Pete Rizzo is editor in chief for CoinDesk.

Whatever people make of the cryptocurrency exchange Binance and its leader, Changpeng Zhao, the company’s success isn’t just unprecedented, it’s precedent-setting.

Binance, I would argue, is emerging as the case study for growing a cryptocurrency business, a success that’s much needed in a community that spends too much time talking up the potential of its technology and too little time analyzing viable go-to-market strategies that can drive the technological sea change we foresee.

In that regard, I think the market is only just beginning to understand just how visionary Binance is and what its success – in terms of market timing and product impact – says about something we all are striving to find: a model for building scalable and impactful cryptocurrency businesses.

Indeed, at a time when many cryptocurrency startups are going through pivots and layoffs, Binance feels as if it’s hitting its stride, offering a deeper level of new, innovative products that are moving the industry forward in just the right ways at just the right times.

It’s a feat made more complex by the boom-bust nature of the cryptocurrency market, in which opportunities for user growth come and go quick and wherein the great majority of cryptocurrency startups overthink execution and fail to adapt thereafter.

But after observing Binance for over a year now, it’s clear there’s no business that has been as deliberate in taking advantage of the cyclical nature of the cryptocurrency market and its ebbs and flows.

Binance has only been around since 2017, but it has evolved significantly in its short life, in ways that show the impeccable thinking of its company and leadership.

Over the past 12 months, Binance has expertly shifted through three stages:

It delivered tested technology – a working crypto-to-crypto exchange offering buying and selling services in all but 15 countries – at a time when market conditions made it possible to massively capture users. As the market downturn began, and other exchanges lost momentum, it shifted to incentivizing users to adopt value-adding products, such as Binance LaunchPad, which propels the sale of new cryptocurrencies directly through its exchange. Now, with its investments in its forthcoming decentralized exchange, it may well be poised to disrupt itself in ways that further legitimize the cryptocurrency industry.

Buckets Of Rain

Focusing on this last idea, it’s safe to say now that in the world of cryptocurrencies, there are two seasons: drought and monsoon.

I like this analogy because it implies its logic viscerally. There are times when acquiring new users (rain) is relatively easy (and when spending capital to acquire new, novice users is advantageous), and there are times (drought) when doing so is fruitless (when the costs of acquiring those users are prohibitively high).

In the case of Binance, its launch time – in the middle of the summer 2017 boom – couldn’t have been better. As the rising tide would lift all boats, it perhaps obfuscated what actually occurred.

A seasoned industry veteran – CZ cut his teeth working at Blockchain and OKCoin, two early cryptocurrency success stories that later succumbed to fatigue – read the tea leaves, and executed a deft go-to-market strategy. Because CZ had spent years building trading systems (in crypto and externally), he was able to raise money via an ICO and deploy a battle-tested technology into an environment hungry for alternative assets (at a time when most exchanges were constrained by U.S.-dollar trading and the regulation in brought).

Here CZ made two decisions whose brilliance is only now becoming apparent.

One, he chose not to allow trading in fiat currencies, thus sidestepping the regulatory issues inherent with government currencies. And two, he built a team that could and did supply the infrastructure necessary to serve the obvious market demand (by quickly and capably adding new crypto markets).

By rapidly adding to the choice of crypto assets that its clients could invest in, Binance scaled to 3 million users in just six months.

An antithesis can be found in Coinbase’s business model. While the San Francisco exchange’s overall user growth was more impressive than Binance’s (they topped 20 million users in 2017), one can’t as easily argue that they evolved the business as well.

Coinbase spent most of the 2017 bubble selling only a handful of assets (four in total), and benefiting from its position as the easiest fiat on-ramp for consumers. It wasn’t until 2018, when the entrance of new users had drastically slowed, that it began launching new assets, though this was largely amidst a period of waning consumer interest.

The end result was that, during the last cycle, Coinbase was essentially an onboarding platform for Binance, meaning users who started at Coinbase and other fiat exchanges were quickly forced, by virtue of its limited asset supply, to look for services elsewhere.

