CZ and SBF's mutual sabotage exposes the dilemma of CEX's competitive landscape

In the past two days, Changpeng Zhao (CZ) and Sam Bankman-Fried (SBF) have been verbally abusing each other and sabotaging each other on social media, attracting the attention of a number of crypto players.

In fact, many details of the exchanges between the two parties are just a war of words. The key information is nothing more than whether FTX's operating conditions and capital are, as CZ said, subject to huge survival risks. Because of the previous cases of Three Arrows Capital and Luna's plunge, it is inevitable that everyone will feel panic.

In addition, the complex relationship between Binance and FTX is also a hot topic. Because FTX received early investment from Binance when it was first established. Now that things have developed to this point, everyone can understand that Binance has built up FTX and wants to destroy it.

Why did Binance take such a drastic action against FTX at this time? In fact, it is very simple. Looking around the exchange market, the players that pose the greatest threat to Binance’s leading position are currently OKX and FTX. Let’s first compare them with other players.

Coinbase's success and failure are both due to its IPO. Entering the capital market is also a constraint for it. The contract and leverage business that really create the largest source of income are completely restricted, making it impossible to expand its scale.

Huobi has recently attracted much attention due to Sun Yuchen's high-profile entry, but it has recently been overshadowed by a series of malicious incidents, and the user reputation that it has accumulated with great difficulty has been lost. In the short term, it will still not be able to compete head-on with Binance.

Although a series of second-tier small exchanges such as Matcha, Gate, and Kucoin have survived tenaciously this year and have made many achievements in their respective fields of expertise, they are still small in size and cannot convert huge user dividends in a bear market. Therefore, their first priority at present is to hold on and wait for changes under such market conditions.

Although OKX has the inherent advantages of the Chinese-speaking world, its overseas market layout lags far behind Binance, which can be seen from the daily trading volume. The gap between the two is equivalent to an international giant versus a local ace, with completely unequal sizes. More importantly, OKX's public chain ecosystem has not made much progress so far, which is very different from Binance's BSC public chain.

The BSC public chain has now formed a virtuous ecological cycle with the Binance trading platform. This is a powerful reinforcement loop that can provide blood transfusions to the platform even in a bear market. A group of developers with poor financial strength even regard BSC as the primary carrier of Dapp, and its popularity once overshadowed ETH. In short, OKX cannot touch Binance's weak spot.

Therefore, the reason why Binance is vigorously suppressing FTX and CZ even scolds SBF on social platforms shows that the core advantage of the latter over Binance must be replicable. This replicability can be divided into three aspects:

1. Solana public chain is comparable to BSC in terms of ecological scale, user experience and technological iteration, and is even in a leading position in some aspects, which makes Binance feel uneasy;

2. FTX has a clear advantage in the North American market and has sponsored sports events many times throughout 2022. Its brand awareness can compete with Binance. In addition, the regulatory pressure from Europe and the United States is weaker than that of Binance, and its policy risk resistance is stronger;

3. FTX has always maintained a catching-up posture in terms of the completeness and experience of its trading products, which makes Binance feel uneasy.

After sorting out these key points, we can roughly understand why CZ did not hesitate to lower himself to expose SBF's shortcomings and put the other party in an irreparable situation. Because the biggest challenger to Binance's position as the number one exchange is FTX. And coincidentally, the opponent, whose foundation is far inferior to its own, had a funding loophole during the bear market, which also gave CZ a good opportunity to add insult to injury.

Finally, it is not difficult to see that in the bear market, the competition among exchanges has entered a situation of using all means possible. In order to compete for the few existing markets, all exchanges have put aside all previous rules and regulations, just to give themselves more chips to survive the sluggish market. It may be that when the next bull market comes, the monopoly position of the next king will be more stable.