. I started computer science. I was interested in programming even in high school, but I wasn’t a programming wizard. I wasn’t one of those really genius coders. I think I’m a decent coder. I think I wrote some decent code in my career. And then when I was like 28, 30-ish, I moved away from coding. I was doing more business development, sales and et cetera. So there was like maybe I would say eight years of my career.

CHAMATH PALIHAPITIYA: So you’re a normal immigrant kid learning to adapt in Canada.

CHANGPENG ZHAO: Yeah.

CHAMATH PALIHAPITIYA: Did you have a lot of friends?

CHANGPENG ZHAO: Yeah, I had a lot of friends.

CHAMATH PALIHAPITIYA: Only Asian friends or no, both?

CHANGPENG ZHAO: I actually had like both Asian and non-Asian friends. But I was actually in our school… Most of the Asians hang out with Asians. But I was actually one of the exceptions that I had like Caucasian friends. I had all kind of different friends. Yeah, my teenager years in Canada was great. It was like some of the best years. I think those years really shaped me to be a happy person. I’m generally a happy person.

University Years at McGill

CHAMATH PALIHAPITIYA: How did it feel when you weren’t able to get into my alma mater, University of Waterloo, and so had to settle for McGill? How does that make you feel? Does it make you feel stupid?

CHANGPENG ZHAO: So actually I was deciding… My sister went to Waterloo, so I was deciding between Waterloo and McGill and maybe UT. I knew I wasn’t going to go to UBC. I wanted to go to a different city and actually UBC gave me the offer, but I just knew I don’t want to go there at the time. My friend’s mother, who I really respect, she said, “Well, you might want to become a doctor because doctors have a good lifestyle.” I took her advice. I studied biology and Waterloo is not much of a biology school. So I went to McGill. But then one semester later I said no more biology. I’m going to move to computer science.

CHAMATH PALIHAPITIYA: Was it a typical kind of college experience for you? Did you have great jobs in the summertime or were you just like an average normal university kid? How’d you pay for school, by the way?

CHANGPENG ZHAO: I worked every summer. I worked every summer. And I also worked part-time during the school year.

CHAMATH PALIHAPITIYA: So no debt. You were like, I must graduate without debt.

CHANGPENG ZHAO: Yeah, I didn’t take any student debt. The first year I actually still took about $6,000 Canadian dollars from my dad. The second year I was still a bit short. My sister gave me $3,000. And then from that point on I never took money at all. I just, I was self-sustainable. So no student debt. Very lucky. But I just worked every summer.

CHAMATH PALIHAPITIYA: You know the best thing about Waterloo, which was a savior for me, the co-op program.

CHANGPENG ZHAO: The co-op program.

CHAMATH PALIHAPITIYA: Yeah. And I had these incredible co-op jobs. I still graduated with about $30,000 of debt. But I was also pretty prolific trader in equities.

CHANGPENG ZHAO: Okay.

CHAMATH PALIHAPITIYA: And my boss, this guy Mike Fisher did this incredible kindness to me where I was working at a bank and I was a derivative trader. That was my day job. But I was trading equities and I had made him enough money. And he said, he called me Sherman, didn’t call me Chamath. He said, “Sherman, how much debt do you have?” And I said, “Fish, it’s about $30,000, $32,000.” And he said, “Go downstairs right now to the CIBC and pay your debt and I’ll write you a check.” He wrote me a $32,000 check.

CHANGPENG ZHAO: Wow. Should have said $300,000.

CHAMATH PALIHAPITIYA: But Canada is incredible because you can get this education and it doesn’t saddle you with this debt that you can’t overcome. Which is not true in the United States for many people anymore.

CHANGPENG ZHAO: Yeah, even in McGill there were people from the United States going to McGill, paying international student tuition and it was still cheaper than the U.S. I was like, that’s crazy.

CHAMATH PALIHAPITIYA: That’s crazy.

CHANGPENG ZHAO: Yeah. So yeah, we were lucky that the Canadian tuition was okay.

From McGill to Tokyo

CHAMATH PALIHAPITIYA: So you graduate from McGill in computer science?

CHANGPENG ZHAO: Yeah, in computer… Actually I didn’t graduate from McGill. I went there for four years and on my third year I got an internship. On my fourth year… My third year, I got an internship job and then extended, extended, extended. And I didn’t go back to McGill. So I didn’t graduate from McGill. And later on I found out I still need a bachelor’s degree to apply for work visas in Japan. So I went to one… This is like the dot-com… This is 2000. This is the dot-com height. So I went to an online education program called the American College of Computer Science and got a degree there.

CHAMATH PALIHAPITIYA: Oh my God. Yeah. So you’re technically a graduate from that school.

CHANGPENG ZHAO: Technically, yes.

CHAMATH PALIHAPITIYA: Okay, so which internship did you get where you started to work there?

CHANGPENG ZHAO: So I got an internship in Tokyo. So I always… From first year college, I always worked on a programming job. So I worked at a company called Original Sim writing some simulation software. And then third year, I got into a company in Japan, in Tokyo called Fusion Systems Japan. And then they were writing order execution systems for brokers of the Tokyo stock exchange.

CHAMATH PALIHAPITIYA: Sorry, that’s a Japanese company with an office in Montreal or an office in Canada or?

CHANGPENG ZHAO: No, no, I went to Tokyo.

CHAMATH PALIHAPITIYA: You went to Tokyo?

CHANGPENG ZHAO: Yeah, it’s actually an American, a bunch of American guys’ company that’s in Tokyo. So it’s like a bunch of guys who are…

CHAMATH PALIHAPITIYA: And you’re thinking, this is an adventure. I’m going to go and live in Tokyo for a summer.

CHANGPENG ZHAO: Yeah, yeah. I mean, I was a college student. Living in Tokyo is like a dream. It’s a dream. And the first time you go there, it’s like, it’s from the future. It’s cool.

CHAMATH PALIHAPITIYA: And what kind of software did you write?

CHANGPENG ZHAO: Mostly order execution software. So the same software that moves orders.

CHAMATH PALIHAPITIYA: What drives Binance today?

Building Trading Systems and Moving to Bloomberg

Pretty much. So it’s the same style. Actually, all the software I was involved with have no decision making.

CHAMATH PALIHAPITIYA: So when you first were exposed to this, it was not like, oh, wow, I love this. This makes sense. Or was it more, okay, I’m asked to write this code and I understand the concept, so let me just do it. Were you attracted to the subject matter or you just did it because it was your job?

CHANGPENG ZHAO: I first did it because it was my job. I was so young, I didn’t know what all the different industries are. And actually when I got to the company, the company was giving me a project on working on digital imaging storage systems. Basically iPhone photos app for medical imaging for Nikon.

But very soon the company’s main product is the order execution system. So I was involved in that. And then that became the thing over my career. And I like it because it requires quite a lot of technical expertise. Everything is about efficiency, making it go as fast as possible, process as low latency as possible. That kind of appeals to me. I’m an efficiency kind of driven guy, subconsciously.

Optimizing for Speed and Efficiency

CHAMATH PALIHAPITIYA: And just to double click on that, when you look at high frequency trading organization, the Susquehannas, the Jumps, they go to such a degree to basically optimize for efficiency and low latency all the way down to their own circuit breakers, their own physical fiber infrastructure. They’re willing to sort of pay the price to just shave off a handful of milliseconds on either end. How does that manifest in the software? So when you’re writing that kind of software, how do you actually optimize for those boundary conditions in code?

CHANGPENG ZHAO: Yeah. So, well, there’s quite a few levels. The first level you do is basically you write your software to be efficient and fast, like no slowness. You want to remove all the database lookups, so you want to do everything in memory and then you want to reduce any sort of additional computation. You want to simplify the risk checks, especially pre-order, pre-trade risk checks.

And then the more advanced versions you move on to like the FPGA, which is a network chip card that’s on the network card, on what we call the Ether card, so that you don’t—

CHAMATH PALIHAPITIYA: Have to go all the way up to memory and come all the way back down to the processor.

CHANGPENG ZHAO: So back then, when I was still writing code like maybe 10 years ago, that round trip is about 100 microseconds.

CHAMATH PALIHAPITIYA: Microseconds.

CHANGPENG ZHAO: Yeah. And then by avoiding that, you’d reduce down to 20 microseconds and then you move it to a physical infrastructure. You want a colocation. You want to—

CHAMATH PALIHAPITIYA: Why haven’t these organizations, like in the AI world, for example, with Grok, our big observation even 10 years ago when we were starting the business, was this exact idea, which is it’s really inefficient to sit in a GPU to go all the way up to HBM to come back down. So let’s just take SRAM and just do everything here on chip. Manage it with C2C.

And that technical problem made a lot of sense and very, very fast for the decode phase of inference. Makes a ton of sense. Why, when so much money is on the line for high frequency trading, why did they never try their own custom silicon? I understand FPGAs, but nobody really went to the point of actually saying here’s a specific ASIC or did they? And we just don’t know about it.

CHANGPENG ZHAO: I don’t think it exists on very large scale. I think the algorithms change too often. So when you go to hardware like you want to design your own chip, it is very efficient. It’s very fast. But when you want to change, it takes a long time.

CHAMATH PALIHAPITIYA: Right.

CHANGPENG ZHAO: So when you want to reprogram it, I think FPGA already offers kind of the best of both worlds. Even FPGAs, if you want to reprogram it, the programming cycle is 10 times longer than software.

From Tokyo to Bloomberg

CHAMATH PALIHAPITIYA: The company you worked at in Japan, was it successful?

CHANGPENG ZHAO: Successful? That company got sold to a NASDAQ listed company just before 2000 for a lot of money, for like $52 million back then. So that was decent money.

CHAMATH PALIHAPITIYA: And so is that when you said, hey, hold on, there’s something here or no. Was it something else that happened?

CHANGPENG ZHAO: No. So at that time I was too young. I was like 20 something.

CHAMATH PALIHAPITIYA: So you’re working at this place, you’re just a coder?

CHANGPENG ZHAO: Yeah.

CHAMATH PALIHAPITIYA: You’re a salaryman.

CHANGPENG ZHAO: Yeah. In Japanese terms, salaryman.

CHAMATH PALIHAPITIYA: Yeah, you’re a salaryman. So then walk us through what happens afterwards.

CHANGPENG ZHAO: So that company got sold, they acquired. There was a lot of culture clashes between the parent company versus the original company. That’s my first experience about how mergers may not work. Yeah, the two managements were just clashing. And then the same partners went to do a different company called Building 2.

But now these partners, I didn’t get any money, but the partners got quite a bit of money now. So they rented a very fancy office. That company only lasted a year. It means that previous success doesn’t guarantee future success. So they spent a lot of money, had a very nice office, but has zero revenue. So that folded within a year. And that’s 2001.

And so early 2001 I was looking for new jobs. And then Bloomberg was hiring. And this is right before 9/11. I kind of got an offer before 9/11. And then 9/11 happened. I still haven’t moved. And then I—

CHAMATH PALIHAPITIYA: Where was this? To New York or—

CHANGPENG ZHAO: This was in, well, I was still in Tokyo back then. And then Bloomberg is in New York. The offer I was supposed to—

CHAMATH PALIHAPITIYA: The offer was in New York.

CHANGPENG ZHAO: The offer was in New York. So after 9/11 I called Bloomberg, say hey, is the job still there? Do you still want me to go? And they said, well, do you still want to come? I was like, yeah, okay. So then I went. So I went to New York in November of 2001.

CHAMATH PALIHAPITIYA: Wow. What was that like?

CHANGPENG ZHAO: The streets were pretty quiet, but you know, I was fine. New York was quiet for a few months, but it became lively pretty quickly, I think. So I didn’t feel too much issues. So I then went to New York and worked at Bloomberg for four years.

CHAMATH PALIHAPITIYA: Doing exactly, again, the same thing. You’re kind of a salary guy. You’re working at a big company. Salary bonus, maybe some options or some phantom equity or something like that.

CHANGPENG ZHAO: Yeah. So I joined as a senior developer. I was put into a team called Trade Books Futures. They just formed this team and they had a system that allowed people to trade futures on Bloomberg, but it was like spread out. So they collected that into one team.

CHAMATH PALIHAPITIYA: And still no inkling of, like, that entrepreneurial bug?

CHANGPENG ZHAO: Not really. Back then I was like, nah.

CHAMATH PALIHAPITIYA: And what were you looking for? Stability. Like, why Bloomberg being in New York, like, what was it?

CHANGPENG ZHAO: I was just a young guy. I was like, I think I was like 24, 25.

CHAMATH PALIHAPITIYA: Okay.

CHANGPENG ZHAO: So I was just a young guy trying to get a job, experience different parts of the world and just find my way through. I knew I wasn’t experienced enough to do entrepreneurship myself. And I was working at a small company in Tokyo. The company only had like 200 people. Bloomberg at the time had about 3,000 people. So to me, that was a big company.

And they had fancy offices, fish tanks, free food and everything. So I joined as a senior developer. I got some good bosses. I got promoted three times in two years. And then I was leading a team of 60 initially, and it kind of grew to about 80 people. And that’s when I became sort of a manager. I no longer wrote code, and I started the worst transition. The worst transition. So that’s kind of my Bloomberg experience. Yeah. So I stayed there for four years.

The Move to Shanghai

CHAMATH PALIHAPITIYA: And then you quit and moved to China.

CHANGPENG ZHAO: Yes.

CHAMATH PALIHAPITIYA: How does that happen?

CHANGPENG ZHAO: I think it was beginning of 2005, again, the same friends I had made in Japan, they were talking about starting a new company, a new fintech company. And they were in Asia. So they’re talking about Tokyo, Shanghai or Hong Kong. And they said Shanghai is most likely the most happening place for the future of fintech. We should have picked Hong Kong. Hong Kong had a lot more happening since then.

So I went there in 2005. So it was like five foreigners from a Chinese perspective. Five Caucasians, four Caucasians plus a Japanese, plus me. I’m the only one who speaks Chinese. And my Chinese was kind of rusty back then too. So the six of us went there to do a new IT startup in Shanghai.

CHAMATH PALIHAPITIYA: So all you guys just land there and what was the idea?

CHANGPENG ZHAO: So we thought, we have all this Wall Street experience on Wall Street trading technology experience.

CHAMATH PALIHAPITIYA: Other friends, had they moved to New York or no, they were still in Japan doing their own thing?

CHANGPENG ZHAO: Two of the friends were in New York with me, and then the other three were from Japan. They were there. So the six of us came together and we wanted to do, our idea was let’s bring the Wall Street trading technology into China so we can service the brokers and exchanges in China. But then, so we went, they rented a very fancy office again.

