Binance paused ERC-20 withdrawals without offering a credible explanation, letting speculation about its true motives run wild.
Binance had a hiccup with its withdrawals for Ether (ETH) and all ERC-20 assets on Friday, with users being unable to access any of their Ethereum-based assets for about one hour. The pause came abruptly, as the exchange’s Twitter account notified users that Binance had “temporarily suspended withdrawals of ETH and Ethereum-based tokens in order to address a congestion issue.”
Binance reassured that “funds are SAFU,” but did not provide any further details. About one hour later, withdrawals were apparently restored but the exchange did not attempt to explain what prompted them to pause such a critical piece 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 pause. The community showed skepticism at such an explanation, with Red, a moderator in the Harvest Finance community, drawing a connection to the rise of Binance Smart Chain:
“The congestion on ETH is no worse today than it has been for the past weeks, so the timing on Binances part could be considered suspect as they try to wrestle mindshare to the BSC chain from Ethereum.”
Indeed, data shows that Friday was not in any way exceptional in terms of blockchain congestion. A DuneAnalytics dashboard by Alex Kroeger shows that prices were in line with the previous two days.
According to Etherscan data, average gas prices are now lower than at the beginning of February, which makes Binance’s current statements all the more confusing. Either way, congestion by itself should not be a major issue for an exchange.
These circumstances attracted suspicion toward Binance’s true motives, with popular pseudonymous analyst Hasu suggesting that it was a “declaration of war on Ethereum.” While the comment was posted before withdrawals resumed, the community at large remains confused as to what exactly happened.
A technical malfunction could be an adequate explanation. FTX CEO Sam Bankman-Fried noted that the Amazon Web Services cluster hosting both Binance and FTX was down, which created issues for the platforms. Bankman-Fried was replying to reports of denial-of-service attacks, however.
A Binance spokesperson contacted by Cointelegraph did not wish to provide any further details, though they said it was a “mundane issue.”
Curiously, Binance Coin (BNB) price spiked from $260 to a brief peak of $350 immediately after the pause was announced. Ether had a mild fall from $1,930 to $1,916 during that time frame, which could have been a normal market fluctuation.
Many are ascribing the BNB rally to growing usage of Binance Smart Chain, which now has double the daily transactions of Ethereum. It would appear that the exchange would have no reason to actively undermine the Ethereum blockchain, but the lack of clear communication is letting speculation run wild. Patrick Maguire, operations lead at node infrastructure provider Pocket Network, commented on the overall significance of the event:
“Whether it was simply scheduled maintenance or intentionally timed, the fact that any exchange can decide when someone is able to use their tokens with little to no warning is antithetical to the spirit of decentralization.”