The crypto exchange Binance is involved in the takeover of Twitter – but this is not only for financial reasons. Musk wants to use blockchain technology to combat manipulation attempts on the platform.
Elon Musk after buying Twitter at Heidi Klum’s Halloween party in New York.
Almost a week ago, Elon Musk took control of Twitter. After months of back and forth, on October 28, the richest man in the world acquired the intended $44 billion to buy the American social media platform Twitter. A motley crew of banks, billionaires, professional investors and Musk himself funded the transaction. Among them was a $500 million stake from Binance.
This is exceptional. Because Binance is a well-known trading place for digital assets. But not just any. The crypto exchange, founded in China in 2017, is by far the largest in the world in terms of the daily volume of traded currencies such as Bitcoin, Ether or Binance Coin. Changpeng Zhao, the founder of Binance, is the richest man on the crypto scene with a fortune of around $21 billion. His commitment to Twitter is not primarily of a financial nature.
survival of civilization
He shares Elon Musk’s worldview. At the Web Summit, a major event in the digital industry, Zhao said this week: “We want to fully support freedom of expression.” Binance’s goal is to increase the freedom of money. “And freedom of speech comes before freedom of money,” he said.
Musk, for his part, has long attempted to make a name for himself by standing up for radical freedom of speech. The purchase of Twitter or the liberation of the bird – “the bird is freed”, as he announced in a tweet – are the culmination of these efforts for him. According to Musk, buying Twitter is about nothing less than the survival of civilization.
To secure this, he wastes no time. He has dismissed most of the Twitter management, and the same fate awaits many employees. Musk quickly dissolved the board of directors and set himself up as “sole director”. A new supervisory body is to take care of the moderation of content from now on; i.e. decide what is permissible in the future and what is not.
It’s not the panel’s job to monitor Musk. In addition to advertising financing, Musk also wants to introduce a subscription model that ensures user verification. Users may also be able to pay for the subscription using Dogecoins, Musk’s favorite cryptocurrency.
An epidemic of bots
Twitter should not only develop in terms of content and commercial, but also technologically. This is exactly what Musk needs the help of Binance for. According to crypto online portal Decrypt, Binance Twitter is providing an internal team to develop plans and strategies “to realize Elon Musk’s vision”.
Specifically, the aim is to find methods using blockchain technology to prevent the spread of fake Twitter accounts. These so-called bots are also a problem in anonymous cryptocurrency trading – Binance should have the relevant expertise.
Bots on Twitter are particularly problematic because they can automatically spread misinformation or malicious software. Bots act like regular profiles, so they can tweet, follow other profiles, and share content. However, they are difficult to recognize for laypeople. It is believed that during the 2016 US presidential campaign, Russian-led “bot armies” helped Donald Trump sway public opinion in his favour.
Bots are not banned on Twitter, but must be declared as such. Bots also played an important role in Musk’s first takeover attempt. Musk broke off negotiations with Twitter in July over disagreements about the number of bots on the platform. Musk accused Twitter management of hiding the extent of the bot epidemic. His accusation was later refuted in court. According to Twitter, fake or spam profiles make up about 5 percent of all accounts.
It is unclear to what extent the Binance experts will specifically use the blockchain – i.e. methods of decentralized, digital verification – to solve Twitter’s bot problem. One thing is certain: Musk had known himself as a supporter of blockchain technology long before he bought Twitter. This is sometimes reflected in the fact that the electric vehicle manufacturer Tesla still holds large stocks of cryptocurrencies, mainly in bitcoins, but also in dogecoins.
Colorful bunch of investors
However, Musk could not finance the $44 billion Twitter transaction with cryptocurrencies, but hard dollars were needed. On the one hand, he took out $12.5 billion in loans from banks like Morgan Stanley, Bank of America, and Barclays. According to a report by the Wall Street Journal, the institutes did not resell the loans, as is usual in such cases, but continue to keep them on their books in order to avoid losses due to the prevailing uncertainty in the market.
Musk brought in most of the acquisition sum with his own money from the sale of Tesla shares. He has also brought billionaires on board, such as the investor Marc Andreessen and Lary Ellison, the founder of the IT company Oracle. Numerous other professional investors participated with capital. And as is so often the case when ambitious financing is to be achieved, funds also came from the Middle East.
The Kingdom Holding Company of the Saudi royal family and Prince Alwaleed bin Talal recently confirmed that they intend to retain their $1.89 billion stake in Twitter. Almost a fifth of Kingdom Holding is owned by the Saudi sovereign wealth fund, which is headed by Crown Prince Mohammed bin Salman. The Qatar sovereign wealth fund is also involved. Qatar Holding is also a major shareholder in Credit Suisse. It was recently announced that she wanted to increase her 5 percent stake in the bank.