"To survive in this industry, we need to maintain innovation, stay humble, be user-centric, and continuously provide good services and content to users."
Host: Joe Zhou, Deputy Chief Editor of Foresight News
Guest: Dr. Lin Han, Founder and CEO of Gate.io
Organizer: aididiaojp.eth, Foresight News
Regardless of bull or bear markets, exchanges remain the fundamental force throughout the entire crypto cycle. We are fortunate to invite Dr. Lin Han, CEO of Gate.io, to the live broadcast to discuss how he views the crypto world while supporting 17 million users.
Host: This year's TOKEN 2049 was exceptionally lively, with many side events held in Singapore during the event week. We saw that Gate.io also hosted several events. Dr. Han, could you share some interesting experiences? What changes have you observed in the industry compared to previous years?
Dr. Lin Han: Hello everyone, I am Lin Han, the founder of Gate.io. This year's TOKEN 2049 felt significantly more vibrant than in previous years, with possibly around 1,000 side events, making it very suitable for efficient networking. Many attendees were very enthusiastic, discussing various topics such as projects, ecosystems, and industry development. I personally participated in many events, one of which was a football match organized by Gate.io and LTP, which was particularly interesting. We invited many top professionals from the industry, and the level of football was very high. I initially thought it would just be a simple pastime, but I was surprised to see very professional players participating. Although we lost the match, everyone communicated very pleasantly during the game, and the atmosphere was very harmonious. Additionally, I attended a press conference for Inter Milan, where we sponsored the armband. Of course, I also conducted many transactions with various projects and participated in numerous ecosystem activities, gaining a lot from them.
Host: Could you briefly introduce the origin of Gate.io and your personal experience?
Dr. Lin Han: In April 2013, I developed and launched the trading platform, and it has been 11 years without me realizing it. I initially studied optoelectronics in Canada. After graduating, I did a postdoc for a year at the university and then started a venture related to optoelectronic simulation software. During the software development process, I discovered that people were using high-performance graphics cards to mine Bitcoin, which made me aware of Bitcoin's existence. I then began to read the Bitcoin white paper and code to understand its underlying principles. Being from a technical background, I quickly realized this was a very promising new technology. At that time, Bitcoin was very cheap, and I bought a little, but the industry infrastructure was poor, with not many trading platforms, and the transaction fees were very high. I once traded privately on forums and ended up being scammed out of 100 Bitcoins. From that moment, I realized the market needed a professional trading platform and service providers to help users with matching to prevent scams.
So, I spent about two weeks developing a Bitcoin trading system. Because of my technical background and previous experience with websites, I quickly understood Bitcoin, and on April 13, 2013, I launched the Bitcoin trading system, which soon attracted a batch of users. At that time, there were very few trading platforms that could provide such services.
Around May or June 2013, CCTV reported on Bitcoin, claiming it was an interesting thing that could be used to buy coffee. Many people started searching for Bitcoin on Baidu and found our platform. The traffic suddenly surged, and although we faced a lot of pressure, user numbers and traffic began to accumulate from that point onward.
Host: Over these 11 years, what significant challenges has Gate.io faced? How did you overcome them?
Dr. Lin Han: In the early stages, both we and the industry were very immature. We didn't fully understand what securitization and virtual currency assets meant, how to ensure security, and how to implement market regulation, etc. Initially, we didn't even have an enterprise wallet; we were using personal wallets for commercial services. The inherent security could not be guaranteed, so we encountered many technical issues, such as system crashes, especially during high traffic periods. Gradually, we began to face challenges brought by regulation.
In the first year after the trading platform was established, we suffered a hacker attack, losing nearly 10,000 Bitcoins. Initially, we just wanted to develop a website to provide services and generate revenue, and users highly recognized our services. However, one day we realized that hackers were also paying attention to this industry and platform, and some hackers had very advanced skills, even state-level, like North Korean hackers. In the early stages, the platform lost about 3,000 Bitcoins in assets, and six months later, we suffered another loss of 7,000 Bitcoins. Faced with this situation, we had to seriously consider our response strategy. At that time, many platforms chose to run away after similar incidents, which was simple for them; they could avoid repaying user assets while taking the remaining assets with them. Others chose bankruptcy liquidation, like Mt. Gox in Japan, to shift responsibility. But we chose the hardest path at that time, which was to continue operating and repay the users' lost funds. After calculations, based on our revenue levels at that time, it would take about 10 years to repay these losses. Ultimately, we decided to repay a little each month from our profits. Fortunately, the market conditions were favorable, and the repayment speed increased. After two to three years of effort, we finally repaid all the compensation.
