Overview
Since January 2018, Binance has been processing more than 1.4 million transactions per second, making it the biggest crypto exchange when you count the daily cryptocurrency volume. Changpeng Zhao has led the company since he established it in 2017.
There are many cryptocurrency exchanges, and even though each is structurally different, they all attempt to provide crypto traders with a stage to trade assets. In addition, these exchanges have asset utilisation initiatives, such as trading discounts, while using their own connected exchange.
On the Binance exchange, you will find the native Token, Binance Coin (BNB). This currency can be used for trading and paying commissions. In addition, they provide services for trading, listing, fundraising, de-listing, and withdrawing cryptocurrencies. They also support four main types of trade orders: limit, market, stop-limit, and one-cancels-the-other (OCO) orders.
They have no surcharge for cryptocurrency fund deposits. You only pay network fees when you withdraw.
Why Binance could fail
Binance In Hot Water: Accused Of Violating Trading And Derivatives Rules
The Commodity Futures Trading Commission (CFTC) and DOJ are suing Binance for allegedly violating trading and derivatives rules to block Americans from trading unregistered crypto products.
The CFTC claims Changpeng Zhao and several of his employees solicited American customers to bolster their US presence while stating they would block and restrict US customers from accessing Binance. The CFTC case also declares that Binance intentionally helped its US clients evade regulations.
The lawsuit is targeting CZ and former chief compliance officer Samuel Lim.
Furthermore, Binance’s activity is being accused of not being adequately supervised, and its anti-money laundering (AML) and know-your-customer (KYC) controls are not up to standard.
CZ Accused Of Improper Proprietary Trading
Apparently, Changpeng Zhao used companies he owns to engage in proprietary trading activities using Binance through 300 “house accounts," but did not publish any information about this venture. The SEC is busy examining the connection between these companies and Binance. It is alleged that they traded on the Binance platform but did not register with the CTFC.
This is a serious case. If the regulatory penalties stand, they will notably influence the companies' US and international markets. The CFTC will want to heavily fine the involved parties and ban them from trading altogether.
Mazars Quit Binance
Mazars' relationship with Binance was limited to proof-of-reserves work. However, Mazars added that it paused such work due to concerns about “the way these reports are understood by the public.”
Mazars stated that they do not constitute an assurance opinion or audit opinion but instead present circumscribed findings based on agreed-upon methods applied to the problem at hand at a historical moment.
Hacked On Multiple Occasions
The 2022 hack, in which hackers stole digital assets worth $250 million, is one of the most notable attacks on Binance. Comparatively, the 2019 attack cost the exchange $40 million.
Despite many of them being able to recover a portion of their digital holdings, cryptocurrency traders and investors lost about $100 million worth of cryptocurrencies. In addition, centralized cryptocurrency exchanges are receiving increasing distrust from the crypto community.
Why Binance won’t fail
Despite their issues, we are quite confident that this leading Centralized-exchange will not fail, at least not in a similar fashion to its predecessors. Here's why
Binance is not FTX
Let's start this by saying that on-chain data is not exhibiting FTX-like behaviour, and an analytic firm discovered that Binance is completely backed and dispersed from its own token.
A blockchain analytics firm in Seoul discovered that no on-chain features carried any weight to support statements made in an audit that Binance is over-collateralised. Another crucial point to consider is that Binance did not experience the same amount of outgoing traffic that FTX did in the days before its downfall. While withdrawals did increase exponentially during December 2022, they were less when compared to the exchange's overall reserves than FTX reserves.
Now let's consider Binance’s health. On-chain data points to the collaboration of all its claims, even if you don’t believe the exchanges' published reports.
Proof of reserves provides current, transparent, and not manufactured data, which is a first in the history of the crypto world. Furthermore, the user can directly audit the data through this revolutionary new blockchain technology.
This brings us to our last point: what could not be controlled by on-chain data were the lavish overspending and crazy employee perks that FTX had. Never before had there been such a complete failure of corporate controls and a complete absence of trustworthy financial information. FTX’s last CEO, John J. Ray III, who was also involved in cleaning up Enron’s mess, said in a court document: "From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented."
A Strong Focus On Building Trust
Binance is taking the lead among other exchange traders regarding their recognition of the momentous challenges the industry faces today.
For some time, the company has been introducing a course of action regarding clarity and confidence, culminating in the birth of a practical set of guidelines for centralised crypto exchanges if the public aspires to do so; this coincides with the development of a dedicated “building trust” landing page on their website.
Rana Kortam created these guidelines to be functional for clients and policymakers in the crypto ecosystem, including centralized and decentralized exchanges. In addition, they hope to ensure a response from the many stakeholders within the crypto community that will persist in improving the benchmark.
This environment is an effective centralized distribution core interconnected with trust and transparency. Binance will constantly update it with future guidelines, new policies on regulation, best practices, and much more.
This framework that was recently launched is by no means the end but rather a new beginning of the crypto adventure, focusing primarily on the concept of transparency and wallet security. Furthermore, it was created to work in harmony with regulations. This is crucial to confronting targeted risk-related concerns in a way that minimises harmful conduct, defends users, and facilitates progress.
They Are Pioneers Of Proof Of Reserves
Initiatives to boost confidence and openness gained momentum in November 2022 by introducing “wallet addresses,” which allowed the customer to confirm that they had adequate holdings of user funds in their reserves.
Thus, the “proof of reserves” system was introduced, a system that depends on Merkle trees, a mechanism that allows blockchain to be much more coherent and reliable by structuring data in a particular manner. The system provides users with a better instrument that they can use to verify that Binance securely stores their assets if the user would like to store assets online.
Recently, and very soon after proof of reserves was implemented, Binance upgraded to a new open-source framework using zk-SNARK. This technology has been the foundation of many revolutions in blockchain. This enables users to send transactions via a blockchain in a completely encrypted manner while simultaneously proving that they occurred legitimately.
This new system illustrates that every Binance user balance that they safeguard tallies up to the claimed total. This demonstrates that they are safeguarding all the user balances and holding the reserves one-to-one; furthermore, it can verify that a user's funds cannot be negative, one of the many defects of the previous solution.
According to Rana Kortam, the steps Binance has already taken are part of a larger initiative to boost confidence in the cryptocurrency sector. According to her, the exchange is already collaborating with other industry players, several associations, and community leaders to build trust.
The Most Trustable Centralized Exchange
Users rate Binance as the least expensive crypto exchange, and the largest exchange by far, but some others are seen as easier to use. Binance positions itself as a professional and safe trading platform, while other exchanges have less strict guidelines. This really comes down to what you're looking for in a platform.
A positive to other platforms is their token availability. There will be a plethora of tokens that users can invest in using websites like Crypto.com and Coinbase. Although these tokens aren't available on Binance… there's a reason.
Binance is much more strict with which tokens are listed on their platform. They are seen as the hardest exchange to list on. There are strict guidelines, and your token needs to be worthy according to the Binance Team. This is ideal for investors, as barely any "Shitcoins" will make it onto Binance.
Conclusion
While Binance has gone through various issues since it opened up back in 2017, they have stood taller than all others. Their CEO has claimed on various occasions that he doesn't see competition as unhealthy, but only a positive impact on the blockchain world as a whole. Their legal issues do not prove to be big enough to collapse the entire business, and they have worked closely with those who make accusations.
We believe Binance is here to stay for many years to come. Their only fallacy might come if crypto as a whole collapses, in which we have bigger fish to deal with.
