Binance, Huobi, OKEx: The Brutal Reality and Uncertain Future of the Cryptocurrency "Three Kingdoms"

Binance, Huobi, OKEx: The Brutal Reality and Uncertain Future of the Cryptocurrency "Three Kingdoms"The cryptocurrency world is as dramatic as any Hollywood blockbuster. Hardly had the dust settled on the public spat between crypto tycoon Li Xiaolai and Binance executives, when mainstream media outlets began publishing damaging reports about Binance, Huobi, and OKEx, sparking widespread attention

Binance, Huobi, OKEx: The Brutal Reality and Uncertain Future of the Cryptocurrency "Three Kingdoms"

The cryptocurrency world is as dramatic as any Hollywood blockbuster. Hardly had the dust settled on the public spat between crypto tycoon Li Xiaolai and Binance executives, when mainstream media outlets began publishing damaging reports about Binance, Huobi, and OKEx, sparking widespread attention. On June 9th, China National Radio (CNR) published an article alleging that Binance, despite claiming to no longer serve mainland Chinese users, continued to do so, and had been involved in multiple hacking incidents. Two days later, on June 11th, self-media outlets released "negative information" about OKEx, claiming it was still providing illegal virtual currency trading services to domestic users, citing supposed "evidence," which was subsequently republished by Phoenix Finance. The same day, another self-media platform published similar accusations against Huobi, also providing "evidence." While such mutual attacks are commonplace among cryptocurrency enthusiasts familiar with the industry's infighting, the simultaneous targeting of all three exchanges is unusual.

I. Feuds and Conflicts: From Past Glory to Present-Day Infighting

The animosity between OKEx, Huobi, and Binance is long-standing, with its roots in their shared history. OKEx's predecessor, OKCoin, and Huobi are both veteran domestic exchanges, both established in 2013. Bitcoin's early explosive growth propelled these two exchanges to rapid prominence, at one point controlling over 50% of global Bitcoin spot trading volume. In 2017, Bitcoin experienced another bull market, surging to nearly $20,000. It was during this period that Binance emerged and quickly expanded, disrupting the duopoly held by Huobi and OKCoin. Binance founder Changpeng Zhao (CZ) and "Crypto Queen" He Yi were both former OKCoin employees, leaving in 2015 after a falling out with Star Xu (OKEx founder), resulting in ongoing friction and conflict. Following the "94 Incident" (a major regulatory crackdown in China), Binance moved its operations entirely out of China, rapidly capturing the overseas market and surpassing Huobi and OKEx in trading volume to become the world's largest cryptocurrency exchange. This established the "three kingdoms" scenario in the cryptocurrency exchange landscape, a rivalry that persists to this day.

In fact, compared to past instances of frequent public insults and attacks between the three exchanges and their executives, leveraging media exposs isn't the most outrageous tactic employed. Last July, Binance's announcement regarding the burning of its platform token, BNB, triggered a war of words between Huobi's "Seven Ye" (a Huobi executive), Binance's He Yi, and OKEx's "Nine Mei" (an OKEx executive). Even Huobi founder Li Lin and OKEx founder Star Xu personally joined the fray, engaging in thinly veiled insults and even personal attacks. This "mutual stabbing" extended offline. In March of this year, media reported that the same group of people appeared at protests outside both OKEx and Huobi offices, suggesting the existence of a cryptocurrency "protest" industry chain involving hired protesters, staged photos, and media coverage.

II. Infighting as the New Normal in a Bear Market: Conflicts of Interest and Competition for Existing Market Share

The increasingly fierce infighting among the three exchanges is a stark reflection of the inevitable conflict of interest and competition for a shrinking market. During bull markets, everyone focused on making money; while competition existed, the market's continuous growth created a situation where the focus was on expanding the overall market size. However, with the bull market over and the market entering a stage of competition for existing market share, the struggle has become brutally intense a zero-sum game. It's foreseeable that, until the next major market boom, mutual criticism, whistleblowing, and the generation of negative news will become the "new normal."

However, as "Chain-on-Wave Cai Teacher" (a prominent figure in the crypto community) pointed out, these actions not only waste industry resources but also make the industry look foolish. Is it really necessary to repeatedly expose the fact that domestic users can register? Industry insiders know that every exchange claims to be registered overseas and not target domestic users, yet domestic users can still register and trade. Surely the regulatory authorities are aware of this? This underestimates the intelligence of regulators. Will repeatedly exposing this hypocrisy truly achieve the goal of suppressing competitors? This foolish behavior yields minimal results, while attracting excessive regulatory scrutiny, potentially leading to collective penalties and ultimately a loss for everyone.