Another significant challenge was in 2017 when the entire industry faced a major challenge, and we were no exception. We focused on compliance from the very first user, then began to attract new users and rebuild trading volume. Not all platforms did this; most leading platforms continued to use their existing systems and brands to go overseas, while we chose a more difficult path, which was a significant challenge for us.
Host: What kind of crypto environment is Gate.io facing now? What new problems are you encountering?
Dr. Lin Han: The current situation is very different from before. Eleven years ago, there were only about 1 million global virtual currency holders; today, the number has reached 500 to 600 million, with about 10% of the global population holding virtual currencies. For example, Singapore is one of the countries with the highest penetration of virtual currencies, with about a quarter of the population holding them. Moreover, unlike other places, the use of virtual currencies offline is very common in Singapore; you can use virtual currencies for food delivery and taxi rides. The entire competitive landscape has become more centralized, with products becoming very homogeneous, and the overall service is becoming increasingly mature, leading to more intense competition among leading platforms.
From the perspective of the overall industry and ecosystem, it is still in a phase of vigorous development. Various new technologies are constantly emerging, the ecosystem is growing, and the number of participants is increasing.
Host: Many exchanges have ventured into Telegram, making it an important channel for attracting new users. What is Gate.io's view on this phenomenon? What efforts has Gate.io made to attract new users this year?
Dr. Lin Han: We believe that homogeneous products need to improve user experience and performance. For example, we will offer more currency options. Additionally, for homogeneous products, we must have strong competitiveness. We are a company passionate about innovation, always thinking about the industry's development stage and future direction, and focusing on users' current and future needs.
For instance, meme coins are currently very popular, with about 15,000 new coins issued daily, most of which are on Solana, with a quarter on the Base chain. These two chains have good performance and low costs. Compared to contracts, our platform actually performs better in spot trading because there are fewer new things and gameplay in contracts, and the rules are simpler. However, in spot trading, there is a lot that can be done. As I mentioned, the spot ecosystem in the meme field is rapidly developing, and the underlying infrastructure is continuously improving.
With the improvement of underlying performance, it may gradually replace some centralized services. We are thinking about how to provide centralized services again on a decentralized basis, allowing decentralized users to enjoy these services at low cost and high efficiency.
Host: Ecosystems like BTCFi, Solana, and Base have also developed rapidly this year. Can you talk about what Gate.io has tried in this area? Are there any on-chain ecosystems that you personally pay attention to?
Dr. Lin Han: Many ecosystems are gradually solving the underlying issues of the entire industry, such as trust, performance, and cost. We were one of the first centralized platforms to support BRC-20, which brought us a significant influx of traffic and users. Additionally, we were among the fastest to support the explosive meme growth on the Base and Solana ecosystems. While in Singapore, I saw many Ton ecosystem meetings, including some hackathons. The Ton Foundation plans to convert 30% to 40% of TG users into the Ton ecosystem within five years. You can see that the user base of recently launched Ton ecosystem projects is very large. So, we are also supporting this aspect. Besides these, there are also some ecosystems focused on solving underlying performance issues, including the Sui and Aptos ecosystems based on the Move language, which are high-performance underlying ecosystems. There is also the Movement ecosystem, a layer two protocol based on the Move language, with which we have expressed a willingness to cooperate. We can provide higher performance and lower fees on layer two. Additionally, we are looking into parallelization, such as the Monad and Sei ecosystems. Monad has not been released yet, but I estimate it will be released soon, and you can clearly feel the progress in underlying technology pushing the entire industry forward.
We have been paying attention to the Ton ecosystem for a long time. At that time, the community launched multiple chains, and last year it gradually solidified. Currently, we see that this chain has received official support, so we are starting to focus on it. From the end of last year to this year, the entire Ton ecosystem has developed rapidly. From the data, the off-chain data of the Ton ecosystem even exceeds the on-chain data. To accommodate such a large flow, the underlying infrastructure of Ton faces significant challenges, and the core development team of Ton is actively working to enhance performance. Additionally, Ton has a very large off-chain ecosystem. For example, Hamster has 50 million interactive users on TG. This vast user base and ecosystem attract many people who hope to transfer functionalities that can be realized in WeChat mini-programs to TG.
