TL;DR Breakdown
- Binance suspended withdrawals on Ethereum temporarily on February 19.
- The platform claimed it made this decision because of the “congestion issues” on the network.
- Ethereum users and other crypto enthusiasts speculated about ulterior motives.
Yesterday, Binance created a frenzy in the crypto space when it decided to temporarily suspend withdrawals on Ethereum and other crypto assets based on the blockchain of the second-largest crypto asset by market cap. While the crypto exchange firm has since restored these services, it stated that its earlier decision was borne out of “congestion issues,” which indicates that the high gas fees being charged by the ETH network were most likely responsible.
But the suspension, together with the dubious explanation offered by the exchange, had drawn criticism from crypto traders and enthusiasts who feel Binance might be trying to pull a ‘Robinhood’ before our very eyes. Simultaneously, some have also attributed this as an attempt by the crypto exchange to draw more developers and traders alike to its Binance Smart Chain.
A moderator with the Harvest Finance Community, Red, posited that the “congestion issues” being cited by Binance is untrue as the asset’s network has not witnessed any significant change in its congestion in recent times. This claim is backed by Alex Kroeger, who shared a stat that showed that the value of ETH was basically in line with what we have seen recently too.
So, what happened? Why did Binance decide to stop withdrawals on Ethereum and ERC-20 tokens? That is the question that the crypto exchange, alongside other crypto enthusiasts, have been trying to come around to.
Is Binance pulling a Robinhood?
On popular social discussion website Reddit, a school of thought already exists that the crypto exchange was pulling ranks and trying to be “Ethereum’s killer,” especially with the rise in its native token price and increased usage of its Binance Smart Chain.
One comment on the platform by “the_wijji” stated that “Binance pulling a Robinhood” has generated many comments and upvotes from other users who shared the view.
Mephistoss, another user, stated that Binance’s suspension of ETH withdrawals is an attempt by the crypto company to “pump BNB more.” According to him, the exchange is just “creating a spotlight for its currency.”
Admittedly, BNB has enjoyed rapid success in recent weeks, culminating in the asset rising to as high as the third-largest crypto asset by market cap. As at the 31st of January, the token was trading for $40 and it ranked as the tenth-largest crypto asset by market cap then, fast forward to today, and its value has not only increased by six times, it has upended unique virtual assets like the embattled XRP token and leading stablecoin Tether.
Not only that, Binance Smart Chain, which was designed to take advantage of the boom in decentralized finance, has seen increased usage in recent times. The platform says it seeks to protect users and developers from the high cost of transactions and delays in confirming such transactions.
Notably, most DeFi projects are built on Ethereum; this puts Binance Smart Chain (BSC) as a direct competitor against the leading crypto asset. However, the Binance backed smart chain has the advantage of being supported by the number one crypto exchange in the world.
Another thing of note is that the value of BNB spiked to over $350 during this suspension while Ethereum’s value dropped by a few dollars. While this might have been the market shenanigans at work, the lack of clear communication has let the imagination of many run wild with them speculating that “Binance was actively trying to overthrow Ethereum.”
Binance defense so far
In a series of tweets, Binance CEO Changpeng Zhao explained that the AWS outage was affecting many crypto exchanges and that his platform was “barely holding up.”
There is an AWS issue affecting multiple exchanges. #Binance is barely holding up, but seeing some caching balance sync issue for small number of users. Working on it.
— CZ 🔶 BNB (@cz_binance) February 19, 2021
This was after he had retweeted Erik Voorhees, the CEO of a self-custody platform, ShapeShift, who had admonished Ethereum users to avoid the path towed by Bitcoin Maximalists. According to him, “ETH Folks… try not to become to Binancechain what the Bitcoin Maxis are to Ethereum. 🙏”
And earlier today, when the value of Ethereum broke the $2k mark, CZ was quick to highlight that BNB and BSC could coexist with Ethereum, saying that
We together make the industry bigger. ETH price did not drop. It increases together with #BNB.
For those holding ETH, no need to attack #BSC. We together make the industry bigger. ETH price did not drop. It increases together with #BNB.
— CZ 🔶 BNB (@cz_binance) February 20, 2021
Have an infinite mindset.
Read:
Infinite Game by Simon Sinek
Innovation Stack by Jim McKelvey https://t.co/kRvNlh83GP
As of press time, Binance has not released a statement concerning ETH’s temporary withdrawal suspension. However, those in the know have classified the matter as “mundane issues” that did not need any further attention.
Final words
Binance allowed “conspiracy theories” and other unsavory comments about its actions to grow unchecked due to its lack of clarity and the communication gap between users and the company. The crypto exchange would have to do better to check the growth of such speculations in the future.
Like one Reddit user said,
Rest assured that this is not the way to bring crypto into the mainstream in the form that we all wanted it,
Additionally,
We need decentralization to remain a core part of the crypto ecosystem; otherwise we’ve simply transferred control of our financial system from governments to corporations.
