Business & FinanceSpotlight

Crypto Exchange Attack Fiasco: Binance has Only Its CEO to Blame

Binance is undoubtedly one of the most famous cryptocurrency exchange platforms in the crypto ecosystem however, that doesn’t make it unsusceptible to all the threats and attacks that come with the crypto business. Only earlier today the Binance CEO, in a series of tweets warned the community that the exchange’s futures were under attack.

BlockPublisher reported earlier this month when Binance launched its futures platform in invite-only mode, following a user-testing period. Two platforms were originally available, with users having the choice to vote for their preferred choice.

The Malta-based exchange platform was caught in the cross-hairs of a trading attack that according to estimates, occurred during late hours on 15 September, most likely close to midnight. The bizarre news was brought to light by none other than the CEO Changpeng Zhao himself, more famously known as CZ.

Binance is known in the crypto community for practicing honesty and transparency about the platform to its customers, in order to maintain a certain level of trust. Even during some of the most trying times, the exchange never kept its customers in the dark; case in point: the hack of May 2019 that cost Binance $41 million worth of bitcoin. Even then CZ and the team updated customers about the events as they unfolded.

Practicing the same virtue of transparency, CZ in his tweets on September 16, warned the community about the rather intriguing attack on the exchange’s futures platform. What made it interesting was the fact that while most of the attacks can almost always be linked to an unknown source, this time around the platform was under attack from one of its own market makers.

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A few hours after the incident, CZ revealed in a tweet that the culprit was a market maker from a smaller futures exchange and this was their second attempt at something like this.

The attacker is a well-known account that trades with Binance and started their own futures exchange a few months ago. This was the 2nd attempt they tried. Shame!

According to CZ, the target was the Derivatives trading platform and the perpetrator allegedly managed to crash the BTC/USD order book from $10,324 to $10,024 in his attempt. However, despite the attackers efforts to cause a string of liquidations, CZ clarified through his tweets that malicious efforts failed and no one liquidated.

NO ONE was liquidated, as we use the index price (not futures prices) for liquidations (our innovation). Only the attacker lost a bunch of money, and that was that.

The clarification however, raised quite a few virtual eyebrows in the crypto community. According to the tweet, Binance accredited the usage of index price instead of the futures prices for liquidation purposes, for dodging the bullet. But the claim that it’s their innovation to begin with, didn’t suit well with some people.

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CZ’s followers pointed out that BitMEX, the number one exchange for trading Bitcoin derivatives, has had its liquidations tied to the index price “since forever.”

The events to an interesting turn, when a few hours later CZ announced on Twitter that the alleged attack was in fact “accidental”. The whole attack situation turned out to be a false alarm that reportedly originated from a technical error on the market marker side.

Despite the fact that the wrongly accused perpetrator remains anonymous, some of the users were furious at the fact that the exchange was too quick to call out the attacker and label the event as an attack causing a frenzy in the community, without even proper due diligence.

This incident ended up pointing out the fact that the futures market is still immature and the surface issues, such as the false attack, is plaguing the big names in the crypto industry. Earlier this month Bitcoin futures offerings from Binance came under criticism as a pre-release tester identified certain flaws.

The Twitter account known as “doublejump” claimed in his tweets that both the options, which were under consideration at that time by lacked basic features which are essential for ease of use. However, the platform went ahead with its plans and came out successful.

On September 10, a Reddit user published their findings on Binance’s futures markets performance, which showed that the 24-hour trading volume of the platform’s futures market had exceeded $150 million denominated in Tether (USDT), that too in invite-only mode.

READ ALSO: As Traditional Markets Fumble, Bitcoin’s Time to Shine is Upon Us

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Abeer Anwaar

Abeer holds a Bachelors degree in Media studies and covers blockchain startups for BlockPublisher. An optimist, excels in the art of the written word and swears by the joy of all things sweet. Contact the editor at editor.startups@blockpublisher.com

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