III. Cooperation and Win-Win: The Prisoner's Dilemma and Lessons from OPEC

Is it possible for the three exchanges to bury the hatchet, cooperate, and work together to advance the industry? The likelihood is extremely low. This isn't just the opinion of "Chain-on-Wave Cai Teacher," but is supported by the "Prisoner's Dilemma" proposed by Nobel laureate economist John Nash.

A classic Prisoner's Dilemma scenario: Two accomplices are imprisoned and cannot communicate. If neither betrays the other, they each serve one year; if one betrays the other, the betrayer goes free, while the silent one serves ten years; if both betray each other, they each serve eight years. Since the prisoners cannot trust each other, they are likely to betray each other, resulting in a worse outcome for both, rather than remaining silent and achieving a better outcome. This is a Nash equilibrium model resulting in a suboptimal outcome, where each party chooses non-cooperation, leading to the worst possible result for both individuals and the collective.

The situation with the three exchanges is similar to the three-prisoner game mutual distrust leads to non-cooperation, using mutual criticism to maximize short-term gains, ultimately resulting in collective failure and harm to the entire industry.

Is there a solution to the Prisoner's Dilemma? Yes, OPEC (Organization of the Petroleum Exporting Countries) is a successful real-world example. Oil-producing countries also compete with each other; global oil demand is relatively stable within a given time frame. If Saudi Arabia increases production, Russia's market share will decrease. Uncontrolled competition would only lead to increased production capacity and price wars, resulting in a collapse in oil prices. The negative oil prices of a while ago were partly due to Russia's refusal to comply with OPEC's production cuts, and Saudi Arabia's withdrawal from the agreement, leading to a sharp drop in oil prices. Later, realizing that uncontrolled competition was detrimental to both oil-producing and consuming countries, they returned to the negotiating table and reached a new production cut agreement. OPEC once again demonstrated the power of alliance.

Could the three exchanges learn from OPEC and form a similar alliance? Theoretically, it's possible. Before the creation of OPEC, oil-producing countries also operated independently; eventually, they realized that cooperative competition was more beneficial to industry development, leading to the formation of OPEC. Game theory also shows that while prisoners choose non-cooperation in a single game, with enough repetitions, they will eventually choose cooperation. However, cryptocurrency is different from oil, and exchanges are not oil-producing countries; the spontaneous formation of an exchange alliance would be extremely difficult.

Cryptocurrency has existed for 11 years. Although it is still young compared to the century-old oil industry, it has demonstrated its tenacious vitality. Today, survival is no longer the main theme; development is key. In the early stages, various parties competed for resources; now the three exchanges have become giants, and the industry has moved from infancy to adolescence, requiring them to take a long-term view of the future. But no one will voluntarily leave their comfort zone unless external pressure is applied.

IV. Three Swords and a Bear: Regulatory Scrutiny, Hacking, and Technological Advancements

Exchanges play a crucial role in the blockchain industry, serving as a bridge between technology and finance, and a hub connecting upstream and downstream sectors. The industry owes much of its success to these exchanges. However, this doesn't mean Binance, Huobi, and OKEx are invulnerable. They face three major threats: regulatory scrutiny, hacking, and technological disruption.

First, regulation significantly impacts the industry, especially exchanges. The CME Group (Chicago Mercantile Exchange), the world's largest regulated futures exchange, uses the spot prices from six global exchanges to determine the price of its Bitcoin futures. Binance, Huobi, and OKEx account for over 70% of global spot trading volume, yet none are included, highlighting their precarious position in the eyes of regulators. With the pandemic subsiding, "Chain-on-Wave Cai Teacher" predicts that increased regulation of cryptocurrencies will soon be on the agenda. The increasingly frequent freezing of funds by banks is a harbinger of this. If the exchanges could form an effective self-regulatory alliance, building bridges with regulators, this would be welcomed.

Second, hacking attacks pose a deadly threat. The collapse of Mt. Gox serves as a cautionary tale, eroding user and institutional confidence in storing large sums of money on exchanges. If exchanges form an alliance, they could jointly establish a compensation fund and an incident recovery mechanism, similar to the FDIC (Federal Deposit Insurance Corporation) in the US. This would not only save each exchange the cost of setting up its own compensation fund, but also improve the credibility and efficiency of compensation, while also enabling the efficient recovery of stolen funds, benefiting both the industry and users, and being welcomed by regulators.

Third, technological