HECO's top star turns to BSC. Huobi has reached a crossroads. What will Li Lin do?

Wu said author | Colin Wu

Editor of this issue | Colin Wu

When Li Lin regained his freedom, HECO was in trouble and had multiple outages. Its competitor Binance was far ahead of it, and its own advantage OTC was in a serious situation. Huobi seemed to have come to a crossroads. What will it do in the future?

MDEX, the flagship project of Huobi Ecosystem HECO, has recently been launched on Binance Smart Chain BSC. In a short period of time, the TVL (total locked value) has exceeded 2 billion US dollars. MDEX has become a rare project that has achieved more than 2 billion US dollars in TVL on both chains at the same time.

The transaction volume of MDEX on BSC has exceeded that of HECO, and the profit is also higher. It is reported that many HECO projects are "queuing up" to migrate to BSC. Although the data are all inflated, from the comparison, the increase of BSC is very obvious, while HECO fluctuates greatly.

The beginning of everything needs to go back to November 2020. On November 2, the news that Huobi COO was investigated by Shanxi was reported. Starting from November 2, Bitcoins from Huobi "crazily" flowed into Binance. Coindesk's calculations show that from November 2 to November 11, a total of 18,652 Bitcoins flowed from Huobi to Binance. However, before that, the flow of Bitcoin was in the opposite direction.

From August to November 2020, Bitcoin has been flowing from Binance to Huobi. Huobi's relatively excellent product experience, as well as its ecosystem and customer resources in Greater China, have enabled it to compete with Binance, and even surpass Binance in some areas. Although Huobi's derivatives were launched the latest, they have developed the fastest. Reverse perpetual and overall contracts once ranked first in the entire network.

COO and CEO were investigated one after another, and Huobi co-founder Du Jun, who was in Singapore, was appointed to take charge. Huobi did not shut down the withdrawal of coins, and established a leadership group headed by Du Jun, CTO, and CSO. Du Jun recruited old subordinates and launched HECO to fight against BSC. At one time, almost all crypto developers in China were pouring in. The top MDEX data on HECO even exceeded the sum of other top DEXs. The long-depressed HT reached a maximum of more than $25. It is almost unimaginable that this happened when the building was about to collapse.

However, all luck comes with a price.

HECO's extensive, irregular and insider collusion began to show its bad results. The landmark event was that on March 1, HBO, one of the projects with the highest market value, had serious problems and its price almost suddenly dropped to zero. HBO's official explanation was that it was supposed to do a production reduction test and mistakenly transferred 5 million coins into the LP pool. Retail investors from all over the country reported to the police and filed a case. At the same time, Lingzong Security, which Du Jun controlled, was exposed for providing security audit services for the HECO project and was attacked by netizens.

In essence, BSC can withstand the malicious behaviors such as harvesting, running away, and losses that are inevitable in all public chains, but Huobi, whose founders and customers are all in China, cannot withstand it. After the HBO incident, HECO began to shrink across the board, and Du Jun basically stopped commenting on HECO.

What's even more embarrassing is that the HBO incident happened when Huobi's top two figures, Li Lin and Zhu Jiawei, were free. The turmoil in HECO at this time can be imagined. On March 9, 2021, Huobi founder Li Lin returned to the company and started working normally. COO Zhu Jiawei resumed work in mid-February. It was not until recently that Huobi began to list coins normally after Li Lin was freed. FILDA and CAN in the HECO ecosystem were launched one after another.

Huobi also had more technical problems. On the night of February 19, the cooling system of the AWS Tokyo node lost power, causing Huobi to experience a serious network outage. With the recent surge in Dogecoin and the sharp drop in the entire network, Huobi once again experienced the most serious failure among mainstream exchanges, and there are many different opinions on the reasons. Huobi's internal employees also launched an Ali-style attack on CTO.

Huobi's Hong Kong listed entity's compliance business seems to be progressing rapidly, with a current fundraising of US$50 million, but the profit should not be high. Binance's profit in the first quarter of 2021 may have exceeded US$3 billion. The revenue and profit of the compliance business are far from comparable to those of exchanges.

Another blow to Huobi’s core business is that since last year, the Chinese government has cracked down on cryptocurrency OTCs suspected of money laundering for telecom fraud, gambling, etc. Huobi’s RMB OTC trading volume far exceeds the sum of other exchanges by several times. This not only damages Huobi’s brand (a large number of customers had their credit cards frozen after trading on Huobi), but also poses a huge security risk to Huobi itself.

In the uncertain environment in China, the Huobi team has proven its strength by competing with Binance. Although the sluggish HT has been ridiculed by netizens, we still believe that Huobi is the best ecosystem builder in Greater China. If its team had come overseas earlier, it would not necessarily be weaker than Binance. International top projects in Greater China often only accept investment from Huobi.

However, the grim situation is already in sight. Binance's dominant position seems unshakable, and the future of OTC will only get worse. What will Li Lin do? After OK's Xu Mingxing was investigated, Huobi and Li Lin held a rare trip to Guizhou that covered the national cryptocurrency circle. The video of his drunken speech went viral on the Internet. Is Li Lin trying to build up his courage or say goodbye? This seems to be a metaphor.