CHAMATH PALIHAPITIYA: Wait, okay, so hold on. So when you guys start this company, this is now your first entrepreneurial. You’re like, okay, let’s do this.

CHANGPENG ZHAO: Pretty much.

CHAMATH PALIHAPITIYA: Did you know to even ask the question, like, okay, guys, what’s our equity split? What’s the cap table? Did you know any of these things or you’re just like, great, let’s go do it. I’m just assuming it’s 1/6, we’re equal. Like, how did it all—

CHANGPENG ZHAO: It wasn’t 1/6. It was like the top guy had like, I don’t know, 39, 40% and the rest five of us split equally. So I had about 11% or so. So I knew that, but I didn’t know, like, you know, all the ins and outs about, you know, shareholder rights. What terms? I didn’t know any of that.

CHAMATH PALIHAPITIYA: Yeah, preferred versus common. None of it.

CHANGPENG ZHAO: And then I—

CHAMATH PALIHAPITIYA: You’re like, great, I got 11%, I’m moving to Shanghai.

CHANGPENG ZHAO: Yeah. So I just have 11%. I didn’t, I have no idea what common stock is or what preferred. So just went. And then, but so I was a junior partner in this group. And then once we landed in China, I start because I speak Chinese. So I began talking to potential clients. I went to talk to brokers. I found out we are registered as a wholly foreign owned, what we call WFOE, Wholly Foreign Owned Enterprise. The Chinese brokers and financial institutions are not allowed to work with a WFOE.

CHAMATH PALIHAPITIYA: That’s right.

CHANGPENG ZHAO: So we found out after we started the company while we were in Shanghai. And so the company pivoted towards doing any IT system for any company.

CHAMATH PALIHAPITIYA: We can be work for hire.

CHANGPENG ZHAO: Work for hire. We can be fixing—

CHAMATH PALIHAPITIYA: You became Deloitte.

CHANGPENG ZHAO: Not even Deloitte. We can be fixing printers or we can be writing like, you know, SAP implementations for you. We did all of that. So there’s a whole spectrum of things. And so we did that for a few years and we actually made a living.

CHAMATH PALIHAPITIYA: For a few years?

CHANGPENG ZHAO: Yeah, for a few years. And we made a living out of that. Yeah, we started, we had quite a number of automotive clients. Shanghai General Motors, Shanghai Volkswagen, Shanghai First Automotive. They were all clients of ours. And then like maybe three or four years in, we started having offices in Hong Kong and then we were dealing with Morgan Stanley, Deutsche Bank, Credit Suisse.

CHAMATH PALIHAPITIYA: So it grew. So it was successful.

CHANGPENG ZHAO: The company’s still around. The company’s still around. So I left in 2013 after eight years, but the company is still around.

Early Career and Personal Life

CHAMATH PALIHAPITIYA: So in the eight years you worked at that company, all in Shanghai?

CHANGPENG ZHAO: I was mostly in Shanghai, but then I spent quite a bit of time helping to set up the Hong Kong office and then I was also doing quite a lot of work for some clients in Tokyo.

CHAMATH PALIHAPITIYA: How big did that company get?

CHANGPENG ZHAO: I think it got to about 200 people again. And it’s kind of stayed there for as far as I know, even till now.

CHAMATH PALIHAPITIYA: And so as a junior partner you just take profits and you share it?

CHANGPENG ZHAO: Yeah. Well, actually we didn’t take that much profits. I actually invested most of my savings back into that company and I actually didn’t cash out a penny. But after a few years the company was stable enough to pay the partner salaries that all of our kids go to international school. So we get a six figure salary.

CHAMATH PALIHAPITIYA: That point you had gotten married?

CHANGPENG ZHAO: Yes. Yeah, so at that point I got married when I was in New York. And then, yeah, so I took care.

CHAMATH PALIHAPITIYA: And you had met your ex wife, how?

CHANGPENG ZHAO: Yeah, I met her in Tokyo when I first went to Tokyo. So I met her in like 1999 when I was first in Tokyo doing the internship. And then she visited me in New York and then, you know, we got married and then we had kids. Now we’re separated or divorced. In Shanghai I had young kids and you know, it was enough salary to put the kids into international school and that was good enough for me.

CHAMATH PALIHAPITIYA: So far again, nothing here tells anybody that you’re about to go and start Binance.

CHANGPENG ZHAO: No, nothing. I didn’t know.

Discovering Bitcoin

CHAMATH PALIHAPITIYA: So then 2013, 2014. How old were you then at that point?

CHANGPENG ZHAO: 2013? I would be 36.

CHAMATH PALIHAPITIYA: Yeah. Mid 30s.

CHANGPENG ZHAO: Yeah, yeah.

CHAMATH PALIHAPITIYA: So again, salary guy, junior partner at this thing. It’s going well, your kids are in private school. So then what happens?

CHANGPENG ZHAO: So then I came across bitcoin. Right? So, well, my friends tells me, look, CZ, you got to look at this thing called bitcoin. I look into it and I was like, it took me about roughly six months to fully understand it. So that was from like roughly July 2013.

CHAMATH PALIHAPITIYA: And that’s because you read the white paper and you said I need to read it again and read it again.

CHANGPENG ZHAO: Yeah, pretty much. Because back then there was the bitcoin talk dot org forum. And then that’s pretty much it.

CHAMATH PALIHAPITIYA: Did you see my Bloomberg article in 2012? Is that that had any influence?

CHANGPENG ZHAO: Unfortunately, I don’t. I read a bunch of stuff. I actually don’t remember what I…

CHAMATH PALIHAPITIYA: I’m just kidding. But I did write this thing and it’s funny because I had a kind of a relationship with Mike Bloomberg. He was kind of not even mentor, like he was just too senior. But he knew me, he liked me, he would invite me to certain things with Mike Bloomberg. Yeah, Bloomberg. And then I got to know some of Mike’s team and in 2012 or so, they said, Chamath, would you write an op ed?

CHANGPENG ZHAO: Okay.

CHAMATH PALIHAPITIYA: And I was like, yeah. And I wrote it about bitcoin. And I said, everybody should put 1% of their net worth into bitcoin. And I said, it’s basically schmuck insurance. And then they publish it in the Bloomberg terminal or whatever. And that’s when I got red pilled on bitcoin where I was like, wow, it’s the most incredibly interesting technical product that I had read about.

And I think the thing that captivated me, I don’t know if you felt this way, it was the only white paper that I read end to end where I thought, this is one of the most elegantly written pieces of non technical prose. Do you know what I’m trying to say? Like, it’s not something that is dense in an archive that is just meant for PhDs. You could literally give it to your sister, to your brother, to somebody non technical and they would understand it.

CHANGPENG ZHAO: Yeah, yeah. And it’s only nine pages.

CHAMATH PALIHAPITIYA: Exactly. You know what an enormous amount of intellectual skill it takes to do that?

CHANGPENG ZHAO: Oh yeah. It’s much harder to write it very short. Much harder.

CHAMATH PALIHAPITIYA: And elegantly and simply.

CHANGPENG ZHAO: Yeah, yeah. Anybody else tried to rewrite that, I think it’d be 90 pages.

The Bitcoin Community

CHAMATH PALIHAPITIYA: So the friend that showed it to you, was he a coworker of yours or just a random friend in Shanghai?

CHANGPENG ZHAO: It’s a random, well, not a random. It’s a friend. We don’t have any working relationships. His name is Ron Cao. He runs, I guess now, Sky Nine Ventures. Back then he was at Lightspeed Ventures. Of course he was a managing director of Lightspeed Ventures in China. So we have a poker house game, small stakes, a bunch of entrepreneur, struggling entrepreneurs versus VCs. So the VCs have all the money.

CHAMATH PALIHAPITIYA: David versus Goliath.

CHANGPENG ZHAO: Yeah, yeah. So but you know, it’s a fun game. It is not a very serious game. So in one of the poker games, Ron said, CZ, you should look at this thing called bitcoin. I was like, okay, bitcoin. So we talked about it a little bit and then Bobby Lee, who was at the time was working for Walmart, was just about to quit Walmart to join BTC China to become their CEO. And as part of that deal, Bobby said he will bring Ron in as an investor, Lightspeed into…

CHAMATH PALIHAPITIYA: Into BTCC.

CHANGPENG ZHAO: Into BTCC. So that’s in July 2013. I was like, okay, so these two guys are pretty serious about this. So I had lunch with Bobby the next day and Bobby said, put 10% of a net worth into bitcoin. Said there’s a small chance you will go to zero. Then you lose 10%. There’s a much higher chance you will go 10x and you will double your net worth. I was like, okay, sounds pretty serious.

So that’s when I started learning. But reading the white paper more carefully took me six months. So it was till the end of 2013 I started like, I’m convinced now I’m ready to go. But then bitcoin went from $70 in mid 2013 to $1,000 by end of 2013. So you already went more than 15x.

CHAMATH PALIHAPITIYA: How did that make you feel?

CHANGPENG ZHAO: I was like, I’m too late. I was like, I wish I got in early. Yeah, because back then, right? It doesn’t matter when you get into bitcoin, you always feel late because everyone you talk to in the bitcoin industry has bought before you.

CHAMATH PALIHAPITIYA: And did you talk to anybody while you were learning about it? To say you have a community in…

CHANGPENG ZHAO: Shanghai, there’s a very small community in Shanghai. And then I was basically talking to anybody in the world that’s willing to talk with me. And then I had a couple friends in Taiwan, they worked for TSMC back then. And then they were trying to do a mining chip for Bitcoin. So two of those guys left TSMC to try to do this startup. Startup never really took off. But that was one group of guys I was talking to.

There was another couple that were mostly miners. There was another guy called, his nickname is Fish, Silver Fish in China. He’s a big miner. He runs the F2 pool even today. So those guys were based in Hangzhou, they came to Shanghai. I talked to them, et cetera. So there was a group of guys that you talked to.

And then the biggest thing was in December 2013, there was a bitcoin conference in Las Vegas. I flew there to meet everyone in the industry was there. There was a 200 people conference. Vitalik was there, Matt Roszak was there, Charlie Lee was there. A bunch of guys were there. And the same guys still today. And then at the time, just before that, it was the Silk Road arrest of Ross Ulbricht. So the media was like, no, this bitcoin is only used by drug lords. And when you go to the conference, it was a bunch of kids, a bunch of geeks. And they’re very nice people. Right. So you talk to Vitalik. You know, he’s a very nice person.

CHAMATH PALIHAPITIYA: Were you still working at that company while you were doing all of this moonlighting?

CHANGPENG ZHAO: Yes. So this is kind of the…

CHAMATH PALIHAPITIYA: You tell your partners, hey guys, I’m just going to go to Vegas for a couple of days. I’ll be back.

CHANGPENG ZHAO: Pretty much, yeah. Yeah. And then when I got back, I told the partners we should do a bitcoin payment system because Bitpay was kind of the big player back then. Bitpay just raised $4 million in 2013. So there was kind of the large player.

BitPay Stories

CHAMATH PALIHAPITIYA: Actually, can I tell you a very funny, I have two BitPay stories.

CHANGPENG ZHAO: Sure.

CHAMATH PALIHAPITIYA: I was very focused on trying to prove the transactional capability of bitcoin. I went to my local car dealership and I bought a car with bitcoin using BitPay in 2012 or 13. That Range Rover is probably $90 million.

And then even more stupidly, there was a real estate development in Lake Tahoe called Martis Camp Beautiful. And I had owned a couple of lots and I said, you know, it would be great if I actually could prove that you could buy real estate with bitcoin. And I called the guys at BitPay and they were like, yeah, we can facilitate this transaction, no problem. I bought a piece of land. And then again, I thought, this is an interesting story. And the Wall Street Journal wrote about it. Now that piece of land is a billion dollars.

CHANGPENG ZHAO: But you cannot calculate this way.

CHAMATH PALIHAPITIYA: CZ, I calculated this way every day.

CHANGPENG ZHAO: You can’t calculate it that way because…

CHAMATH PALIHAPITIYA: It’s the stupidest purchase ever.

CHANGPENG ZHAO: No, no, no, no, no. This, that’s the money mentality, right?

CHAMATH PALIHAPITIYA: No, no, no, that’s true.

CHANGPENG ZHAO: Right. So even if you didn’t use bitcoin, you would have used some money.

CHAMATH PALIHAPITIYA: Exactly.

CHANGPENG ZHAO: Buy the land. You could have used that money to buy bitcoin. Yeah, right. Yeah.

CHAMATH PALIHAPITIYA: So you’re like, hey, we should do a version of BitPay.

CHANGPENG ZHAO: Yeah, yeah.

CHAMATH PALIHAPITIYA: And your partners are like, what are you talking about?

CHANGPENG ZHAO: Exactly.

CHAMATH PALIHAPITIYA: And now at this point, you still hadn’t bought any bitcoin?

CHANGPENG ZHAO: No, at this point I had maybe one bitcoin. Yeah, yeah. And one bitcoin was only a thousand bucks back then. Yeah.

The Big Decision

CHAMATH PALIHAPITIYA: So then what happens?

CHANGPENG ZHAO: And then, so I tell my partner, look, I think this is the biggest thing, this is the biggest thing in my life, right? So when I think there’s three fundamental, back then I realized there was two fundamental technologies in my life. There’s the Internet. I was too young to do too much with it. And there was this bitcoin thing and I was 35, 36. I wasn’t going to miss it. The next thing that’s going to come along is going to be 15 years later.

CHAMATH PALIHAPITIYA: Did you feel old when you go to Vegas and you see all these young 22 year old kids and you’re like, I missed it. Did you think that at any point?

CHANGPENG ZHAO: No. 36 is still okay, so it’s still doable. You don’t feel super old today. I feel that. But I thought, look, the next thing that will come will be 10, 15 years later. And that’s AI right? So today I say there’s three fundamental technologies in my life. But back then, that’s the thing, right?

So for me it was very clear I got to do something in this industry. So I told my partners, look, I’m going to quit and I’m going to work in the bitcoin industry. That’s what it’s called back then. And then I was, I also need to buy bitcoin and I don’t have money. So I just, I said, look, I’m going to sell my apartment in Shanghai and then buy bitcoin. But selling the apartment takes time. So it took me a solid few months to sell it. And it was only sold in…

CHAMATH PALIHAPITIYA: Where did you, just got a rental apartment?

