Binance’s brief pause in Ethereum withdrawals leaves the community at a loss

189
SHARES
1.5k
VIEWS
ADVERTISEMENT

Related articles


Binance had an issue with the withdrawals for Ether (ETH) and all ERC-20 assets on Friday as users were unable to access their Ethereum-based assets for about an hour. The pause came abruptly when the exchange’s Twitter account informed users that Binance had “temporarily suspended withdrawals of ETH and Ethereum-based tokens to address an overload issue”.

Binance assured that “funds are SAFU” but did not provide any further details. About an hour later, the withdrawals appeared to be restored, but the exchange made no attempt to explain what caused them to stop such a critical part of its infrastructure.

The somewhat vague motivation of “congestion issues” seems to have indicated that Ethereum’s high gas fees had something to do with the break. The community was skeptical of such an explanation. Red, a moderator in the Harvest Finance community, made a connection to the rise of the Binance Smart Chain:

“ETH congestion is no worse today than it has been in recent weeks, so Binances’ timing could be viewed as suspicious as they attempt to wrestle Mindeum to Ethereum’s BSC chain.”

In fact, data shows that Friday was by no means exceptional in terms of blockchain congestion. A DuneAnalytics dashboard by Alex Kroeger shows that the prices matched the two previous days.

Average hourly Ethereum gas prices in Gwei. Source: DuneAnalytics.

According to Etherscan data, average gas prices are now lower than they were in early February, which makes Binance’s current statements all the more confusing. In any case, the overload in and of itself shouldn’t be a big problem for an exchange.

These circumstances aroused suspicion of Binance’s true motives, with the well-known pseudonymous analyst Hasu pointing out that it was a “declaration of war on Ethereum”. While the comment was posted before the withdrawals resumed, the community as a whole remains confused about what exactly happened.

A technical malfunction could be a reasonable explanation. Sam Bankman-Fried, CEO of FTX, noted that the Amazon Web Services cluster, which hosted both Binance and FTX, was unavailable, causing problems for the platforms. However, Bankman-Fried did respond to reports of denial-of-service attacks.

A Binance spokesman contacted by Cointelegraph did not want to provide any further details, but said it was a “mundane problem”.

Oddly enough, immediately after the break was announced, the price of Binance Coin (BNB) rose from $ 260 to a brief high of $ 350. Ether saw a slight drop from $ 1,930 to $ 1,916 over the period, which could have been a normal market volatility.

Many attribute the BNB rally to the increasing use of Binance Smart Chain, which now processes twice as many transactions as Ethereum every day. It seems that the exchange would have no reason to actively undermine the Ethereum blockchain, but the lack of clear communication has fueled speculation. Patrick Maguire, Operations Manager at the node infrastructure provider Pocket Network, commented on the overall importance of the event:

“Whether it was just scheduled maintenance or deliberately scheduled maintenance, the fact that any exchange can decide when someone can use their tokens without warning is contrary to the spirit of decentralization.”