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Binance spending a lot of money to consolidate assets, is it reasonable? Exchanges typically do this.

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Binance spending a lot of money to consolidate assets, is it reasonable? Exchanges typically do this.

On September 21st, the surge in Ethereum network transaction fees has attracted community attention. Binance publicly stated that the spike was due to wallet maintenance during a period of low gas fees, which is a normal operation for exchange businesses. However, criticism arose over Binance spending nearly a million in gas fees for wallet maintenance, with some even suggesting that Binance was paying exorbitant fines. Independent researcher Haotian released an analysis to counter these claims.

Two Ways to Organize Exchange Wallets

Haotian, formerly from the renowned cybersecurity firm PeckShield and an independent researcher, has his own Blog HaotianCryptoInsight.

He criticizes the spread of rumors before facts in every abnormal incident, so he wrote about the business mechanisms of exchanges, pointing out that exchanges typically have two ways of organizing wallets.

First Method: User Deposits Are Immediately Transferred to Aggregated Address

  • Procedure: After user deposits, corresponding assets are immediately transferred to hot wallets.

  • Advantages: Transactions are decentralized, users are not aware.

  • Disadvantages: More transactions, need to absorb costs during high Gas Fee periods.

Second Method: Regular Wallet Aggregation

  • Procedure: After user deposits, fragmented EOA wallets remain unchanged, and users withdraw directly from the large hot wallet. Regular wallet aggregation is performed.

  • Advantages: Can choose to operate during periods of lower Gas Fees.

  • Disadvantages: Likely to attract attention, leading to public relations events, difficult to explain the need for "wallet aggregation" and high Gas Fee costs.

Comparison of OKEx and Binance Practices

Haotian points out that OKEx follows the first method, while Binance follows the second method.

He compared the data of two addresses, Binance14 and OKX3, the disparity between the two is significant, for reference only.

Binance14

Binance14 holds nearly 110,000 ETH, totaling 10,000 ETH consumed. On 9/13, it consumed 388 ETH in a single day, with the highest record of 871 ETH in a day.

Binance14

OKX3

OKX3 has a smaller asset scale, totaling 1,530 ETH consumed. The data also shows a more balanced daily average consumption cost, with a maximum of only 15 ETH spent in a day.

OKX3

He states that under the business logic of exchanges, no matter which option is chosen, there are significant costs. Different platforms may have different strategies, so he also urges not to criticize without understanding, leading to the dismissal of those responsible for wallet organization.

Wallet Aggregation Involves More Than Just Cost Issues

Haotian reiterates that exchange wallet aggregation involves more than just cost issues, including:

  • Cost optimization

  • Security risk control

  • Internal control processes

  • Capital efficiency

He urges everyone to have a rational discussion:

Reviewing the Binance14 wallet, it can be seen that similar high Gas Fee wallet aggregations are not isolated cases, indicating that it is a balanced solution after comprehensive consideration by Binance. I can only educate to this extent, more details must come from the official source. I have no involvement in Binance's Mid-Autumn Festival gift box, there is no need to speak for them, just providing some professional insights from an industry perspective, please refrain from unwarranted criticism.