The miniAPPs on TG are rapidly increasing every day, with many developers and teams eager to create their own mini-programs on TG. These applications cover a wide range of areas, including trading, trading bots, and sniper bots, and you can even see people starting to offer financial services. There are also more general applications, including games. TG currently has about 900 million users, and it is expected to reach 1.5 billion in the coming years, but the number of users currently supported by the entire app is still relatively small, and developers see early opportunities.
In terms of BTCFi, Gate.io has built its underlying infrastructure very well. When BRC-20 started gaining popularity in May last year, Gate.io was one of the first centralized exchanges to support it. Gate.io has consistently been a leader in this area; for example, some BRC-20 tokens have recently launched on the now-popular Fractal Bitcoin, and Gate.io remains one of the earliest supporters, with a large trading volume from users. You can see that it has a very large user base, but the quality of its users is different from other ecosystems. There are many seasoned BTC veterans in BTCFi, who are early participants in the industry and have accumulated significant wealth. You will find that the trading value they generate is substantial. For this segment of customers, we need to think about what kind of services to provide and how to meet their needs.
In addition to the Solana and Ton ecosystems, the Ethereum layer two protocol Arbitrum has the highest market share and has developed a very good ecosystem. Layer two protocols are generally valued because they are built on the Ethereum foundation, which essentially eliminates centralized cross-chain security issues. However, the current problem with layer two protocols is that their costs are still somewhat high. Although the costs are much lower than Ethereum, they are still relatively high, so most people still choose the Solana chain.
Besides layer two protocols, there are also some layer one ecosystems that plan to address performance and cost issues through underlying infrastructure. In the future, I feel that Sui and Aptos have very good prospects, as well as Movement. We are also optimistic about parallel EVMs, such as Monad, because parallelization is a key technology for reducing costs and improving performance in the future.
The entire virtual machine and language design of Sui and Aptos are more suitable for parallelization, giving them inherent advantages. The main issue now is that EVM developers use the Solidity language, which has a very strong foundation. Transitioning these developers and projects to suddenly switch to a new language and redevelop is very costly.
Host: Recently, many centralized exchanges have launched "pre-listing trading markets." What is Dr. Han's view on this new trend? Why is this trend occurring? What are the advantages and disadvantages of this model?
Dr. Lin Han: When some high-quality leading projects distribute points in advance, users actually have a demand for early trading. We have also considered how to provide such an early trading market for users, but we have not yet found an ideal solution. Recently, there have indeed been some breakthrough methods in the industry, such as allowing users to auction trade in the market by providing a portion of the deposit, enabling them to sell expected points or tokens they may receive in the future. However, the current pre-market trading that needs to be launched by platforms suffers from inefficiency. Everyone basically relies on OTC methods, and transactions can only occur when someone places an order and buys, which is a less efficient model. To address this, we invented a new method—pre-mint. After minting the tokens in advance, users can trade them like other tokens, greatly improving trading efficiency. Through pre-mint, we successfully launched popular tokens like DOGS and HMSTR, and the trading volume has been quite good. If there is unique innovation in the product and the underlying technology is well implemented, it will significantly enhance user convenience and trading volume.
We are currently also focusing on solving the pricing issue in the pre-market. When very early projects begin to trade in advance, there is a strong uncertainty about the future, so this carries a considerable amount of risk. We will provide strong risk warnings to users when they enter, informing them of the potential risks. At the same time, we aim to minimize uncertainty. Therefore, in the mechanisms we implement, we will agree on many conditions with users in advance and clearly explain the token valuation model. First, we let everyone know the market's expectations for the project, and then we set a fixed total quantity ratio. Once the total quantity is set, users will have a valuation in mind, and naturally, the price can be established.
If users find that the total quantity of tokens set by the project differs from what we established, we will map it according to the corresponding ratio. As long as you have a reasonable valuation, the value you receive in the future will not deviate significantly.
Host: This year, I noticed that several leading exchanges are focusing on wallet services. What is Gate.io's approach to wallet services? Will there be greater support for wallet services?
Dr. Lin Han: Wallets are a very important area for us, and the level of investment varies among different companies. With the improvement of Web3 application performance and the reduction of costs, the user threshold is getting lower, and more participants are joining. At the same time, on-chain trading volume has grown rapidly in recent years. Of course, when the market is good, the trading volume of centralized exchanges will also rise. Compared to centralized exchanges, the market share of DEX has increased from about 8% two years ago to 13% now. This trend is expanding, so we have decided to increase our investment in Web3 infrastructure.