The Tokyo Move and Bitcoin Investment

I sold it at the time. Actually, my family also moved to Tokyo. So my family moved to Tokyo. We lived in a rental apartment in Tokyo, and then I was traveling in Shanghai. So that’s kind of the time I started moving, started separating from the family as well. So I was spending a lot of time traveling.

And so I sold the apartment for roughly $900,000, like just under a million, but started buying. And I got paid in tranches because, you know, you get a first down payment, you get paid in tranches. And every tranche I get, I just buy. Well, the first tranche at $800 and then Bitcoin’s dropping, $600, $400, kind of averaged to about $600.

CHAMATH PALIHAPITIYA: Incredible. Yeah, incredible. So now you have your Bitcoin position, but you still don’t have a job?

CHANGPENG ZHAO: Yeah, well, I was looking for a job at the same time.

CHAMATH PALIHAPITIYA: But you were looking for a job in the Bitcoin industry or you were just looking for any job?

CHANGPENG ZHAO: In the Bitcoin industry. That was very specific. It didn’t take me that long to get a job. Like the gap was probably from the time I said I’m going to quit until I finalized the job was probably only about two to three weeks.

CHAMATH PALIHAPITIYA: Oh, wow.

CHANGPENG ZHAO: Yeah.

CHAMATH PALIHAPITIYA: And so who hired you?

Joining Blockchain Info

CHANGPENG ZHAO: I first discussed with BTCC Bobby. He wanted to hire me. But then Blockchain Info came along, brought me to Roger Ver. And then at the time, Blockchain Info was, I was the third person to join the Blockchain Info team. That was Ben Reeves, who’s a founder, and there was Nicholas Carey who was just hired as CEO, and I was like the third guy in. So I was like VP of Engineering because we wanted to reserve the CTO title for Ben.

So yeah, I joined Blockchain Info and flew to York in London, like three hours north of London. I spent some time there figuring out what to do.

CHAMATH PALIHAPITIYA: Yeah, how did that go?

CHANGPENG ZHAO: That didn’t go very well. We expanded the team to 18 people and then Peter Smith joined as a CFO wanting to raise money for Blockchain Info. Coinbase just finished raising a round, raising $30 million. And that was a big one in the industry back then.

Peter Smith somehow maneuvered himself into the CEO position, pushing Nicholas Carey to the product manager kind of role. But the culture kind of changed a little bit. So I left. A bunch of the developers I hired left and then Ben Reeves sold quite a lot of his position, also left a few months later. So I was only there for like six, seven months. So that didn’t work out too well. But I learned a lot from that experience.

CHAMATH PALIHAPITIYA: Yeah, you learned what not to do.

Lessons from Blockchain Info

CHANGPENG ZHAO: No, like Blockchain Info, when I joined, Ben Reeves said, look, we have no company, we have no office, everyone works remotely. We just pay everybody in Bitcoin. And so that’s something I learned from that company. And I still, look, that’s still very heavily used in Binance today. So I learned a lot.

I also learned that that company, the whole marketing at the time, Blockchain Info was the largest user platform in the industry. So they had about 2 million wallets, more than Coinbase at the time. And the entire marketing was one thread on bitcointalk.org, one thread. The thread is 150 pages. Ben Reeves just replies to that thread. And that’s how you grew to a 2 million user platform. I was like, okay, so you can do quite a lot of guerrilla marketing to be successful.

So I learned a lot. But the culture changed a little bit. It wasn’t fit for me. And then I left. And then that was when he hired me into OkCoin. So he said, look, why are you working for this wallet company? Your experience is dealing with order execution, exchanges.

CHAMATH PALIHAPITIYA: So he hired you there as a developer?

Moving to OkCoin

CHANGPENG ZHAO: As a CTO. As a CTO, yeah. So, yeah. So in the process, I think BTC China helped me again. So I was kind of looking for a job again. So I left. And then he was talking to me and Bobby Lee found out. And Bobby Lee, so OkCoin back then would offer me 5% equity. And then, sorry, BTC China came along and offered me 10% equity. And then OkCoin matched it within three hours.

And then I was debating between Shanghai and Beijing and I decided to go to Beijing to join OkCoin back then. He, at that time had 1% equity. So he hired me to be like the bigger sort of partner in the business. So that’s how I went to OkCoin for about eight months or so.

That didn’t last long either because I think there were also culture differences at OkCoin. There were some stuff that I didn’t agree with, both in terms of simple examples, like how they run promotions, how they do fee discounts where you have to ask for it. They advertise a fee discount, but you have to ask for it to get it. It doesn’t apply to everybody, even though they advertise as such. So small things like that. And then, so yeah, so that was in early 2015. I said, no, I’m going to leave. So that lasted for a few months in 2014, mostly.

CHAMATH PALIHAPITIYA: So how do we get from there to Binance?

The Japan Opportunity

CHANGPENG ZHAO: So 2015, with a couple of my old colleagues said, we’re going to do a Bitcoin exchange in Tokyo in Japan, because this is a year after Mount Gox and all that.

CHAMATH PALIHAPITIYA: Gox and all that.

CHANGPENG ZHAO: Yeah, yeah. So there’s a vacuum in Japan. So we got two developers that came to me on the same day I decided to leave OkCoin. They came to me, said, look, somehow they also quit their respective jobs. I said, okay, well, why don’t the three of us do something?

And so we said, okay, so I will be the CEO and then I’ll be the big guy with more equity and then I’ll be responsible for fundraising. And I was paying them a salary out of my own savings and I wasn’t taking anything. So the two developers, we whipped up a demo very quickly. We downloaded an open source software for an exchange and then we tweaked the UI to be a little bit sexier and then we hooked up.

CHAMATH PALIHAPITIYA: You just forked an open source project, like, this is our project, this is Binance?

CHANGPENG ZHAO: No, we didn’t say it was Binance. Yeah, this is before Binance. Yeah. And we didn’t say, I was very transparent. I was like, we whipped up this demo up in two days or in a few days, and this is a demo that we can show you.

CHAMATH PALIHAPITIYA: But this is not the ultimate product. It’s just a proof of concept.

Building the Demo

CHANGPENG ZHAO: And then we had a script that took Bitfinex market data. Bitfinex was like the large exchange back then. And we just kind of copied the order book and the order book was flashing, there’s trades going on. So it was a very lively demo.

And then when the investors saw that, it was like, wow, this is good technology. But it’s not just a demo. When they ask me questions, I can answer in very deep ways. When they ask me, how do you structure this to be a fast exchange? I can talk about in memory matching.

CHAMATH PALIHAPITIYA: Optimizing database, all the stuff you’ve learned.

CHANGPENG ZHAO: Yeah. So I can go really deep when they ask questions. So my knowledge is there. So they were like, okay, this technology is cool, but you won’t be successful running a Bitcoin exchange in Japan. You don’t speak Japanese. I was like, okay, they have a point.

So they said, why don’t you sell this technology to other exchanges? Because most of the Japanese exchanges don’t have very good technology. So, okay. So then I went to talk to a few of the exchanges. Like literally two weeks later, we signed a contract with one of the exchanges and then they paid $360,000 for the system. So they made a down payment of $180,000. That was enough for me not to pay salaries anymore. So I was happy with that. So we pivoted from wanting to run our own Bitcoin exchange to exchange systems provider.

CHAMATH PALIHAPITIYA: Yeah, you’re selling software.

The Software Licensing Business

CHANGPENG ZHAO: We’re selling software. And then in July 2015, a bunch of Chinese companies came to us saying they want systems.

CHAMATH PALIHAPITIYA: Let me just say, by the way, sorry to interrupt you, but it’s really incredible because there are so many founder stories when somebody says, I’ve started a company and then somebody says, well, how much is it worth? Or how successful is it? Then, you know, let’s just say Binance is a $200 billion company, probably less than that, but it’s in the neighborhood.

A lot of people think that there is some incredible origin story that is like lightning in a bottle. But so often than not, the story is more yours, which is this. It’s kind of like moving along, meandering, learning things, trying some other things, this non obvious iteration. And then all of a sudden things kind of catalyze. But even then you still don’t get the right form because you’re licensing it, really. And people just misunderstand that this is actually more what entrepreneurship is. It’s the resilience and the grit to just keep grinding.

CHANGPENG ZHAO: For sure. For sure. I think most people idealize, you know, entrepreneurship. Like they just hate it and they…

CHAMATH PALIHAPITIYA: No, it’s like the Facebook story. You hack it together in college and oh, it’s now a million users.

CHANGPENG ZHAO: It’s Facebook, it’s Microsoft.

CHAMATH PALIHAPITIYA: Right, exactly.

CHANGPENG ZHAO: And also Google. These three are like, you know, college garage. And they just, exactly.

CHAMATH PALIHAPITIYA: But the reality, Binance or Tesla, it’s like a grind.

CHANGPENG ZHAO: It’s a grind and it’s a grind. You have to go so many different ways and it wasn’t obvious from the beginning. So I think those three are the exceptions that kind of just hit it from day one.

CHAMATH PALIHAPITIYA: Exactly.

CHANGPENG ZHAO: But then that kind of shaped the people’s perception, like 99%, 99.9% of the other successful businesses are not like that. So if you look at any other successful company, yeah. So the same here.

CHAMATH PALIHAPITIYA: So get us to the founding moment.

CHANGPENG ZHAO: Yeah, so we did…

CHAMATH PALIHAPITIYA: So you’re licensing the software.

Growing the SaaS Business

CHANGPENG ZHAO: We’re licensing the software. That business went pretty well. So we’ve had like 30 different exchange clients.

CHAMATH PALIHAPITIYA: Wait, no way.

CHANGPENG ZHAO: Like, over…

CHAMATH PALIHAPITIYA: Over multiple years?

CHANGPENG ZHAO: Over two years. In two years we signed up…

CHAMATH PALIHAPITIYA: Yeah. So this is a multimillion dollar…

CHANGPENG ZHAO: Oh, yeah, yeah.

CHAMATH PALIHAPITIYA: Licensing business.

CHANGPENG ZHAO: Yeah. So, and it’s a SaaS business. What we call exchange as a service business. So we charge a fixed monthly fee every month. And this platform business is paying us. It’s a very steady business. Every new client increases the revenue. So every new client is like a step up. Exactly. So it’s actually a very, very good business model.

But then in March 2017, the Chinese government shut down most of our clients. And then by May, we were like…

CHAMATH PALIHAPITIYA: And they don’t touch you because you’re the software vendor.

CHANGPENG ZHAO: We’re a software vendor.

CHAMATH PALIHAPITIYA: Exactly.

CHANGPENG ZHAO: We don’t run any business. Exactly. We’re a software vendor. But then our business, we have no client. So we lost our clients. And so by May, we were like, okay, we need to pivot. By April, May, we were like, figure out how to pivot.

By end of May, three guys who work for me said they want to do a Poloniex copycat. Poloniex was the biggest exchange back then. And then I said, let me invest. We have some extra cash. Three days later, they want to do some on chain chat trading software. I was like, no, we’re not going to invest in that anymore.

And then I said, well, why don’t we do that? We have the exchange system already. We still need to customize it to do a crypto to crypto only trading.

CHAMATH PALIHAPITIYA: My gosh.

The Birth of Binance

CHANGPENG ZHAO: So in May, we said, okay, we’re going to do an exchange again. The team said, fine, sure.

CHAMATH PALIHAPITIYA: How big is the team at this point?

The Birth of Binance Through an ICO

CHANGPENG ZHAO: 20 people. And we had tech people. We don’t have marketing because we’re a B2B business. We have two sales guys. Two sales guys plus me. And then we said, well, now we can run our own. Let’s do our own crypto to crypto exchange.

So that was end of May, and then June 1 to June 10, there was a guy who was a BTC co-founder, Ling Ke. He ran an ICO in China. He raised US$15 million in 10 days. And then I looked at him, I was like, he only had one document and one website. No product, nothing. He raised US$15 million. If he can do that, I might be able to do that too.

CHAMATH PALIHAPITIYA: You need venture funding. You’re like, if I get the $15 million, I can build out a team, I can invest in some marketing, I can be in the J curve and not feel the pressure.

CHANGPENG ZHAO: Exactly, yeah. So originally we were going to go to the VC funding route. But then when I saw that, I was like, well, and everyone talking about ICOs back then. I went to a conference mid-June 2017, and everyone’s talking about ICO. Everyone’s like, “CZ, you got to do an ICO. You got to do an ICO.” So by mid-June, June 14th was the date. And then I said, okay, call the team, said, we’re going to do an ICO, write a white paper.

CHAMATH PALIHAPITIYA: And so did you have a name at that point, like in the bitcoin community or in the crypto community either in China or in Japan or somewhere?

CHANGPENG ZHAO: I had a little bit of a name even working at Blockchain Info. Quite a lot of people know me. Blockchain Info was the most popular platform back then. And then OkCoin was also like, I was a CTO, I was quite active on social media. I was also kind of managing their international markets, non-English speaking or non-Chinese speaking markets because nobody else. I was the best English speaker on that team, even though my English is not that great. So I had a little bit of a name. People know me in the community.

CHAMATH PALIHAPITIYA: You needed a bit of a name or some kind of pedigree to actually do an ICO at the time.

CHANGPENG ZHAO: Yeah, yeah. So but this is an advantage of when you get involved early in the industry. Like you go to a few conferences, like there’s 200 people and you go to like, by the second time you go there, people know you. But the third time people are like, you know OT already.

CHAMATH PALIHAPITIYA: You’re the expert.

CHANGPENG ZHAO: Yeah, you have OT already. So I had a bit of a reputation. So I thought that Ling, the guy who did the ICO in China, he’s quite well known in China, but he’s not known internationally. I have a little bit of both. I said, well, I can probably do an ICO and raise the same amount. So we did.

The ICO Buyers and Early Token Economics

CHAMATH PALIHAPITIYA: So who were the buyers of the Binance ICO?

CHANGPENG ZHAO: To be honest, even to this day, I don’t know.

CHAMATH PALIHAPITIYA: Even to this day you don’t know?

CHANGPENG ZHAO: I think, but are they…

CHAMATH PALIHAPITIYA: Chinese, are they Japanese, are they people from all around the world that kind of knew you? Was it that your white paper was really good?

CHANGPENG ZHAO: Okay. So I think in terms of demographic, it’s probably like 80. The ICO purchases are probably 80 to 90% Chinese. And there were some international guys who bought it. And I think the data shows that there was about 20,000 people who bought in the ICO.

CHAMATH PALIHAPITIYA: 20,000 people.

