Like most CEX founders, CZ started building Binance with a tech background. SBF, founder, and CEO of FTX, on the other hand, worked as a trader on wall street before he stepped into the blockchain. The love story of SBF and CZ had begun in the summer of 2019.
“The honeymoon”
FTX started in the summer of 2019, it had a value of assessment with 200 million USD in total, by the end of 2019, Binance invested in FTX, and raise FTX’s worth to 1 billion USD. In addition, CZ claimed Binance would hold FTT in long term, and help FTX grow with Binance.
The derivatives product market was dominated by other CEX giants such as BitMex and OKEx. Binance, which started with altcoin spot, has just launched its contract business. Binance hopes to expand its ecological layout by investing in FTX, helping Binance to catch up in the derivatives product market. SBF and CZ spent a harmonious honeymoon period in 2019.
FTX has not failed to meet the expectations of Binance, and has made outstanding achievements in derivatives products and innovation. FTX has launched profitable products centered on the spot, contract, leveraged tokens, etc. under extremely low fees for its users.
At the same time, FTX launched Move volatility products and alternative vix (volatility index) products to attract in-game users by mapping traditional financial products; at the same time, it launched equity tokens, pre-IPO products, and market prediction products to attract outsiders.
Unlike Huobi, OKEx, Binance and other exchanges where most of the founders are tech based, the founders of FTX and most of the team members are traders (SBF doesn’t even know how to write code).
The active and passive market-making and trading capabilities of the FTX team were a dimensionality collapse strike for other CEX at that time. At that time, only a few teams such as BitMex had such professional Trader capabilities and backgrounds. It is the cornerstone and origin of FTX's success, and it’s also the Sword of Damocles for FTX, which eventually lead it to a dead end.
In July 2021, FTX completed a $900 million Series B with an $18 billion valuation. CZ also said: Binance had completely withdrawn from FTX's equity investment. "The exit is part of the normal investment cycle, and it was done under good conditions. We are still friends."
“The breakup”
Strictly speaking, the breakup period between Binance and FTX cannot be counted as the end of the official announcement by both parties in July 2021. Before that, there were subtle changes and gaps. The reason for the change is that the business expansion of both parties has direct competition.
On the one hand, Binance has started to "lightning expand" from an exchange that started with altcoins spot, to become an exchange that integrates spot (mainstream + altcoins), Trade market making, and derivatives (perpetual/delivery contracts + leveraged tokens + options), OTC, and ecological business (public chain + projects investment, etc.).
On the other hand, FTX relies on its professional Trade market-making ability to make huge profits, and gradually surpasses the BitMEX exchange in the derivatives business, and is also at the forefront in the spot and OTC business, and has a heavy position in the leading public chain Solana in the ecological business and extensively deployed a number of top DeFi projects, becoming the top exchange across CeFi-DeFi second only to Binance.
Although there was no direct conflict between Binance and FTX during the period around July 2021, the businesses of the two parties have already highly overlapped and directly competed.
In the second quarter of 2019, FTX was established as a derivatives exchange; in the third quarter of 2019, Binance contracts were launched, and since then, it has launched perpetual/delivery contracts, options, and other businesses.
In August 2019, FTX took the lead in launching leveraged tokens, and Binance also launched leveraged tokens in the following months.
In April 2020, Binance announced the acquisition of CoinMarketCap for US$400 million; in August of the same year, FTX announced the acquisition of the encrypted asset management tool Blockfolio for US$150 million in cash.
In September 2020, Binance announced the launch of the BSC chain. Since then, BNB has risen by more than 30 times. In January 2021, FTX and its allies completed the off-site acquisition of nearly 80% of the total SOL tokens from most of Solana's SAFT investors, employees, service providers, communities, and foundations at a price dozens of times the private placement price. FTX took the lead in Solana chain, and SOL continued to rise by more than 120 times in the following year.
In July 2021, Binance and FTX ended their investment relationship and began to gradually enter a period of competition.
“The Fight”
The competition between Binance and FTX comes from the conflict between the two parties’ market share of core businesses such as spot and derivatives on the one hand; On the other hand, since the outbreak of DeFi Summer in 2020, FTX and Binance are competing in ecological layout, strategic and cultural.
The genes of trader origin determine that SBF has a strong style of opening the situation by trading, and has a high degree of risk preference. Some commentators believe that FTX is more like a large 3AC, operating funds with high leverage all year round, and will make strategic choices with extremely high risks.
CZ is a typical entrepreneur + geek dual persona, with the boldness of Chinese descent who dares to think and act, and is a super upstart rich man who has risen from the encrypted world. For example, in the early days of BNB’s issuance, Binance conducted a lengthy cleanup of the early private placement chips, and BNB kept breaking its ICO price. Many early investors and users were washed out, and Binance even had disputes with some early investors such as Sequoia Capital and recovered some of the chips of early investors. Later, Binance revised the white paper, and the burning of BNB was changed from secondary market repurchase to team repurchase. Later, the market cap of BNB entered the top ten, but CZ left an overly shrewd impression of a lack of contract spirit.
“The End”
On July 7th, 2022. CZ tweeted to mock SBF and questioned that FTX might be out of money. CZ said that 3AC owed Voyager hundreds of millions of dollars and caused Voyager to go bankrupt. Alameda (under FTX) invested in Voyager and borrowed 377 million dollars from Voyager. Why did FTX not pay back the money to rescue the bankrupt Voyager, but gave 3AC a 100 million bailout?
Regarding the questioning, SBF mocked CZ for pretending to rescue the industry and not knowing the legal knowledge about bankruptcy.
From November 6th – 7th, CZ compared FTT with Luna and claimed to liquidate FTT(worth 530million USD). Since then, FTX is in a liquidity crisis, the FTT price dropped from 26.14 to 4.04 in one week.
After FTX issues FTT, it sells it to Alameda at a low price, and then the price rises (it can be controlled and pulled), and then Alameda uses FTT as collateral to borrow the real money in FTX, and when the price of FTT plummets, Alameda’s Collateral is effectively worthless.
On November 11th, SBF announced the bankruptcy of FTX. In just four days, the giant fell.
What blockchain technology and web 3 mean to us is full transparency, self-owned, and decentralization. When we keep it in our mind all the time, it will help us to grow with the ecosystem, instead of being destroyed.