The Binance platform was disrupted on Friday as funds were withdrawn from Ether (ETH) and all ERC-20 assets, with users being unable to access any Ethereum-based assets for nearly an hour. The hack came suddenly when the exchange’s Twitter account warned users that Binance had “temporarily suspended the withdrawal of ETH and Ethereum tokens to address the congestion issue.”
Binance confirmed that “this is SAFU money,” but did not provide details. After about an hour, the withdrawals appear to have been restored, but the exchange did not attempt to explain why it was suspending such an important part of the infrastructure.
The somewhat ambiguous drive behind “congestion problems” appears to indicate that the rising costs of gas in Ethereum have had something to do with the gap. The community was skeptical of this interpretation, and Red, the community moderator at Harvest Finance, linked it to the emergence of Binance Smart Chain:
“The congestion in ETH is not worse today than it has been in recent weeks, so the times listed in the Binances section can be considered suspicious as they try to break the idea of Ethereum’s BSC chain.”
In fact, the data shows that Friday was not exceptional in terms of blockchain congestion. The DuneAnalytics dashboard by Alex Kroeger shows that the prices were in line with those of the previous two days.
Average Ethereum gasoline prices per hour at Gwei. Source: DuneAnalytics.
Average gasoline prices are now lower than they were in early February, according to Etherscan, adding to the confusion of Binance’s current announcements. In any case, congestion in itself should not be a big problem for the stock exchange.
These circumstances raised doubts about Binance’s true motives, with a noted analyst under the pseudonym Hasu indicating that it was “declaring war on Ethereum”. Although the comment was posted before the downturn resumed, the general public does not understand what happened.
Technical error may be a sufficient explanation. Sam Bankman-Fried, CEO of FTX, noted that the Amazon Web Services group that hosts Binance and FTX is down, which poses problems for the platforms. However, Bankman-Fried responded to reports of DDoS attacks.
A Binance spokesperson contacted by Cointelegraph declined to provide any details, although they said it was a “secular case.”
Ironically, the price of Binance (BNB) rose from $ 260 to a short peak of $ 350 right after the break was announced. Ether has decreased slightly from $ 1930 to $ 1916 during this time period, which would have been normal market fluctuations.
Many attribute the rise of BNB to the growing use of Binance Smart Chain, which now has twice the number of daily transactions with Ethereum. There appears to be no reason for the exchange to effectively undermine the Ethereum blockchain, but the lack of clear communication is allowing speculation to spread. Patrick Maguire, Operations Director at Pocket Network, the contract infrastructure provider, commented on the overall significance of the event:
“Whether it is just routine maintenance or on purpose, the fact that any exchange can decide whether someone can use tokens with little or no warning is the opposite of the spirit of decentralization.”