CHANGPENG ZHAO: 20,000 people. So, and this is like a brand new brand. Some people know me in the industry. And that was it.

CHAMATH PALIHAPITIYA: So even though the exchanges were put out of business in China, the ICO was allowed.

CHANGPENG ZHAO: No, the ICO wasn’t banned back then.

CHAMATH PALIHAPITIYA: Wasn’t banned. It was not allowed.

CHANGPENG ZHAO: It was not allowed.

CHAMATH PALIHAPITIYA: Exactly.

CHANGPENG ZHAO: So let me just make one clarification. The exchange clients that we were serving were mostly stamp cultures exchanges, not crypto exchanges. Crypto exchanges were not banned in March. Crypto exchanges were banned after we started.

CHAMATH PALIHAPITIYA: I see.

CHANGPENG ZHAO: So that was in September. We’re talking about like June, July, time frame in 2017.

CHAMATH PALIHAPITIYA: Wow, you’re really threading a needle.

CHANGPENG ZHAO: Yeah, yeah. So we didn’t know that that ban was coming. We just saw like, you know, those…

CHAMATH PALIHAPITIYA: How much of the company did you sell?

CHANGPENG ZHAO: No, we didn’t have. We were just the coins.

CHAMATH PALIHAPITIYA: We launched the token.

CHANGPENG ZHAO: You had to do no equity participation.

CHAMATH PALIHAPITIYA: There’s no equity involved. We launched a new token, BNB. It’s still there today. And then we said, look, we’re going to sell 60% of it for $15 million roughly. So because we’re talking bitcoins.

CHAMATH PALIHAPITIYA: And what were the original tokenomics that you designed for the BNB token?

CHANGPENG ZHAO: Well, we said a bunch of things, but the main one that was going to be live was going to be if you hold BNB, you receive 50% fee discounts when you trade on Binance, eventually the platform that gets launched, that was the main thing. But we also said, look, it’s going to be a, it’s going to have, eventually it’s going to have its own chain, its own decentralized ecosystem. There’s like three or four things.

Moving to Tokyo After China’s Ban

CHAMATH PALIHAPITIYA: So then you guys must have been ecstatic. You’re like, wow, we raised $15 million. We’re now going to launch this exchange. But then September comes around and then exchanges themselves were. So then what do you do?

CHANGPENG ZHAO: Yeah, September comes around September 4th. Like seven different departments of Chinese government issued a memo together saying that, number one, crypto exchanges are no longer allowed in China. ICOs are no longer allowed. Mining is not allowed, crypto mining. We said, well, we’re going to move. Well, we said, we have to move.

By then it was clear that while at the time China was one of the largest user base, they had like 30-something percent user base from China, but we still have like 70% from the rest of the world. We said, look, if we cut off that 30%, we can still survive. We can actually survive pretty well. So we said, well, I just said, look, let’s move. Let’s move to Tokyo. Back to Tokyo. I’ve been back in and out of Tokyo. I know it.

CHAMATH PALIHAPITIYA: And by the way, at that point, do you speak Japanese as well?

CHANGPENG ZHAO: I speak very little Japanese. What I call taxi Japanese. I can say like, no, thank you. Go left, go right. In a restaurant when I order, I say, is this, this, this not the full menu names? Sushi. I can name most of them.

CHAMATH PALIHAPITIYA: Okay.

CHANGPENG ZHAO: Yeah. So that’s my Japanese level. But, you know, I know Japan, I know Tokyo. It wasn’t, it’s not like a new country for me. So I said, like, let’s move to Tokyo. And we had like 30 people then.

CHAMATH PALIHAPITIYA: And everybody moved.

CHANGPENG ZHAO: Everybody moved.

CHAMATH PALIHAPITIYA: Wow.

CHANGPENG ZHAO: Back then, eight years ago, I think very, like maybe one or two of the people were married and nobody had kids. So it was like a very easy move for the team. So everybody just packed up and moved. I remember one girl cried, one product manager, she cried because her boyfriend is in China. So she cried. But she moved with us and she’s now married to her boyfriend. So anyway.

CHAMATH PALIHAPITIYA: Incredible.

CHANGPENG ZHAO: Yeah. So we moved to Tokyo when China did that, and our platform continued to grow.

Finding Product-Market Fit

CHAMATH PALIHAPITIYA: So when you first launched Binance, was it an instant hit or did it take energy to find that product market fit, that first few zealous users that would tell everybody else? How did the virality start? How did the liquidity really get built?

CHANGPENG ZHAO: So Binance, I would say the product was growing pretty well, but the token price went down. From ICO price, it went down 30, 40%. It took about three weeks to recover. So when we launched the product, because at that time, crypto is still pretty hot. I think the product market fit was there. It wasn’t a new idea. It’s just a crypto to crypto exchange.

CHAMATH PALIHAPITIYA: So then the ICO was critical then. Because these people say, well, I own this token now. I can trade at a fee discount. So that’s why I’m going to choose Binance. But was it also architected better? Was it materially faster or more reliable?

CHANGPENG ZHAO: Yeah, for sure it was. So back then, when we launched, even using your eyeballs, you can see that placing an order on Binance is so much faster than our competing platform. And so the performance of the exchange system was visible.

CHAMATH PALIHAPITIYA: Back then 2017, who were the big platforms that you were competing with?

CHANGPENG ZHAO: There was Poloniex, Bittrex were the biggest ones, and then there’s a few Chinese ones. There’s Huobi, OKX, OKCoin back then. And then in the Western world, Coinbase was there. Gemini wasn’t there back then, Gemini was later. So Bitstamp was there, Bitfinex was there. Now they’re kind of really, really small.

The Surreal Moments of Success

CHAMATH PALIHAPITIYA: So you’re now in your late 30s.

CHANGPENG ZHAO: Yeah, yeah.

CHAMATH PALIHAPITIYA: And this thing is working. 40s now. 40s, sorry, 40s. How did you internalize the success? You’re like, what is this? What’s happening? Are you saying that to yourself?

CHANGPENG ZHAO: Yeah, there were some really surreal moments where you were like, is this real? Yeah, in a good way. So, like, what’s our revenue? I forgot the number, but she said, like, a couple hundred bitcoins. Like, that’s crazy. We can’t be making them. Are you sure? She’s like, yeah, I’m sure. This number can be correct. We must be off by like a magnitude. And we double check, double check, triple check. Like, correct. It was like, that’s crazy.

And then there was also a period where three weeks in, when the BNB price was recovering. So BNB ICO, at about $0.10, it dropped to $0.06. And then we announced He joining. And then for the next two, three weeks, every time I, you know, you go to sleep, you wake up, the token’s up 20%. You go to the meeting, come up, the token’s up 20%. You go to the bathroom, come back, token’s up 20%.

CHAMATH PALIHAPITIYA: I mean, it must have been very quick where you’re like, wait a minute, I’m rich.

CHANGPENG ZHAO: That came a little bit later. That came in early 2018, about six, seven, eight months in. Forbes put me on the cover. That’s when, like, well, I said, well, how did they…

CHAMATH PALIHAPITIYA: Even know to find you at that time to put you on the cover?

CHANGPENG ZHAO: I actually don’t know, but Forbes was doing a crypto edition.

CHAMATH PALIHAPITIYA: I see.

CHANGPENG ZHAO: So with all the crypto guys, and then they already had a picture of Vitalik doing a fancy hand gesture, which is really cool picture. They contacted our PR department which maintains contact with them, which was really He’s team back then, like team of four or five girls. And He says like, well, Forbes want to do a special feature with you and take some photos. I think you should go. I was like, I don’t want to go. But they said, we’re a new brand, Forbes can still help us, you know, increase…

CHAMATH PALIHAPITIYA: The brand awareness.

CHANGPENG ZHAO: Yeah, yeah, yeah. So I said, okay, fine, I’ll go. So I went to do the photo shoot. That was like my first photo to put makeup on me. And then the first time put makeup.

CHAMATH PALIHAPITIYA: CZ, what is money? Is it important? I mean, don’t take this wrong way, but you got rich old.

CHANGPENG ZHAO: Yeah, yeah.

CHAMATH PALIHAPITIYA: So did it matter at that point? What is money? When you’re in your 40s and you…

The Meaning of Wealth

CHANGPENG ZHAO: Make it, it still matter. But money is not everything. And I think I was old enough that there’s a couple of things that happened to me. Number one is I was older, so I was 40 something. So I’m not like a young 20 year old that just lambos big parties. Too old for that. So I have also my personality is quite stable so I don’t get too excited on things.

Also the other thing, not to brag, but I went from barely financially free to cover Forbes. And I was like, wait a second, how rich am I? I don’t even know. When I look at my wallet, nothing changed. Like Forbes cover, nothing changed for. But then people say, look, now you might be a billionaire. I was like, am I really a billionaire? It doesn’t feel that way.

Even like a month ago, not a month. At that time, when we left China to go to Japan, I booked economy classes for a red eye flight. And he was like, no, maybe we should upgrade to a business class so we can lay down sleep. Okay, that makes sense. So I have those kind of habits. So when you make money successively, like you know, from 1 million you become 10 million, you might want to buy some fancy cars from to 100 million, you might want to buy, you know, some yacht or something to a billion. Then you have. I didn’t go through that stepwise process. I just went from like a relatively okay kind of thing to like you’re on the cover of Forbes. So I do not develop quite a lot of those habits.

CHAMATH PALIHAPITIYA: What does it mean now? Now? I mean, depending on the day, you’re a deca billionaire or a centi billionaire. What does it all mean?

CHANGPENG ZHAO: It doesn’t mean very much to me. I think money is two things. Number one, you have to take care of yourself. You have to have food, shelter, which—

CHAMATH PALIHAPITIYA: Is very minimal amount of money.

CHANGPENG ZHAO: Very minimal. You don’t need that much for that.

CHAMATH PALIHAPITIYA: People can confuse themselves and create all kinds of complexity. But it doesn’t take much.

CHANGPENG ZHAO: It doesn’t take much so that I for sure have a very. I don’t have a luxury life, but I have a very comfortable life, I think. And then the other—

CHAMATH PALIHAPITIYA: Sorry, what does that mean?

CHANGPENG ZHAO: If you look at my house, my house, the living room water leaks every month or so because the house is too so old. But that’s the house. That’s the right size for me right now. No, it’s not. We’ll just fix it whenever it leaks. So that still happens. Like that happened a month ago. So people think I live in a very fancy house. This other craziness, I live in a decent sized house, but it kind of fits all my family members. But it’s an old house that I bought third or fourth hand. But it’s in the right location for you?

It works for me. It’s in the right location. It’s functional. Things break once in a while. It’s fine.

CHAMATH PALIHAPITIYA: Would you say it’s because you’re practical or is it just because you’re just not moved by—

CHANGPENG ZHAO: I’m function driven.

CHAMATH PALIHAPITIYA: You’re function driven?

CHANGPENG ZHAO: If it functions, I’m okay. I don’t care about the fanciness, I don’t care about style, I don’t care about colors, I don’t care about glittering gold. And if it’s functional, I’m okay. So if it solves the problem, I’m good.

Emotional Regulation and Self-Awareness

CHAMATH PALIHAPITIYA: Do you ever have bouts of insecurity?

CHANGPENG ZHAO: Not really. I know my weaknesses and I learned to deal with it. So I hope I’m not super arrogant. So I don’t think I’m arrogant.

CHAMATH PALIHAPITIYA: I’ve only gotten to know you in the last couple years. I saw videos of you. I think it was in the late teens, early 2000s. And my immediate reaction, because that’s always been my struggle, is sort of these bouts of insecurity or ego. I thought, man, this guy’s really calm.

CHANGPENG ZHAO: Yeah, I’m calm. Yeah. So I describe this one very well.

CHAMATH PALIHAPITIYA: Regulated, very self aware, it seems.

CHANGPENG ZHAO: Yeah. Other people’s emotions may go like this, like happy, sad, I’ll feel happy, sad, happy, sad.

CHAMATH PALIHAPITIYA: But my amplification amplitude is very moderated.

CHANGPENG ZHAO: Isn’t narrower. Yeah, right, yeah.

CHAMATH PALIHAPITIYA: So it just allows you to manage in many ways. I mean, success is somewhat illusory. If you’re like working on a problem. Nobody knows the toil.

CHANGPENG ZHAO: Yeah, yeah, yeah.

CHAMATH PALIHAPITIYA: And nobody really wants to hear about the toil. They want to have a very simple way of pointing to something and say, oh, wow, look at what you have. But if you’re working and you have no time to enjoy it, nobody understands that.

CHANGPENG ZHAO: Yeah, yeah. You know, yeah.

The Addiction to Work

CHAMATH PALIHAPITIYA: Okay, so you launch this thing, it’s going bananas. But there were some hiccups. Do you think that you got too addicted to the growth at any point?

CHANGPENG ZHAO: I wouldn’t say I was addicted to the growth, but I was addicted to the work. The work was actually very satisfying, very rewarding.

CHAMATH PALIHAPITIYA: What was the average day for you? What were you trying to do?

CHANGPENG ZHAO: I was basically doing like 20 plus meetings a day, like scheduled calls or meetings and then plus other random stuff and then having to respond to people on Twitter and stuff. So. But it was very rewarding because it’s very. There’s a sense of fulfillment that is very hard to describe. It’s not the money, it’s not the growth. Yeah, it’s, you know.

CHAMATH PALIHAPITIYA: Yeah. What was it when you were running Binance? I don’t know if you do this, but some. Sometimes people fixate on the leading indicator. Like revenue is a lagging indicator.

CHANGPENG ZHAO: Right.

CHAMATH PALIHAPITIYA: Revenue and profits are just. Yeah, they’re here. That’s from six months ago. A year ago.

CHANGPENG ZHAO: Yeah.

CHAMATH PALIHAPITIYA: Manifest today. What was your leading indicators? What were the North Stars that you really cared about that said this is the health of the system?

CHANGPENG ZHAO: Yeah, yeah. I think it’s really daily active users. It’s not trading volume, it’s not revenue.

CHAMATH PALIHAPITIYA: Why DAO versus those other things?

CHANGPENG ZHAO: I think as long as you keep helping serving more users, then you’re giving them value. So I believe a product is valuable when people want to use it. So the more people who wants to use it, even if your revenue is zero, you have value. So any product that people use, the more people use it, the higher value. Right. So that’s kind of always my philosophy.