There were few other options and even fewer teams that executed as well.

The Miraculous BNB

But if it was heretical not to enable trading in U.S. dollars, CZ didn’t just stop there.

Another aspect he seemed to implicitly understand was that since competitors could easily replicate his strategy of offering many cryptocurrencies, he would need built-in incentives to keep users on the exchange. Enter: Binance Coin.

Binance Coin (BNB) seemed like an excuse for an ICO at the time, but it’s since been revealed to be a brilliant way to encourage repeat business.

By offering traders a way to speculate on a token that floated on a public market, and by enabling the exchange’s fees to be paid in that coin, Binance seems to have created a virtuous cycle by which its users were incentivized to stay within its platform.

Binance Coin now has an insanely large market cap of $2.3 billion, a number that has been growing a-cyclically in a down market).

(Note: This is not an argument so much for the present valuation of BNB, nor an analysis of what that can or should be, but an acknowledgement that Binance Coin is an innovation that the market should and is in the process of valuing).

Not content to rest on those laurels, Binance has created a network of additional products around BNB coin, such as “LaunchPad,” a service that conducts ICOs payable in BNB, thus further extending and incentivizing its ecosystem. (If you don’t think this is impressive, again, remind yourself this is a company that, despite its now 300+ employees, hasn’t lost its timing).

With incentives so well aligned, other exchanges have been rushing to replicate the model, including Huobi, OKcoin and a slew of other smaller exchanges.

That this is likely to become a staple of the exchange business model seems like a foregone conclusion. Could there seriously be a crypto exchange business that isn’t studying what has been created here and thinking about what it means for their business?

I doubt it, as the need for such solutions can be seen across the exchange sector.

Kraken, for example, raised its recent $100 million funding round largely from its users, the logic being that those who invest in its future will be more likely to stay, thus providing liquidity, product feedback and other valuable input.

The message is clear – cryptocurrency exchanges, some of the largest and most profitable businesses in the industry have a big problem for which they’re willing to consider any and all manner of solutions for, retaining users. Binance, it seems, not only anticipated the problem, but already has a solution.

An Ambitious Future

So, what’s next for the exchange? Will it rest on its laurels until IPO? It doesn’t seem so.

Binance appears set to soon launch a fiat-to-crypto gateway in Singapore, a move that would bring it, finally, under an influential regulator’s purview. It’s the kind of success you’d expect a CEO to tout on Twitter, right?

But bending to convention doesn’t seem to be top of mind for CZ these days. In potentially the most dramatic pivot, Binance is working rapidly toward deploying a decentralized exchange, the Binance DEX, having already put it on testnet in February.

Decentralized exchanges, in which users would be able to trade cryptocurrencies peer-to-peer through a blockchain protocol – without the backing of a single service provider like Binance, are cutting-edge technology. None have been deployed at scale, and it remains to be seen what challenges lie ahead in their execution.

That Binance has embraced his direction, though, should give the market pause – it stands in sharp contrast to those being made by other major exchanges.

At a time when most appear to be adding old guard Wall Street professionals and taking on VC money with the intent on courting institutional money, Binance, it seems, sees a bigger prize in successfully building the next-generation version of the kind of product it originally created – cutting-edge tech that can massively scale for global retail consumption.

Critically, Binance’s lack of VC funding and the freedom that affords means it is better placed than probably any other company to take its embrace of a decentralized exchange to its natural but extreme conclusion: handing over its operation completely to users of the BNB network.

In disrupting itself, Binance could even end up being something even more innovative than an exchange (decentralized or not) – a viable, crypto-native exit strategy.

If that’s the case, the Binance story could even one day offer an alternative to the Silicon Valley narrative that companies should foster user growth only to pursue a conventional exit by going public.

Is all of this an over-read of Binance? Perhaps.

But after the company has amassed such a track record, there’s maybe only one question left – who, exactly, is betting against Binance?

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