Host: Which auditing firms does Gate.io work with? What assets and business categories do they audit?
Dr. Lin Han: Gate.io collaborates with multiple auditing firms, covering various areas such as code audits, on-chain contract audits, wallet audits, user asset audits, and penetration testing. In addition to external third-party audits, we also have internal audits. It is worth mentioning that Gate.io was one of the first exchanges in the industry to conduct proof of reserves, and we have obtained a patent related to proof of reserves, which involves using Merkle trees for this purpose. As early as October 2020, we released the first proof of reserves report, which was provided by the leading American auditing firm Armanino. We placed user data in a Merkle tree and published the code, allowing users to verify the accuracy of the data themselves.
However, in 2022, after they completed our proof of reserves, FTX collapsed, causing a significant negative impact on the entire blockchain industry. In particular, traditional auditing firms developed a very negative view of the blockchain industry and chose to exit, making it very difficult to find a traditional auditing firm to provide auditing services. Therefore, we redeveloped an asset auditing method based on zero-knowledge proofs. This innovative technology no longer requires reliance on third-party auditing firms. Traditionally, platforms had to collaborate with reputable third-party auditing firms because user asset data could not be made public. However, with zero-knowledge proof technology, we can prove user assets without exposing user information, ensuring the security of user data.
In traditional finance, trading, clearing, and asset custody are handled by different companies with clearly defined responsibilities, making it nearly impossible for traditional financial institutions to misappropriate user assets. However, the situation in the crypto space is different. In centralized trading platforms, trading, clearing, and asset custody functions are all concentrated on the same platform. For users, these exchanges are like a "black box," making it difficult to understand their internal operations. As early as 2020, we began advocating for platforms to provide proof of reserves, allowing users to understand whether their funds were being used by the platform. When a platform holds a large amount of user assets without regulation, the risk of misappropriating user assets is very high. For example, some platforms might consider using user assets for on-chain wealth management, investment, asset management, or quantitative trading. Although these operations may seem low-risk in some cases, if they fail, users' assets will be at risk. Therefore, we advocate for the introduction of transparent mechanisms that allow users to view the platform's asset status. However, merely allowing users to view the platform's asset status is still insufficient, as it does not guarantee that the platform will not face a hacker attack one day. Therefore, we have also implemented multiple security measures, setting strict thresholds and limits. For example, we set a maximum limit on the assets that can be transferred under specific circumstances and store most assets in cold wallets, with only a small portion in hot wallets, to ensure that user assets are not lost even in the worst-case scenario. Additionally, we have established our own reserves as a safety guarantee.
Host: How can we prevent exchanges from acting maliciously and ensure that they do not engage in malicious price manipulation in contracts?
Dr. Lin Han: For exchanges to avoid malicious actions in contracts, or to intentionally liquidate users' positions, a very key point is that your system must be very open and able to provide a very equitable environment.
Many platforms have internal teams that can control the market, allowing them to manipulate liquidity, and the entire API is not public or has very limited openness. Additionally, the proportion of institutional users on the platform significantly affects whether it can provide a fair environment. Institutional users can easily detect any signs of subtle manipulation on the platform through API trading. We provide institutional users with very good API interfaces, serving over 1,000 top institutions globally, who have provided us with many requirements. In this case, it becomes very difficult to manipulate contracts to harvest users in the market. Because institutional APIs are built there, any fluctuations will quickly create arbitrage opportunities. Therefore, for us, we need to provide an open and transparent market, allowing others to trade, while we simply facilitate matching. This way, there will be no intentional price manipulation in contracts because there are no conflicts of interest; users are not our counterparties, and users trade with each other. As long as we provide a fair environment, we do not need to engage in malicious actions.
Host: Can you talk about Gate.io's culture? Some say Bitget resembles Huawei's culture, Coinbase has a winning culture like an NBA team, Binance prefers hardcore employees and advocates for simple, direct communication; Kraken believes that bureaucracy must die and despises office politics, even at the cost of letting some employees go. What do you think Gate.io's culture is? If there are keywords, which ones do you think can represent Gate.io's culture?
Dr. Lin Han: Gate.io is a company with a very simple structure, so it is not easy to form complex equity relationships. Everyone has a strong belief in the entire industry; we feel that meaningful things can indeed be done in this industry, rather than just encouraging everyone to trade with leverage and earn more fees. We can allocate funds better and quickly promote the development of innovation. We believe that many meaningful things can be accomplished in this industry, which can help improve the entire global financial system.