Whereas you can optimize for revenue, you can optimize for profit short term and you can lose the long term growth. But I believe long term, if you have a large number of people using your platform, that’s where you create value. Not just for yourself, you also create value for your users. People choose to use you because there’s a value in using you. Right. So that’s kind of my North Star.

And also knowing that, related to that was knowing that hundreds of millions of people are using us, we help them. Right. So the way I view is if they pay like a commission fee, then they’re willing to pay because we must have given them some higher money.

The First Encounter with Bad Actors

CHAMATH PALIHAPITIYA: One of the double edged sword of the DAO is that some of those DAO are bad actors. When was the first inkling that you had that that may be a problem and that you have to take that seriously?

CHANGPENG ZHAO: It was like, I think what does—

CHAMATH PALIHAPITIYA: What does that first meeting look like where they’re like CZ, I have good news and bad news.

CHANGPENG ZHAO: Yeah, yeah, there’s actually a very clear point. I think it was like Christmas Day, January 1, or like New Year Day, January 1, 2018. So this is like six, five months after, you know, we were kind of large or five months after we started and we were kind of, we were number one exchange already.

On that New Year’s Eve, December 31 ish, 2017, a US Homeland Security guy reach out to me. His name I think is Joseph. I always remember his name was Patrick or Joseph, I’m not sure which one. He wrote an email and then I got the email and said, well, he wants our help to help track some hackers who may have moved funds off the Ether Delta hack. Ether Delta was a decentralized exchange back in 2017. They got hacked, that went down.

So this guy who works for the US government emailed us. And I didn’t know how to deal with it. Nobody on our team knows how to deal with law enforcement. So I got a couple guys to huddle together and say, well, how do we help this guy? And then we give the information that he requested. First of all, we had to verify who he was. And then afterwards he thanked us and then I said, hey Joseph, can you recommend somebody that we could hire that can interface with law enforcement in the future?

He recommended someone, but the guy was based in the US and we don’t have a US entity. We couldn’t hire anybody in the US back then. So we kind of had to let that go. But that was the point. It was like a New Year’s Day.

CHAMATH PALIHAPITIYA: Where you were like, this is going—

CHANGPENG ZHAO: To happen more obviously invariably.

CHAMATH PALIHAPITIYA: Law of large numbers.

CHANGPENG ZHAO: Yeah, yeah. So that’s the day when I realized, okay, we need to have somebody who has experience working with law enforcement.

CHAMATH PALIHAPITIYA: And so what did you do?

CHANGPENG ZHAO: So we are eventually hired. We hired more guys. Yeah. Okay. Yeah.

The Biden Administration and Regulatory Challenges

CHAMATH PALIHAPITIYA: Obviously like you’re not looking at the transactions so you wouldn’t know. But if we fast forward a little bit, the claims that then the US government under President Biden made at you was essentially that people like Hamas or people like other organizations were using Binance and you didn’t do enough.

CHANGPENG ZHAO: Yeah. So on this point, I may have some legal restrictions on what I can say and cannot say about the plea, the et cetera. So I’m not a lawyer, but I try to stay very clear from that. But overall, though, I would just say the Biden administration overall is quite hostile to crypto. I mean, they openly announce war on crypto. Right.

So it’s good to see this new administration change 180 degrees. I think that’s this is good for America, this is good for the world. So I think it was. I wouldn’t blame the previous administration, but I think they just didn’t understand.

CHAMATH PALIHAPITIYA: Why do you think that they were so hostile to it?

CHANGPENG ZHAO: It’s fear of the new, simple as that. I think they probably in their heads, there’s some degree of let’s not disrupt the current financial system, the banks and whoever else. There’s probably a lot of lobbying from those industries as well to them. So that kind of brainwash or affect the thinking, however you call it. So that’s human nature. I mean, if you think about it, it’s not understandable, it’s not ideal, but it’s understandable.

Launching Binance US

CHAMATH PALIHAPITIYA: So you’re running the exchange. Things are going well from 2018. 2019. 2020, it’s kind of like you’re really coming into your own.

CHANGPENG ZHAO: Yeah, yeah, yeah.

CHAMATH PALIHAPITIYA: You eventually open a U.S. entity.

CHANGPENG ZHAO: Yeah. In 2019. Yeah.

CHAMATH PALIHAPITIYA: And why did you feel the need to do that?

CHANGPENG ZHAO: So 2019, there was some news about US governments, basically in my layman words, chasing BitMEX. There was some BitMEX in the news. There were some also Bitfinex stuff in the news. I think the US government frozen, froze. At least the Poland government froze like 6 to $800 million of their assets when their market cap was only like 4 billion. That’s like a large chunk. And then they got sued later on by the US government, saying that they don’t have enough reserves.

So we saw those news and we’re like, okay, well the US government is looking at this industry and we better register. And you know, again, I asked my friends, many of them have legal backgrounds and then they sort of a general consensus was, okay, we got to, we should operate in a registered fashion in the US so this is 2019. So we registered Binance US and it’s a separate entity, it’s a separate deployment, it’s a separate matching engine, separate liquidity. So. And Binance US has been regulated from day one. Yeah.

CHAMATH PALIHAPITIYA: 2019. 2020, 2021. Things are just generally working generally.

CHANGPENG ZHAO: Generally, yeah, yeah.

The Rise of FTX

CHAMATH PALIHAPITIYA: Then you start to see some of these other folks start to pick up steam, SBF and FTX start to really. Tell me about that. How did you meet him? Because you ended up owning a lot of the equity.

The FTX Investment and Exit

CHANGPENG ZHAO: Yeah, yeah. So, well, we invested in them only 20% as equity at some point and then we exited a year later. We didn’t stay there for very long. I think I first met him in January 2019 in one of the Singapore conferences Binance organized. I think at the time FTX did not exist. Sam Bankman-Fried, SBF, was running Alameda and they hosted an after party in the Singapore Aquarium on Sentosa and they had divers in the fish tank, holding a sign, et cetera. So they were like a VIP client. They were like a large trader on Binance. So we’re friendly to them.

CHAMATH PALIHAPITIYA: Yeah, right.

CHANGPENG ZHAO: So that was in January 2019. And then a couple of months later they came to us saying, look, they want to start a futures platform. They proposed a futures platform, some kind of a JV. I can’t remember exactly, but I think they proposed 60, 40 in our favor. I thought about countering proposal. We had all the users, they don’t have anything back then. I thought about counter proposing like 95, 5, but I don’t think that was very polite. They’re still like a trader, they’re still like a VIP client. So we declined that. We said no because they were a…

CHAMATH PALIHAPITIYA: Crucial part of the liquidity pool.

CHANGPENG ZHAO: Not a crucial part, they’re a large trader. But Binance, they were new too. It wasn’t like they were there for many years.

CHAMATH PALIHAPITIYA: Okay?

CHANGPENG ZHAO: They were only there for probably six months or a year, I don’t know the exact date. And then a little bit later they came back with a better offer, said, look, in summer they came back with a better offer. We still said no. And then in November they came back, said, okay, look, we’re going to offer you this really, really attractive offer. But then FTX was launched. That’s some volume. They said, look, we’re going to basically give you 20% at this price. And there was a swap of tokens, BNB versus FTT tokens. So that’s, we got some initial FTT tokens at the time. BNB tokens are much more liquid and FTT tokens are less liquid. So we’ve done that deal.

And then almost as soon as we did that deal, I keep hearing from my friends like SBF badmouthing us in the Washington circles in the US, et cetera. I was like, come on. And then they also did some other stuff which is kind of annoying. They pay five times salary to our VIP account managers that had access to our VIP database. And then so that girl goes working for, if we match that girl then we have to 5x everybody. So it was like, okay, you go work for them. And then the day after the girl works for them, our VIP clients gets called saying look, they’re going to get a better rate on FTX, et cetera.

So I called Sam, said like, can you stop doing this? We’re like, we’re your shareholder. At the same time, he’s like, CZ, can we do a one to one panel on a crypto event? Right. So fine. And we’re an investor, we want to help promote. I actually want multiple exchanges to be successful in the industry because then we won’t be the ones that get targeted all the time. Yeah, but there was always like, no, I always keep hearing there was some bad mouthing, some other this and that.

So a year later, I think it was mid, early 2021, we said, and they were claiming to be like raising money at 32 billion valuations. We’re like, well, why don’t we exit? Actually, so in our investment clause we had veto rights on any future rounds. So if you want to block them, we could. I didn’t want to use that to block them.

CHAMATH PALIHAPITIYA: Oh wow.

CHANGPENG ZHAO: So I was like, why don’t we just exit and we can compete. Right. And then we talked about exit and then we exited. I think if I remember correctly, it was in July. The deal was finalized and the transfer was done in July 2021. And this is like a full year and a half before they had issues. At the time we didn’t know.

The FTX Collapse and Aftermath

CHAMATH PALIHAPITIYA: Right. Because there was some rumors that a lot of their issues started after you sold and they were somehow conjoined. I’m sure you’ve heard of that. But you can put all of that to bed.

CHANGPENG ZHAO: Yeah. So that’s categorically not true. And also because of the competitive nature in the businesses, even though we’re a shareholder, I never really, I never asked them for financial statements. Oh wow. So I just, no, I just didn’t ask for it. I’m a very passive investor. So when I invest I don’t get involved in their business. Yeah. And they also, they’re slightly competitive. We have, we had a futures platform. They had a, they have a futures platform. So I try to stay, no, let them do their thing.

CHAMATH PALIHAPITIYA: So post this. The thing with the FTX thing that most people talk about are a couple things. One was the way in which the restitution happened was suboptimal to some of the holders of FTX people who had cash money there. The other thing that people talk about is the value of some of these investments. Post, what do you think in the aftermath of all of this? It says anything at all about the industry or crypto in general or…

CHANGPENG ZHAO: Yeah, I don’t understand the whole bankruptcy process, whether that’s fair or not. I read a lot of different things online also, just to be transparent, there’s an ongoing lawsuit between the state and us. They want to try to claw back some of the money that we got like a year and a half before.

CHAMATH PALIHAPITIYA: Right.

CHANGPENG ZHAO: So there’s probably limited stuff I can comment on that. Yeah. But again, I’m not an expert there, but I did hear some complaints about, you know, some Chinese users are not eligible, et cetera, et cetera. But now from what I read is because of the appreciation of crypto now in US dollar terms, they have enough. Even though if people held crypto back then they probably have gotten more. I don’t know what the deal is.

When Things Got Complicated

CHAMATH PALIHAPITIYA: When did things at Binance start to get complicated for you?

CHANGPENG ZHAO: You mean with the US governments, right? Yeah, for me, like they started asking for information, the information request, which we always comply. Right. So that was like 2021, 2022ish. And it was like late 2022, it was getting more hostile. And then I think early 2023 was more clear that they were making, they were, we either reach a deal of some kind or they’re going to indict us or stuff like that. There was like became negotiations.

CHAMATH PALIHAPITIYA: How do you deal with that as a person? Do you think, I can’t believe this is happening. Like when you’re in this meeting and your lawyers or whoever it is are telling you, hey CZ, I think there’s going to be an indictment. I don’t need. How does that meeting go?

CHANGPENG ZHAO: So number one, I’m not a legal background, so I had to rely on a lot of other people’s advice. That’s generally the harder part for me because I don’t have experience there. Like no one has experience going through this. You go through this once, you never want to touch it again.

CHAMATH PALIHAPITIYA: Right.

CHANGPENG ZHAO: So no one really on the receiving end have any experience. You have a bunch of lawyers and the lawyers are, the lawyers I think are good. But how you organize lawyers actually is quite tricky. You hire a bunch of expensive lawyers, they all have different specialties and they all have different opinions and they all…

CHAMATH PALIHAPITIYA: Want to seem like the smartest person that’s driving the…

CHANGPENG ZHAO: And also they all want to take a lot of time to analyze. They get paid by more time they spend. I’m not saying that they’re unethical, they want to do a really good job. But then they go in all kinds of different tangents. So you get dragged in a lot of different places. That was the most troublesome part for me if somebody told me these are the three things you got to focus on. You got this strategy. We also didn’t have a strong legal team. Our team is young. Our legal team didn’t have had this type of experience dealing with this type of issues. So that was always tricky. But I kind of look at when I come…

CHAMATH PALIHAPITIYA: By the way, where was the entire team at this point?

CHANGPENG ZHAO: Still this. We’re all spread out now. You’re everywhere now. We’re everywhere. We spread out. And I think 2023, I was in Dubai, I was in Abu Dhabi, Dubai split in time. So yeah, it was very stressful. But the way I deal with stress is I just look at the best and worst case scenarios. Right. So ask the team, what’s the best case scenario? Okay, you pay a fine, you get a, you know, you get a DPA or then this, this thing’s over. Then, okay, so that’s the best case. And then the worst case is, okay, so they were going to ask you to, they’re going to try to put you in jail, stuff like that.

Weighing the Options

CHAMATH PALIHAPITIYA: Was that the worst case though? Because at the time it seemed like the fact pattern was folks would get some sort of probation or that would…

CHANGPENG ZHAO: Be the worst worst case. But also, yeah, so before me nobody got put in jail but they could ask for it. Yeah, right, right, right. There’s actually another worst case which is you fight it and then you, if you, if you come, if you can’t agree on a term, you fight it and you stay in the UAE which is a non extradition country. And you know, and now you have citizenship and so they, there’s almost zero chance you’ll get extradited. But then your travel is going to be limited. Anytime if you cross to a different country, even if that country is not a non extradition country, there can still be a chance that there’s a deal being made. Right. It’s kind of leaving fear.

CHAMATH PALIHAPITIYA: Plus it also creates complexity just at a government to government level, if folks are allies and it just creates a lot of noise.

CHANGPENG ZHAO: It creates a lot of noise. It also creates a lot of pressure for the UAE government potentially. I don’t want to trouble people who gave me a citizenship. I don’t want to be the trouble causer. Right, but the worst case scenario is you don’t go there. They indict you and then they put you on the red notice list, stuff like that. Right, so that, those, no, those are potential possibilities. Yeah.

CHAMATH PALIHAPITIYA: So how did you resolve it?

CHANGPENG ZHAO: It took like the negotiations was basically daily calls with like 12, 20 lawyers on call for like more than a year.

CHAMATH PALIHAPITIYA: More than a year.

CHANGPENG ZHAO: More than a year of back and forth.

CHAMATH PALIHAPITIYA: With the President Biden DOJ.

CHANGPENG ZHAO: The President Biden DOJ. And the most common thing I hear from my lawyers is we have never seen them this hostile on a case like this. Right? We have never seen this before. That’s the most common phrase I’ve heard.

