Binance CEO Chengpeng Zhao (“CZ”) has come under attack after appearing to advise crypto holders to store their holdings on exchanges instead of on personal storage devices like USB drives or hardware wallets.
In a tweet, Zhao appeared to infer that the risk of self-storage is significantly greater than the risk of storing cryptocurrency on “reputable” exchanges like Binance. Writing on January 15, he said:
‘This Tweet Will Become a Meme’
Expectedly, the tweet came in for a barrage of criticism, not least because he actually posted it in response to news that Cryptopia, a New Zealand-based cryptocurrency exchange had just been hacked, with at least $2.44 million worth of ethereum (ETH) and $1.18 million worth of Centrality (CENNZ) transferred to several unknown wallets. While at press time it remains unclear whether hackers were behind the transfer or Cryptopia itself made the transfers for security reasons, Zhao’s Twitter mentions rapidly filled up with several negative responses.
Some of the responses were politely skeptical.
Others were not so charitable.
A few even bordered on downright accusatory.
Exchange hacks on the scale of the 2014 Mt Gox hack are not regular occurrences, but such breaches nevertheless are a serious risk to the long-term stability and adoption of cryptocurrency. CCN.com reported recently that more than $731 million was lost to exchange hacks in the first half of 2018 alone, the bulk of which was lost in the $500 million Coincheck hack of January 2018.
Confidence or Hubris?
To many in the cryptocurrency community, there is no such thing as a completely safe exchange platform. To them, it is potentially only a matter of time before Binance gets hacked.
A few, however, do believe that Zhao’s confidence in Binance’s security infrastructure is not misplaced and that their funds are “SAFU” in the platform’s storage wallets.
Some even believe that Binance has achieved the proverbial “too big to fail” status within the cryptocurrency market, effectively guaranteeing the safety of their funds.
In the light of the furor generated by his comment, Zhao later posted a follow-up tweet stating that contrary to the general perception raised by his initial post, he was not, in fact, recommending the use of exchange storage over any other storage option.
The comments will be particularly interesting to some who expect that as the world’s largest cryptocurrency exchange, Binance will at some point introduce some sort of insurance mechanism to cover users in the event of a large scale security breach. While Zhao has neither confirmed nor denied such rumours, it will be interesting to observe what new security and assurance features Binance will introduce if indeed it plans to become the gold standard for user coin storage.
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Last modified: March 4, 2021 2:51 PM