According to Binance’s reserve evidence, the wallet containing the collateralization of the cryptocurrencies produced by Binance would “by mistake” host part of the funds of the exchange. Binance has admitted its mistake, and says it is working to take the necessary steps to transfer the funds deposited into the wallet involuntarily.
Binance makes a wallet error
According to a Bloomberg report, Binance would have mixed some of its customers’ funds with its own funds dedicated to collateral of his bridge. The largest exchange in the world has recognized its error and claims to take the necessary steps to correct this error “as soon as possible”.
Indeed, as we can see on the page dedicated to the collateralization of “B-Tokens”, some tokens are largely or very largely over-collateralized, the latter not being however, according to the own rules of the exchange, supposed to be insured only at a ratio of 1 to 1 :
“When a user deposits one bitcoin, Binance’s reserves increase by at least one bitcoin to ensure client funds are fully collateralized. It is important to note that this does not include Binance company holdings, which are kept on a completely separate ledger. »
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Synthetic, Binance deposits funds serving as collateral to the 94 tokens it produces itself (tokens wrapped) on its wallet called “Binance 8” (which holds more than 10 billion dollars at the time of writing these lines) in order to ensure the ratio of 1 to 1. But, following an internal error, funds belonging to clients have been sent to the wallet in question.
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The risks of reserve proof
Starting from Binance’s supposed good faith, this is a direct consequence of a desire for transparency induced by the collapse of FTX, which has severely damaged the confidence of crypto investors in centralized exchanges. Thus, to respond to this major crisis of confidence, cryptocurrency exchanges found themselves obliged to publish their evidence of reserves.
The latter, to be credible, must be completely public and visible on chainwhich is the case of Binance here, which quickly revealed its various wallet addresses in order to prove that its customers’ funds were safe.
Until recently, it was the audit firm Mazars which provided audits of the largest cryptocurrency exchange platforms such as Kraken, Crypto.com, KuCoin or Binance. However, the company decided to end its auditing activities concerning cryptocurrency exchanges last December.
Mazars then reported ” concerns about how these reports are understood by the public”probably in reaction to the more than mixed feedback from the crypto community regarding the publication of the audits in question, the process used for their production having been severely called into question.
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