Dealing with the Pressure

CHAMATH PALIHAPITIYA: At some point you just become desensitized to it or do you keep internalizing it, personalizing it? Do you think, why is this happening to me? No resentment or just more. How did you deal with it?

CHANGPENG ZHAO: I’m just, it takes successive steps and there were a couple steps which are really hard to take. The step where you say, look in the negotiations, right, they come to a few points where you say, look, we’re just going to have to say no. And it’s like, look, we just kind of agree to that deal. They wouldn’t back off. And I couldn’t agree to that deal. It was just happy to say no. And then there was a couple of weeks that lapse and you don’t know what’s going to happen.

CHAMATH PALIHAPITIYA: Purgatory.

CHANGPENG ZHAO: So you could get indicted. They can indict you any moment, right? So that’s their choice. You already said no to that. To that. There were like a couple periods like that. And then in those couple weeks you’re like, you’re mentally thinking, okay, I can’t travel anywhere, so I might have to get used to this life of just living in one country and be very careful, et cetera. There might be some sealed indictment that’s not public at any border that you cross. And interestingly, they come back after two weeks and they say, okay, we can negotiate again. And then you’re like, what do you…

CHAMATH PALIHAPITIYA: Think is happening over there?

CHANGPENG ZHAO: Well, no, I think that’s a, now looking back, that’s a very useful negotiation tactic. Like for me or for anybody in my situation.

CHAMATH PALIHAPITIYA: The silence.

The Psychological Toll of Legal Proceedings

CHANGPENG ZHAO: Yeah, the silence. For anybody who’s going through this on the receiving end, you only go through this once. You’re not experienced. This is your life. There could be a sealed red notice against you. And this is the life they have to deal with going forever. And these things can stay there for decades for them.

They do this every day. This is their daily job. But I think they’re smart enough that they know two weeks is about the optimum time. Because longer than that, you really get used to it. And when they come back to negotiate, you’re going to say no, right? It’s like, look, I’m already used to this. If you leave the guy in the situation for too long.

So they’re very skilled in this type of mental work. So there were some really tough periods. And for this type of stuff, you don’t get used to it. It’s mentally challenging.

CHAMATH PALIHAPITIYA: How did you get yourself to a place to agree to the final terms?

CHANGPENG ZHAO: After a lot of negotiations, we were like, okay. Basically said, okay, I violated a single charge of a banking secrecy violation, which is a registration failure, which is a federal crime. It’s serious. But no one went to jail for this in history. And there’s no, sorry, that charge.

Understanding the Charges: Perception vs. Reality

CHAMATH PALIHAPITIYA: That’s more technical. How does that relate to the perception of what was in the media, at least in America, which was money laundering and aiding and abetting folks, and not doing KYC and not doing AML versus the actual charge? Are those two things connected and they’re equal, or these are sort of disjoint perception versus the actual specifics?

CHANGPENG ZHAO: Sure. I can try to explain my understanding. I’m not a lawyer, so I want to make a small disclaimer here. This is my layman understanding. Could be wrong. There’s a first. My understanding is there’s a first level is like banking Secrecy act violation, which is a failure to register. Basically. We serviced US users without register as a financial services company in the US.

CHAMATH PALIHAPITIYA: So that’s a you thing that has nothing to do with the user themselves doing anything nefarious or bad. No, you did not register with the proper authorities to say, I’m going to take on U.S. customers.

CHANGPENG ZHAO: And so that’s number one. Right. So that’s the kind of base layer.

CHAMATH PALIHAPITIYA: Okay.

CHANGPENG ZHAO: On top of that you can say, look, you didn’t have adequate KYC AML procedures, so all your procedures are not strong enough. So that’s another level. Even if you’re not registered, you’re also supposed to have KYC, et cetera. AML procedures. And those things are not. And those things, people think that’s a black and white thing. In reality, it’s not. It’s how well you do it. Which systems do you use how do you do?

CHAMATH PALIHAPITIYA: How many people do you have? What’s your standard operating procedures?

CHANGPENG ZHAO: Yeah, yeah. So there’s actually a lot of details and then like quite a bit above that, in my understanding, is if you have somehow known and facilitated batch transactions so you can have a weak ML program and that didn’t catch all the bad players. But you don’t know that. Right. So it’s not like you’re intentionally facilitating.

CHAMATH PALIHAPITIYA: It’s not robust.

CHANGPENG ZHAO: It’s not robust.

CHAMATH PALIHAPITIYA: Relatively naive, but it’s there versus this is. I know this to be bad and I’m enabling it to happen regardless.

CHANGPENG ZHAO: Yeah, right. And there’s a next level which you personally handling the transactions. Right, right. So, which is, you know, you know, Charlie. Charlie Schramm handles transactions for Silk Road, for ros. Right. So that’s how. So there’s different levels. I don’t handle any transactions at all myself. That’s just not my thing. I just don’t do it.

And so they said, okay, Binance number one, we didn’t register KYC. AML is weak. So those are things. Fine, we can agree on that.

CHAMATH PALIHAPITIYA: Layer one, layer two, yeah, so we.

CHANGPENG ZHAO: Can agree on that for those single charges without any other additional stuff. No one ever went to jail in US history, even till today. Right. So. And then the government, we couldn’t agree on the two additional. The government want to add two additional charges they call enhancements.

CHAMATH PALIHAPITIYA: The three and four.

CHANGPENG ZHAO: The three and four. They said somehow I personally facilitated, but they couldn’t provide any evidence. They were trying to lean on the company. Somehow something happened in the company, you know, et cetera, they were trying to use.

CHAMATH PALIHAPITIYA: Were they able to point to a transaction or some.

CHANGPENG ZHAO: No, they wasn’t. So this two enhancements, the court outright rejected. But we decided to. Before I went to the U.S. we said, we agreed that we will argue that in court. Right. And also based on. I don’t want to get into the sort of privileged conversations, but like, the understanding I went before I went was no one went to jail.

The worst guy who got punished was Arthur Hayes of BitMEX. He got six months home confinement for BitMEX. And when I look at that case, he had much more direct interactions with clients, whereas I had much less direction. Basically, I don’t deal with clients at Binance. I deal with users on Twitter, but not like, you know, Binance backend kind of thing. So I felt pretty confident that, you know, we should be in a fairly strong position and that’s the best thing forward. Right.

Arriving in America

CHAMATH PALIHAPITIYA: So you’re like, we agree with this. We agree with this. We’re going to really debate this in court. Layers three and four. I’m going to come to the US and we’re going to hash it out in court.

CHANGPENG ZHAO: Yeah.

CHAMATH PALIHAPITIYA: So you land in America.

CHANGPENG ZHAO: Yeah.

CHAMATH PALIHAPITIYA: You go into the courtroom, you start this process. What happens?

CHANGPENG ZHAO: So, yeah, there was quite a lot of details there. First of all, the first, like the first day you go, you go and plea. Right. So the plea, the agreement has already, like, debated, by the way. Sorry.

CHAMATH PALIHAPITIYA: And where you’re staying? In a hotel.

CHANGPENG ZHAO: I was staying in a hotel.

CHAMATH PALIHAPITIYA: Yeah.

CHANGPENG ZHAO: I was staying in a hotel in downtown Seattle.

CHAMATH PALIHAPITIYA: Is your family with you or.

CHANGPENG ZHAO: No, my family went to join. To, to. Well, not my, not my, not my, not my kids, but my sister and my mom went to join me. I didn’t want my kids to go to. Has school. Yeah. And then my partner has a business to run. I was already like, no longer running the business, so I didn’t want to drag her away from, from, from, from that.

So. So my sister, my, my, my, my mom and my older kids were with me. And then. Yeah, so that’s. And then I was staying in a hotel. And then the next morning. Going to court. Going to court. The first part of the process is the plea. Right. The judge asks you, do you understand this paragraph? This paragraph? This paragraph, Just say yes, yes, yes. The paragraphs are already like negotiated, like out of the wazoo by the multiple Sunni lawyers.

CHAMATH PALIHAPITIYA: Over, lawyered, over lawyered.

The Bail Battle

CHANGPENG ZHAO: And you. So, you know, and then the lawyers debate about the first case after the plea. They didn’t debate about the charge. They debate about my bail, my bail condition. So I got opposed bail. My lawyers argued I should be allowed to go back to UAE waiting for the sentence. Three months later, the government argued that I may not come back.

So they want me to stay in the US and they said they will not restrict me in my movement in the US Because I don’t possess any harm to the community. They argue about that. The magistrate judge, the first judge, approved me leaving the US to go back to the UAE for three months, which would, which would have been great.

And then the government appealed that. My lawyer says in his 40 years, he never seen a appeal on a bail condition. And then he said, well, this guy is a tone death because this will piss off the courts, which will actually be in my favor. And guess what? Two weeks later, the court ruled in the government’s favor and I was kept in the US.

So I was kept away from home for three months. When three months came in that hotel, I was free to travel in the U.S. I was like, well, I’m stuck in the U.S. so might as well travel. I have a sister. My sister have a place in the US So I was staying with my sister for a bit of the time and then I was traveling just cool, just to try to keep myself cool, chill.

And then three months later, the government requests for another three months extension. So now I have to stay in the US for another three months longer, waiting for.

CHAMATH PALIHAPITIYA: Now, were your kids at this point coming to see you at least so that they could come see you?

CHANGPENG ZHAO: No, I didn’t ask them to come and see me.

CHAMATH PALIHAPITIYA: So you didn’t see them for six months?

CHANGPENG ZHAO: Yeah. And. Well, actually I didn’t see them for a year.

CHAMATH PALIHAPITIYA: Yeah.

The Sentencing Request

CHANGPENG ZHAO: Yeah. And then so that government asked for another three months extension. Then on April 30, 2024, that’s my court date. And then a week before that is when both sides submit their request. The government requests for 36 months, which is twice the maximum sentencing guideline for the worst case scenario for me. Right. So the court said, this court had never seen a government asking the court to ignore the sentencing guideline.

CHAMATH PALIHAPITIYA: Did you find that out for the first time sitting there in the court?

CHANGPENG ZHAO: No. Just a week before the court because the government had to make the submission. There’s a written submission before.

CHAMATH PALIHAPITIYA: How did you react to that?

CHANGPENG ZHAO: Well, not good. Right. So, and then my lawyers also, my lawyer tone changed before they said, oh, you can probably get home. They said, look, the judge most likely is going to split the baby. So if the government’s asking for 36 months, you’re asking for probation. The government most likely going to pick some number in between. Right. So I was like, okay, that’s not good. Wow.

Yeah. And also, five days before my sentencing on April 25th, Senator Elizabeth Warren went on TV to say to declare war on crypto again. So this is like 5 days before my sentencing. And he wrote an open letter, she wrote an open letter to the DOJ saying all this stuff, which is actually most of it, is not correct.

So yeah. So then that’s in April 30th, I got sentenced. And then the judge said a bunch of really good things about me. I have all the excerpts in the book. And then at some point the judge says, but. And then you’re like, okay, that’s not good. Yeah. And then I got from.

CHAMATH PALIHAPITIYA: That’s how they start the sentencing. They’re like, he’s telling you all the good things. And then he gets to the. But and you’re like, oh, my God.

CHANGPENG ZHAO: Pretty much. Pretty much, yeah.

CHAMATH PALIHAPITIYA: Wow.

CHANGPENG ZHAO: Yeah. So the lawyers do a debate and. But the sentencing on the April 3rd is the lawyers debate in court about. No, that’s when the two enhancements got rejected by the court. Like, my lawyers argued like, no, this and that. I never touched any of transactions. I’m not aware. This thing’s just layers three and four.

CHAMATH PALIHAPITIYA: Of the accusations got thrown out.

CHANGPENG ZHAO: Yeah. So. And then they argue about, you know, what the recommended sentencing should be. My lawyers, of course, argued for either probation or home confinement at the worst case. And then the government argued like, this guy’s a really bad guy. This case is really big, and we should punish him really, really hard with double the punishment of any legally recommended punishment, 36 months. So the judge landed at 4.

Facing Prison

CHAMATH PALIHAPITIYA: How did you deal with that?

CHANGPENG ZHAO: It was difficult at the beginning. Right. It wasn’t a full month. It was, am I going to be safe?

CHAMATH PALIHAPITIYA: Right.

CHANGPENG ZHAO: So if you tell me I’m going to go to this place for four months, I’m guaranteed to be safe, I’ll be okay. I’ll be like, okay, fine, I’ll just deal with it. But the uncertain part is also right after the sentencing, a bunch of the big media wrote that I’m going to be the richest person to ever go to U.S. prison. And then my lawyers, plus prison consultants, they say, well, given all this coverage.

CHAMATH PALIHAPITIYA: What is a prison consultant?

CHANGPENG ZHAO: That’s a whole industry of some guy who advises you what prisons is like and give you advice and stuff like that.

CHAMATH PALIHAPITIYA: How to live, how to.

Prison Life and Safety Concerns

CHANGPENG ZHAO: Yeah. So that’s a whole big industry that’s growing because the prison population is growing in the US. So anyway, the prison consultants, given the high profile coverage, you are a prime target. You’re probably the biggest target for potential extortion in prison. So your safety is going to be an issue. So that’s the thing I was worried about then. I was like, how do I deal with this? You go in and you don’t have anything, right? How do I make sure that I stay safe? That’s the top consideration. So you’re really thinking about how do you do that.

You talk to a lot of people. Prison consultants are usually ex-guards, ex-wardens. There’s another group of guys who have been to prison, but those guys are in prison working there. They’re not inmates. There’s another group of guys who’ve been into prison as an inmate, so you talk to a lot of those guys and then you figure out what prison is like. Do you make friends? Do you not make friends?

You get advice on if somebody comes up to you on the first day and they’re really, really friendly, don’t take anything from them because they will ask for 10 times more favor back later on. If you don’t, then they stab you and stuff like that. So I got a lot of different advice, but at the end of the day, just got to go and face it, right?

So what I learned is actually the US prison system is so vast. 2 million people stay in US prison. The US government spends per annum more on prison than on education, on schools, right? So that’s how big the US prison population is. And there’s 50 states and every state has a different system. There’s state prisons, there’s federal prisons, and each one is like a mini city. The prison I went in has 2,200 inmates. It’s like a small city and they each have their own rules. So I got some advice, but many of those advice are not really useful. But when you go in, just got to deal with it.

Sentencing and Check-In Process

CHAMATH PALIHAPITIYA: So you get sentenced on April 30, you said?

