Top Crypto Exchange Binance Joins Musk’s Twitter Bid, With Web3 in Its Sights

Twitter, Elon Musk, takeover, acquisition, investment

The world’s largest crypto exchange, Binance, just backed Elon Musk’s Twitter bid to the tune of $500 million. And that’s just the beginning.

Accounting for $9.6 trillion out of a total of $14 trillion in total crypto trading volume last year, according to research-oriented cryptocurrency site The Block, Binance is owned by the richest person in crypto, Changpeng Zhao, better known to his 5.9 million Twitter followers — and everyone in cryptocurrency — as CZ.

Binance’s involvement in the deal will almost certainly make cryptocurrency payments a bigger part of Twitter. Former CEO Jack Dorsey made the opening move by allowing bitcoin tipping, and the company recently expanded into the space to include payments to small businesses in a recent deal with payments firm Stripe.

Binance announced plans in February to invest $200 million in Forbes’s upcoming special purpose acquisition company (SPAC) merger, which will take the century-old media firm public. At the time, Zhao told The Wall Street Journal that the firm is going on a buying spree this year.

See more: Stripe Rolls out Crypto Payment Capabilities, Signs Twitter on as First User

“We will look at almost every sector of traditional industries, and we will try to make a few acquisitions, a few investments, and try to bring them into Web3 and the blockchain world,” he said.

See also: Web3: Is There Any ‘There’ There? And if so, Where Is It?

This suggests that his interest in Twitter is, like Musk’s, based on more than earning money.

Binance was the only non-investment company among the 20 backers Musk revealed in a May 4 filing, which also included Andreessen Horowitz’s crypto venture arm a16z ($400 million), along with major industry investors Sequoia Capital ($800 million) and Fidelity Management & Research Co. ($316 million). Crypto-connected investors were among the biggest on the list, accounting for four of the seven largest investors.

Like Musk, Zhao is a dedicated and effective user of Twitter. And while Musk’s 91 million (and skyrocketing) Twitter following dwarfs Zhao’s 5.9 million, consider that few people outside of crypto have ever heard of him. His @cz_binance account is, however, far and away one of the most influential in the crypto industry.

His tweet about the investment was typically succinct — “Probably nothing.” — but his comments on issues have real influence, not unlike Musk’s, who added 20% to bitcoin’s price in January 2021 by adding “#Bitcoin” to his twitter bio.

Binance and its CEO have also had some setbacks as the price of bitcoin cratered, which could affect its buying capabilities.

Bloomberg estimated Zhao’s personal fortune at $96 billion in January and $28 billion on May 5, which shows just how wildly a net worth based almost entirely on cryptocurrency can fluctuate.

That said, the exchange had a 24-hour volume of $72.6 billion on Thursday May 5 according to CoinMarketCap — vastly more than any other — and has been known to reach $100 billion more than that on heavy trading days. Its spot trading business Wednesday (May 4) was $19.3 billion, compared with Coinbase’s $2.8 billion, and its cryptocurrency derivatives’ 24-hour volume was $70.4 billion, vs. No. 2 Bybit’s $13.8 billion.

Where’s Web3?

Zhao’s stated goals for Binance’s investments — pushing Web3 — don’t really match Musk’s, who can best be described as a skeptic about the goal of creating a third-generation Web built on a decentralized blockchain-based infrastructure. An expansion of Web3 would offer far more privacy and personal control of data while shedding Big Tech’s current control of the internet.

The Tesla CEO and then-Twitter CEO Jack Dorsey, a strong Web3 enthusiast, shared a Twitter conversation about the risks venture capital investments bring to Web3 in December — although that began with Musk suggesting (accurately) that Web3 is mostly vaporware at this point.

Read more: Musk, Dorsey Hint VC Money Puts Web3 Vision at Risk

That said, Dorsey, who’s now CEO of payments firm Block, the developer of CashApp, is a true believer. He started Bluesky, a Twitter project aimed at developing an open-source, blockchain-based social media platform onto which Twitter would eventually migrate — hopefully along with other social media platforms.

This was a pure Web3 project, as a stated goal of Bluesky was to give users more control of their account’s personal data. More broadly, Web3 aims to make accounts portable from one platform to another. That’s something likely to get a push as Musk is reportedly talking to Dorsey about rolling over his current Twitter shares and remaining a major investor in the company.

That’s potentially at odds with one of Binance’s likely longer-term goals for its Twitter investment, and indeed all of its Web3 investments: Making its ethereum-competitor, BNB Smart Chain (formerly Binance Smart Chain) a potential foundation of Web3 projects like Bluesky.

More here: PYMNTS Blockchain Series: What Is BNB Chain and Why Isn’t It Binance Anymore?

BNB Smart Chain is a so-called ethereum killer, one of a number of smart contract platforms hoping to woo decentralized finance (DeFi), nonfungible tokens (NFTs) and other projects onto its blockchain by offering far better scalability and transaction fees than ethereum, with the added bonus of little to no carbon footprint.

Launched in September 2020, BNB Smart Chain has exploded, bringing the price of its native currency token, Binance-issued BNB, up tenfold. BNB, which generally drew value by providing Binance users trading discounts, also helped make BNB Smart Chain into a serious Ethereum-killer competitor in record time.

Musk has already talked about adding dogecoin payments — it was among his first Twitter comments when news of his purchase of a major stake in the social media giant broke. Binance issues the No. 4 stablecoin by market capitalization, Binance USD, or BUSD, with a market cap of $17.8 billion despite being a relative newcomer launched in late 2019.

Better Control

Zhao and Musk also have a common goal in ridding Twitter of scams and hackers — the former has tweeted out warnings repeatedly to beware of various Twitter-based phishing scams pretending to be Binance, and noted as far back as December 2018 that he personally uses “a service that actively blocks and reports scammers on my twitter” as well as actively blocking them himself.

Going after the scammers that plague Twitter has been a key goal Musk cited among his plans for Twitter, saying a “top priority … is eliminating the spam and scam bots and the bot armies that are on Twitter.”

That said, Zhao and Musk have traded tweets in the past, and not always particularly friendly ones.

On Nov. 23, Musk tweeted: “Hey @cz_binance, what’s going on with your Doge customers? Sounds shady,” after a network update forced Binance to suspend withdrawals of Musk’s beloved dogecoin.

After some back and forth, Zhao explained, “Elon, we are pretty certain it is an issue with the latest #doge wallet. We are in communications with the devs. Apologies for any inconvenience that may have caused you.”

He then added, “What happened here?” — linking to a story about a software glitch causing a safety recall of 12,000 U.S. Teslas.

Annus Horribilis

Long-homeless Binance has been searching for a headquarters since last year, when it became the focus of regulators around the world, including the Securities and Exchange Commission, the Justice Department, the Internal Revenue Service and Commodity Futures Trading Commission. It has also been a target of regulators from Britain, Canada, the EU, Singapore and other nations.

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