Therefore, Gate.io actually advocates an innovative culture. We often think about what kind of products and services we can provide to users. If we offer differentiated services and receive positive feedback from users, we feel a great sense of achievement.
The entire blockchain industry is a combination of the internet and finance, and finance itself is very fast-paced because it is closely related to money, while the internet industry is full of innovations. The combination of these two powerful industries has created the blockchain industry. Therefore, to survive in this industry, we need to maintain innovation, stay humble, focus on users, and continuously provide good services and content to them.
Host: Are you trying to engage in compliance business? What do you think about the rise of compliant exchanges and the pressure on non-compliant exchanges?
Dr. Lin Han: Gate.io has always placed great importance on compliance, which is related to my exposure to the compliance culture in Western society during my doctoral studies abroad. Moreover, Coinbase's listing has inspired us; it proves the feasibility of compliant development and has strengthened our confidence in moving towards compliance. Therefore, we began our global compliance layout early on.
As early as 2018, when Malta introduced regulatory systems related to virtual currencies, we started submitting license applications and eventually took four years to successfully obtain Malta's Class 4 Virtual Financial Assets Service Provider license, which authorizes us to operate a virtual currency spot exchange and custody services locally. Although compliant platforms may face some impact on profitability, especially in the early stages requiring significant investment, we believe that compliance is an inevitable direction for industry development, and we have sufficient advantages and capital, so we decided to push forward vigorously. Since our compliance layout in Malta, we have gradually expanded our compliance efforts to other regions, including Dubai, the United States, Canada, Singapore, Hong Kong, Italy, Australia, the Bahamas, and other countries or regions.
The European Union is a very large market, and everyone actually wants to enter the EU market, which is also a place with strict regulations, requiring a lot of work to enter. However, as mentioned earlier, we have been laying out in the EU for many years. In addition to Malta, we also have compliance layouts and investments in Italy and Lithuania. Currently, the EU has also issued MiCA, and we are simultaneously upgrading our compliance layout in that region, actively communicating with regulators to upgrade our licenses, aiming to cover the entire EU region. In addition to the EU, we also have a DLT license in Gibraltar.
Host: Where are Gate.io's main markets currently? Which markets will be key directions for Gate.io in the future?
Dr. Lin Han: We will focus on some of the leading regions globally because, from the overall user distribution, in addition to developed regions, there are also some areas we value highly, with a very good user base and high blockchain penetration rates. I mentioned earlier that Singapore's penetration rate has reached 24%, and possibly even higher is the UAE's penetration rate, which may reach 25%. There are also some countries and regions with high penetration rates, such as Vietnam, Turkey, Brazil, and Argentina, which are all very large markets. Therefore, we are gradually covering these markets through compliance pathways.
Host: What stage is the crypto market currently in? What are your views on future market development trends?
Dr. Lin Han: It is very difficult to predict the short-term market because it is influenced by many factors; tomorrow could see a rise or a fall. However, I maintain a very optimistic attitude towards long-term trends. Most of us have a consensus now; we see the contributions that the blockchain industry brings to our entire society, such as efficient asset allocation and directing funds to the most effective places.
The blockchain industry is no longer a niche industry. Currently, about 10% of the global population holds crypto assets, making it a very large asset category. Although the scale of the crypto market may still be about 10 times smaller than that of gold, its size is already significant and is beginning to be influenced by the entire global macroeconomic environment. The volatility of the blockchain market is highly correlated with the ups and downs of the stock market, especially the U.S. stock market. Changes in global macroeconomic factors, such as the Federal Reserve's interest rate cuts and the dynamics of interest rate cuts in Europe, will directly affect the asset fluctuations in the blockchain industry. I am optimistic about the future of blockchain for three main reasons: first, the market still has expectations for interest rate cuts; second, we find that blockchain is gradually moving towards mainstream acceptance; during the U.S. presidential election, we saw both candidates actively express support for blockchain technology, even proposing to make Bitcoin one of the strategic reserve assets of the United States. Additionally, the growth rate of blockchain users far exceeds that of internet users, and there is still significant room for growth. From about 1 million users approximately 11 years ago to around 600 million users today. As mentioned earlier, currently only 10% of the global population holds crypto assets, and in the next 5 to 10 years, the blockchain industry is likely to expand to about 30%, 40%, or even 60% of the population, so there will still be substantial growth potential.
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