CHANGPENG ZHAO: Yep.

CHAMATH PALIHAPITIYA: And when do you start?

CHANGPENG ZHAO: So when you get sentenced, you don’t know where. We don’t know which prison you’re going to. The court makes two recommendations and then usually you will receive a letter.

CHAMATH PALIHAPITIYA: You can be in the hotel or doing whatever and then you have to check in basically on some date, like you have to go.

CHANGPENG ZHAO: So in my case, the judge ruled that I don’t need supervision, which is very unique. Then I don’t have a check-in. So I just have to sit, I just have to wait for a letter that comes to my sister’s place, which is an address I register with, of course.

In fact, the government, the DOJ, in their request, they asked me to be remanded, meaning that I’ll be taken away in handcuffs. I think they really wanted that photo for PR reasons. But the judge said, look, he’s not a risk, he’s not a flight risk, he’s not a risk to society. I’m not going to do that.

In fact, the judge added one sentence that he does not need supervision, which is actually a very interesting legal clause I learned later. So this is why when I finish my sentence, I don’t have probation, there’s no parole, I don’t need supervision.

CHAMATH PALIHAPITIYA: Oh wow.

CHANGPENG ZHAO: So there’s some really interesting stuff, well, interesting stuff that you learned.

Prison Experience

CHAMATH PALIHAPITIYA: How was that period for you? Did anything bad happen or was it…

CHANGPENG ZHAO: Luckily, nothing too bad happened. It’s not a really bad experience overall. But nothing like no physical harm. There’s no fights. There’s no real extortion. What I found, my prison consultants tell me, when you go in, don’t join any gang. Stay to yourself. Just stay quiet. Stay out of sight.

The minute I walked into the prison gate, the guard says, “Well, you’re going to need some protection here. I hear the Pacific Islanders are hiring, so you might want to join them.” That’s literally the minute I walked through the gate, one guard was saying this to me.

CHAMATH PALIHAPITIYA: Wow.

CHANGPENG ZHAO: I was like, what does that mean? Right? And then, you know, after the whole day, the first day was putting you through so many processes. They strip search you. I talked on CNBC about this. They strip search you. And then you move to your unit, which is 200 inmates there. It’s like three rows of cells, 20 cells each facing each other, three floors, and there’s a common area in the bottom. And there’s 200 macho guys looking at you. And you walk into a cell.

But what I actually found out is they organize prisons by race, by ethnicity. So if you are a Chinese dude, they group you with a Chinese dude. And if you’re a white guy, they group you with white guys. Black dudes, Mexicans, Spanish guys, they put them in one group. This actually does avoid a lot of conflicts. You are more likely to get along with people of your own ethnicity in terms of culture, customs.

There was one or two Arab guys that pray, they have a different schedule. So they put you in groups by ethnicity. And the guards actually, the prison encourages it because it reduces fighting. And then once you’re in a group, if you have a problem with somebody else in some other group, there’s a group rep and the rep will talk about it. And this is like a hierarchy, union reps, kind of like union reps.

CHAMATH PALIHAPITIYA: And then they come together and they hash it out.

CHANGPENG ZHAO: Yeah, they say, look, stand down. We’ve worked through it. So there’s a system to it. But I didn’t know any of this, right? So I walk in and then this half-Asian looking dude comes to me, says, “Look, my name’s Chino. Welcome to our group.” He says, “Car. Welcome to our car.” I was like, what? Should I shake his hand? Should I not? Am I joining this gang?

CHAMATH PALIHAPITIYA: It’s crazy.

CHANGPENG ZHAO: And this guy is a Filipino-German mix. There’s not enough Asians, so they kind of group anything that’s kind of Asian. And they also group the Native Americans plus Pacific Islanders, like the Hawaiians, into the same group. So our group only has six people out of this 200 people.

And I was sent to a low security prison. I should be eligible for a minimum security prison, which is one level lower, where most of the white collar crimes go. But because I’m not a US citizen, they put me into a low, which is where all the drug laws are.

CHAMATH PALIHAPITIYA: Wow.

CHANGPENG ZHAO: Yeah. So it’s a crazy experience. I have quite a lot of details about this in my upcoming book.

Release and Immediate Aftermath

CHAMATH PALIHAPITIYA: What was the first thing you did when you got out?

CHANGPENG ZHAO: A good shower, a good meal. When you first get in, the shower is literally a box this big. This is like a cowboy bar door that covers the middle part. They can see your legs and see your head. But it’s hard to take a shower without touching the wall. So when you get out of prison the first time, it’s like taking a shower. You no longer need to touch the shower wall. That’s a luxury.

And also there’s very limited fruits, very limited protein, like proper protein. There’s a lot of carbs, a lot of bread, flours, fried stuff, very little veggies, very little protein, very little fruit. I haven’t seen a whole fruit for months. When I got out and saw a plate of fruit, I was like, wow, that’s a luxury I haven’t seen for a few months.

CHAMATH PALIHAPITIYA: Wow. Did you immediately just go back to the UAE?

CHANGPENG ZHAO: Yeah, yeah. When I left prison, it took me about 26 minutes from leaving the prison door to getting on the airplane and flying out.

Reflecting on the Experience

CHAMATH PALIHAPITIYA: What were you thinking? Were you saying to yourself, I understand where they were coming from and I was at least vindicated on the parts that I felt were overreach. I can see where they were coming from with these first two things. Did you say that to yourself or did you say this was a total railroad and this is completely unfair and how did this happen to me? Why did this happen to me? What were you saying to yourself?

CHANGPENG ZHAO: I have some restrictions on what I can say about the agreement, the plea. So I’m just talking emotionally. I just want to be, I would just want it to be over with. And remember that when I first got out, this is still the Biden administration. The election has not happened and it wasn’t clear who’s going to win. It wasn’t clear. The US policy is still the same.

CHAMATH PALIHAPITIYA: You went in when?

CHANGPENG ZHAO: I went in on May 30, 2024.

CHAMATH PALIHAPITIYA: And you got out four months later.

CHANGPENG ZHAO: September 27 is the day I fully got out. The election was in November, right?

CHAMATH PALIHAPITIYA: And by the way, sorry, at that point, you had been in America for a year. You hadn’t seen your kids in a year.

CHANGPENG ZHAO: Yeah, yeah. So at that point, I just want this whole thing to be over with. And I thought they will continue. Well, I thought if the policies continue, then it will still be anti-crypto policies or just whatever. We’ll just survive however we survive. So yeah, that was kind of the mentality.

Life After Binance

CHAMATH PALIHAPITIYA: So when you get back, had you come to terms as well with the fact that you couldn’t run Binance per se and that that was part of the plea?

CHANGPENG ZHAO: Yeah, so I’m actually okay with that. Stepping down was really, really hard. I actually cried over it. And the only other time I really cried was when my father passed away a few years ago. But after coming back, I was actually quite happy not to run Binance, have a lot more free time.

And then if I step down myself, people will say, “Hey, this guy ran out of stamina.” But now I can’t run Binance, so it’s not my choice, right? But after a while, it’s like there are other very useful, meaningful things I can do with my life. I think overall I’m in a very fortunate position. I have resources, I have enough money to do whatever I want to do in terms of enabling projects and businesses, including Giggle Academy, free education, stuff like that.

CHAMATH PALIHAPITIYA: Yeah, I want to talk about that in AI.

CHANGPENG ZHAO: Yeah, yeah.

The Pardon Process

CHAMATH PALIHAPITIYA: But before I do that, let’s just do a little bit of the final coda here. Tell me about the process to start getting a pardon and getting it and what you had to do.

CHANGPENG ZHAO: So on the pardon, I don’t think anybody knows what the pardon process is.

CHAMATH PALIHAPITIYA: It doesn’t seem like there’s a process.

CHANGPENG ZHAO: I don’t even know what the process is. Well, the process is you find a lawyer who writes you a petition, who puts all the arguments why you should be pardoned, why you were overly prosecuted. And why are you a good person?

CHAMATH PALIHAPITIYA: And a pardon, what is it for? Is it effectively to recognize over-prosecution?

CHANGPENG ZHAO: No, a pardon should erase everything you had before, so you’re now a normal person.

CHAMATH PALIHAPITIYA: But the reason to be considered for it can be anything.

CHANGPENG ZHAO: It can be anything.

CHAMATH PALIHAPITIYA: It’s really just the discretion of the President reading the petition, I think so.

CHANGPENG ZHAO: Well, based on my understanding, the Constitution grants the US government or the US President to give pardon. And that’s about as much detail as it says, I think.

CHAMATH PALIHAPITIYA: Right, okay.

CHANGPENG ZHAO: And then how he does it.

CHAMATH PALIHAPITIYA: So it’s really about the social norms in that moment and then how he interprets it, I think so.

CHANGPENG ZHAO: Social norms, yeah. And then, you know, historically, most presidents pardoned on the last day, right? And then Biden, I think, started pardoning some in between.

CHAMATH PALIHAPITIYA: And he also did pre-pardons.

CHANGPENG ZHAO: Which is a bit new. Which is new and also crazy.

CHAMATH PALIHAPITIYA: Well, it was very new. Yeah. Which was largely around COVID for that. But yeah, that really caught a lot of people.

CHANGPENG ZHAO: He also pre-pardoned his son for some period.

CHAMATH PALIHAPITIYA: That’s right. It wasn’t just the COVID stuff.

The Pardon Process

CHANGPENG ZHAO: It wasn’t just a Covid stuff. It was like a period of time where nobody even talked about.

CHAMATH PALIHAPITIYA: That’s right.

CHANGPENG ZHAO: It was like, why do we need it?

CHAMATH PALIHAPITIYA: That’s right.

CHANGPENG ZHAO: But anyway, so the process, I believe is there’s no process that the President can do whatever they want. And then so you submit a petition and you wait. And then there is a pardon czar in the White House. I think her name is Alice Johnson. She also went to prison for many years. She wrote a really nice book, which I read.

But your lawyers ping her, say they need a status update. They need a status update. There’s no. No, no. And then suddenly it happened. So that’s kind of the extent I know about the pardon process. I don’t think that’s a fixed process. I don’t think anybody knows what that is.

CHAMATH PALIHAPITIYA: The question that some people can kind of jump to is they think, what must CZ have done to try to get it? Do you want to put that to bed?

CHANGPENG ZHAO: Well, I didn’t do much. I didn’t do anything. But I think, look, without a pardon, it’s quite hard for Binance to enter the US in a proper way. I think if you—

CHAMATH PALIHAPITIYA: Because you’re the UB, though.

CHANGPENG ZHAO: I’m the UB of Binance and Binance US. Right. Without a pardon, Binance is severely limited to do stuff in the US. If US wants to become the capital of crypto in the world, you cannot not have the largest player. You cannot have US people not be able to access the largest liquidity pool in crypto. And also, we’re also one of the largest crypto ecosystems. So I think my guess would be that, look, the president is a pro crypto president.

CHAMATH PALIHAPITIYA: Obviously, he’s had his own issues like the debanking. Exactly where he’s felt what it feels like to be targeted.

CHANGPENG ZHAO: Not only debanking, he got 34 criminal charges. Right, that as well. And he got like one of the, I don’t know, all the other charges, but that as well. When I was in prison, I saw on the prison TV that he got 34 criminal charges and one of the charges was he brought some document to his bathroom to read. That’s crazy. Right?

So I think the fact that he went through the Biden DOJ will probably help me a lot to get the pardon because he will sympathize. He knows how aggressive that DOJ was. Right. So that probably helped me in some way.

Current Activities and Investments

CHAMATH PALIHAPITIYA: So how do you spend your time now?

CHANGPENG ZHAO: I’m still getting pretty busy now. So I do Giggle Academy, this free education platform. I consult with many governments to help them to put in sound crypto regulatory policies. I get involved on the investment side. We invest in the blockchain, AI biotech, the very active team doing investments.

CHAMATH PALIHAPITIYA: And then this is within Binance or outside of Binance?

CHANGPENG ZHAO: This is outside of Binance. This is part of Easy Labs. And then I also help, like mentor coach a few guys in the, a few founders in the BNB chain ecosystem, et cetera. So between all of those things, I’m actually pretty busy.

Giggle Academy: Free Education for All

CHAMATH PALIHAPITIYA: Tell me about Giggle Academy.

CHANGPENG ZHAO: So I thought, it’s possible to fully digitize all education content.

CHAMATH PALIHAPITIYA: And why is that important?

CHANGPENG ZHAO: There’s some numbers. I think 700 to 800 million adults are illiterate. Two third of them are women. And on top of that, there’s about 500 million kids who are not in school. So if you add all of that up, that’s like 1.2 billion people who are not educated.

CHAMATH PALIHAPITIYA: 12, 13% of the world population.

CHANGPENG ZHAO: Yeah. And these are all in really poor areas. There’s just no schools around or they just couldn’t afford to go to school. And the schools are not very good today either. The schools are like, you know, the schools average you out, you have a classroom.

How is the software designed so it’s just an app. On a phone? On a phone or tablet, it’s just an app. I believe that we have enough technology with gaming, understanding of human psychology with AI. Like a single app can deliver all the education content you need and we can do that for free.

CHAMATH PALIHAPITIYA: Have you looked at versions of this, like Alpha School, and do you have any opinions on that?

CHANGPENG ZHAO: Yes, yes. I think Alpha School is great. Alpha School is really, really good. But, you know, it’s high cost.

CHAMATH PALIHAPITIYA: High cost.

CHANGPENG ZHAO: All right, so it’s more—

CHAMATH PALIHAPITIYA: I think Joe’s software is called Timeback. I think that’s what it’s called. Have you had a chance to see—

CHANGPENG ZHAO: I have not played with a lot. I did meet some of the founders there and some of the key executives there. They solve a very hard problem of making the existing education better, where I solve the other end of the problem, making the education accessible, hopefully better later.

CHAMATH PALIHAPITIYA: And so your goal would be that this is widely proliferated. Are there schools in your view of how Giggle works or—

CHANGPENG ZHAO: No, I actually don’t want to do schools. I want everyone to learn from one app.

CHAMATH PALIHAPITIYA: The software is very reward oriented. It—

CHANGPENG ZHAO: Yeah.

CHAMATH PALIHAPITIYA: Badges.

CHANGPENG ZHAO: Yeah. Yeah.

CHAMATH PALIHAPITIYA: I mean, just going to ask the obvious question. When I looked at it, I was like, well, badges is like a trail of breadcrumbs to like tokenize. Tokenize and earn payments. Am I just making this up or no?

The Token Question

CHANGPENG ZHAO: So I thought really hard about this. But I will for a very long time resist issuing a token on Giggle Academy. This has pros and cons. When you issue a token, you can do the rewards. You can learn to earn.

CHAMATH PALIHAPITIYA: Learn to earn.

CHANGPENG ZHAO: Exactly. You can do a bunch of stuff you can do. You can incentivize teachers to create content. That’s good. But for me, I want to avoid the token. Because of me. Right. Because if I do a token, everyone wants to buy the token and everyone—

CHAMATH PALIHAPITIYA: On the platform, people want to speculate on the token.

CHANGPENG ZHAO: People want to speculate on the token. Then I won’t be able to tell if people are they real kids learning or they’re just people farmers that are trying to farm the token. Yeah, I want to. If I issue a token, if Giggle issue a token, everyone’s going to—

CHAMATH PALIHAPITIYA: I have to be honest, I think giggle sounds really incredible, but that was where my reptilian brain went.

CHANGPENG ZHAO: Because everyone thinks about that very obvious thing, right? Yeah, exactly. But I want Giggle to be a real free education platform instead of a token platform instead of some crypto thing. Right. So if there’s a token, then people are going to focus on the token.

CHAMATH PALIHAPITIYA: So your goal is that you’ll just deficit finance this and just continue to kind of proliferate this?

CHANGPENG ZHAO: Yeah, so that was my goal. But what happened is there’s a community project that donated like $12 million based on a meme coin. And this is not something like, and I’ve only spent like maybe 3, 4 million dollars on the entire project so far. Yeah. So now it’s actually net, like, you know, it’s hard to give money away. Yeah, so it’s hard to give money away with positive impact.

CHAMATH PALIHAPITIYA: With positive impact. It’s very, very difficult. Very difficult.

CHANGPENG ZHAO: So, yeah, so my plan is to outfund it for as long as it needs to reach that goal of a fully digitized delivery of education in a gamified, sticky way.

AI Agents and Crypto Payments

CHAMATH PALIHAPITIYA: Let me ask an AI question for a second. You said that AI is this third pillar of your life, that you see these big waves, right? Yep. One of the most interesting things about AI is that when you basically get one level below the English and you start to look at the embeddings and the layer of embeddings, what you start to see is that it’s this machine readable language. It’s not English. And there’s a richness of information there. It’s perfect for agents. It can traverse it, you can cipher query it, you can do all this stuff that allows you to make really incredible leaps in productivity and otherwise.

It stands to reason that agents are also participants of commerce and need payments. And, you know, and I think you said this is like probably the largest user of crypto at some point in the near future.

CHANGPENG ZHAO: Future.

CHAMATH PALIHAPITIYA: Describe that vision for us.

CHANGPENG ZHAO: Yeah, I think it’s fairly straightforward, I think, as you said. Right. I think it’s very clear soon each of us going to have hundreds or thousands or millions of agents working for us in the background and they will be transacting, they will be moving money around. Right. So in theory, if I want to listen to this podcast, people should pay a few cents to listen to it. Whatever economic model that you want more than—

CHAMATH PALIHAPITIYA: Sure, of course, sure.

CHANGPENG ZHAO: But there was some economic model. Right. Right now, you know, even last year we talked about agents buying tickets for us. It’s not quite there yet, but you will get there. Right. They will book restaurants, they’ll pay for hotels for us, and then the agents can transact a million times more than us. And they are not going to use banks. Banks just won’t be able to support.

CHAMATH PALIHAPITIYA: Banks won’t onboard and AML KYC in AML. It doesn’t even make sense.

CHANGPENG ZHAO: You can’t do a KYC. They can’t swipe a card.

CHAMATH PALIHAPITIYA: It doesn’t make sense.

CHANGPENG ZHAO: Make any sense. Right. So—

CHAMATH PALIHAPITIYA: But also what agents will do is they’ll transact at a transaction volume and at a rate, it’ll make the traditional network’s head spin.

CHANGPENG ZHAO: Exactly. They’re just not going to be able to support it. Yeah, right. And also even stuff like investments on trading. Right. So today you open the Binance app, you look at a chart, you have to like, you know, click on a price level and you have to type in the price and a green or red button. That shouldn’t be the interface.

The interface should be, hey, look, convert 10% of my stablecoins into BNB and then you’ll figure out, okay, if you have a large position, you’ll do slowly over time. If you have a small position, which would be one market order, all of that stuff should be just happening in the background. So the agent can do this for us. Soon you will be able to.

CHAMATH PALIHAPITIYA: What is the most viable payment system today that agents could rely on?

CHANGPENG ZHAO: I’m actually not too sure. I don’t think there is anyone that’s super—

CHAMATH PALIHAPITIYA: What crypto project today do you think comes—

CHANGPENG ZHAO: Oh, you mean crypto.

CHAMATH PALIHAPITIYA: Yeah, that agents could use. Theoretical.

CHANGPENG ZHAO: Again, it’s early days. I don’t want to speculate, I don’t want to name any specific projects. It will cause some token price fluctuations, but quite a number of people are working on it, so especially recently with a more like an AI agent social network thing. So it’s getting more and more hype.

CHAMATH PALIHAPITIYA: Yeah.

CHANGPENG ZHAO: And yeah. So I think you’ll get there.

Privacy in Crypto

CHAMATH PALIHAPITIYA: Let me ask you about crypto in general for a second. What is the role when you see a lot of stuff around free speech? What is the role of privacy in crypto? One of the things that I struggle with, if you ask me, am I a Bitcoin maximalist? I would say no. Even though I was early. I think my biggest issue with it is that there’s a lack of fungibility, which I think is problematic to get to mega scale. And then there’s a lack of privacy.

CHANGPENG ZHAO: I agree.

CHAMATH PALIHAPITIYA: It’s probably the biggest thing that will hold Bitcoin back from being ubiquitous. Where does privacy play as the world evolves?

CHANGPENG ZHAO: As you see, I think privacy plays a very fundamental role in our society. But right now, as you said, I also think that Bitcoin and most cryptocurrencies do not have enough privacy features. I think when Bitcoin was designed it was going to be pseudo anonymous. But the fact is every transaction on the blockchain can be traced. Especially now you have a centralized exchange with KYC. Exactly. And if you have like it’s actually very easy.

The Value of Privacy in Cryptocurrency

CHAMATH PALIHAPITIYA: And by the way, we always go back to the same argument, which is it always goes back to the corner case of, well, somebody’s using this for something illicit. And I say there are those use cases, but the overwhelming majority is you buy a pack of gum, but tomorrow you may buy, you know, you may want to buy a certain movie or a video game, you may want to buy a cigarette. And it’s not for me to judge.

And dollars are fungible in that sense. There’s complete anonymity. We have no idea about what it was used before that I got my hands on it.

CHANGPENG ZHAO: Well, there are actually real applications where privacy is extremely important. If you book a certain hotel and people know that hotel address, like blockchain hotel address, the receiving address, they will know that you will be in that hotel. That’s a physical security risk for you.

CHAMATH PALIHAPITIYA: That’s right.

CHANGPENG ZHAO: So there are real use cases where privacy is very important. This is why people don’t publicize their home addresses online. In many countries, if you reveal somebody’s home address, in Japan, if you reveal somebody’s home address, that’s illegal. So there are real use cases for privacy which Bitcoin and most cryptocurrencies currently do not provide.

There’s a counter argument. Okay, law enforcement wants to track down bad guys. That can be done. I’m supportive of that. But there are fundamental privacy issues. So I do think that in the future we as an industry need to figure out how to evolve the privacy features which no one’s really focusing on right now.

There are a few privacy-focused coins. I shouldn’t say no one, but they don’t have much market cap, they don’t have much size.

Writing the Book

CHAMATH PALIHAPITIYA: Tell me about the book.

CHANGPENG ZHAO: It’s coming along. It’s always a longer project than I anticipate.

CHAMATH PALIHAPITIYA: What was the point of it? Was it like catharsis or is it to make a point? Is it to tell a story?

CHANGPENG ZHAO: All of those things. A bit of everything. It started because I was bored. I started drafting when I was in prison. It was just to keep me busy because I don’t want to be chatting with people. Just keep me busy in prison. So I was drafting it and typing on a very dumb terminal and sending it to my assistant.

And then once I got out, I was like, well, I have enough that if I spend a bit more time on it, I can have a book. But editing a book takes so long. Every pass takes like two, three weeks if you want to edit a book. Because right now it’s like 95,000 words, so it’s like 300 pages. And then I’m also editing the English and Chinese version, so it just takes longer.

But the point of the book right now, I think, is just to get the story out. I think there are many misconceptions about who I am, what I went through.

CHAMATH PALIHAPITIYA: What are those misconceptions, do you think?

CHANGPENG ZHAO: Well, there’s a lot of negative media about crypto. There’s a lot of negative media about CZ, Binance, the entire industry. And to some extent, I think there’s a lot of negative media about Trump, DeFi, et cetera. That part is not too heavy in my book. It’s as simple as we talked about on this podcast, but just for people to understand who I am to some extent, and by extension, who Binance kind of is from my perspective.

CHAMATH PALIHAPITIYA: Is it an important story for your children?

CHANGPENG ZHAO: I think so, yes.

CHAMATH PALIHAPITIYA: Why?

CHANGPENG ZHAO: I think it’s important for them to… They think, they, of course, are more on my side. They know all this media is not the right stuff, but I didn’t have time to explain the story to them in this level of detail. And I think it’s important for them to read this and they will understand a lot more detail than what I’m able to tell them verbally or in person. Even though the book doesn’t contain everything, but it’s as much as I can put in.

Parenting and Values

CHAMATH PALIHAPITIYA: What do you want for your kids?

CHANGPENG ZHAO: I want them to live a healthy and happy life, however they define it. If they’re happy just being a normal person, then that’s good for me. If they want to do startups and build companies, that’s great. If they want to be artistic, et cetera, that’s great. If they want to do humanitarian efforts, charity, that’s also great. Whatever they figure out what they want to do, I just want to be there to support them.

CHAMATH PALIHAPITIYA: How similar or different is that from what you got from your parents?

CHANGPENG ZHAO: Pretty similar. My parents didn’t pressure me. My parents didn’t pressure me to be this or that. They’re not even like normal Chinese parents where they want you to be a doctor or engineer.

CHAMATH PALIHAPITIYA: Lawyer.

CHANGPENG ZHAO: Engineer, lawyer.

CHAMATH PALIHAPITIYA: That was my parents.

CHANGPENG ZHAO: Okay. My parents didn’t do that with me. My parents were like, you can do whatever you want. My parents said to me, it’s very un-Chinese. Very un-Chinese. My parents said, “Don’t hurt yourself. Don’t hurt other people.” So don’t do drugs. Don’t get into crime. And then don’t hurt other people. That’s as simple as I got from my parents.

Success and Normalcy

CHAMATH PALIHAPITIYA: There are a lot of people that probably hear this and they’ll probably think that, and I think this is a real compliment, by the way. So don’t take this wrong when I say this this way: that could have been me, too. I think that we glorify success in a way that makes it seem like it’s impregnable. It’s like this very quixotic thing that happens. And it’s not that.

CHANGPENG ZHAO: No. Yeah.

CHAMATH PALIHAPITIYA: And the reason why I can say that is that when I spend time with you, and I’m sure now with the people, you know, rounding two hours with you, they’ll think, man, this guy is really normal.

CHANGPENG ZHAO: I’m a normal guy.

CHAMATH PALIHAPITIYA: Exactly. A lot of people say that. Like, you know, to me as well, in this weird way, it’s like you’re just a normal guy. And there’s something really valuable about working on things that you like, because then the time just passes.

CHANGPENG ZHAO: Yeah.

CHAMATH PALIHAPITIYA: And you kind of just put your head up and you’re like, wow, okay, there’s something new to try. Let’s go try that. Let’s go learn something. I want to give you a chance to speak to all these people who are probably thinking to themselves, wow, that could be me.

CHANGPENG ZHAO: Absolutely. I think, number one, I’m a normal dude. I don’t think, I know I’m not super smart, but you don’t need to be super smart to be successful. You can’t be too dumb, but you don’t need to be super smart. There are a lot of other things like principles, values, emotional quotient. A lot of those things come into play. I think there’s a lot of luck as well.

But I think for most people, you are in a situation where you are. You usually cannot change the situation. So what you can only do is change yourself. So if you just push yourself a little bit every day, you don’t have to push yourself too hard. You push yourself too hard, you’re going to burn out. You’re not going to last long. But you want to push yourself to like 120%, 110%, 130%, somewhere in that range where you can last long.

And if you do that for like 30 years and you get lucky, you will most likely be relatively successful. You might not be a billionaire, but you’ll have a very comfortable life.

Beyond Money

CHAMATH PALIHAPITIYA: I think that it’s important to maybe dispel the myth that being a billionaire is not everything it’s cracked up to be.

CHANGPENG ZHAO: Oh, yeah, absolutely. Money is money. So in our life, there are a few… I kind of picture a spider web graph. Money is only one tangent. It’s one thread. Once you have enough on one thread, having more doesn’t help you.

In fact, there’s health, there’s family. There are other things that can keep you happy, like your values, contribution, positive impact. That’s intrinsic internal rewards that you feel very happy about. A lot of those things are extremely important. So once you have enough money on this graph, more doesn’t make you happy. Sometimes you have more, sometimes you have less.

Then how’s your health? Also, there’s another dimension: time. How much time do you have? Can you use your time the way you want? Are you working on the stuff you want? Are you spending time with the people that you want to spend with? And is your family healthy? You are very lucky if your family’s all healthy. That’s already a huge gift.

And then your mental health is also important. How to deal with pressure, et cetera. I somehow am very lucky to have a very sort of stable mind. So I think all of those things are extremely important and all of those things you can improve on instead of just money.

A lot of people only chase money but sacrifice everything else. They work really, really hard. They don’t have free time. They are not spending time with their family. Their health deteriorates after 10, 20 years.

CHAMATH PALIHAPITIYA: They don’t enjoy the time that they’re spending on these things even to get the thing that they have so much of that they don’t need.

CHANGPENG ZHAO: Yeah, yeah. So this is also the part, like, I’m actually very grateful that I don’t have to run Binance anymore. Now I have more time. Whereas before, even though that was very enjoyable, on my other quotients, I was not doing well. So, yeah.

CHAMATH PALIHAPITIYA: CZ, thanks for joining the All In podcast.

CHANGPENG ZHAO: Thank you. Thank you for having me.

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