Binance's collateral loan feature hides a black box? Users experience forced liquidation in borrowing, realizing product descriptions are inaccurate

On the evening of December 11th, a Binance user on Twitter mentioned that they encountered certain inconsistencies after their leveraged position was forcibly liquidated while using the "Binance P2P Loans" service.

Is Binance's Collateral Loan a Black Box?

When collateralized borrowing encounters sudden price fluctuations, it may face forced liquidation, where the collateral is liquidated to repay the debt.

However, on the evening of December 11th, due to abnormal trading activities with OSMO, a Binance user found that when facing forced liquidation, the "OSMO" token he used did not follow Binance's official liquidation rules, leading him to suspect foul play.

According to Binance's official explanation, the liquidation is determined based on the collateral rate, where the collateral rate is the loan amount plus interest, collateral rate = loan value / collateral value, with an initial collateral rate of 65%. This means that digital assets worth 65% of the initial collateral value can be borrowed. Once the collateral rate reaches 75%, the system issues a margin call notice, and at 83%, forced liquidation occurs. As for how prices are determined, it is based on the "index price" provided by Binance.

However, this user, when trying to understand how they were liquidated, found that the so-called index did not include the "OSMO" token, making it unclear for the user to understand the liquidation situation at that time. Through sampling tests, although APT tokens can be used as borrowing/lending assets, they also do not provide a price index.

The user stated that they were unable to determine their liquidation price, as Binance did not provide relevant records. Other descriptions of the event process have been deleted.

Netizens mentioned that there must be a pricing source in the system for the initial borrowing and lending process; however, the user mentioned that although they understand this, their automatic margin call did not operate as expected.

According to preserved records, Binance customer service mentioned that although there is an automatic margin call function, it may not always operate stably. The user believes that the key issue is the lack of an index price, which is essentially a violation of operations.

Controversy Over Centralized Operations - How to Balance Transparency and Centralized Intervention?

Despite Binance adopting greater transparency policies such as proof of reserves and asset audits post the FTX incident, it seems that some aspects of their operations still require clarification.

In addition, as the world's largest centralized exchange, Binance has faced mixed opinions regarding market interventions in major events due to reasons like cybersecurity and industry ethics.

From past instances like the Bitcoin Cash SV fork, whether to provide LUNA/LUNC/UST markets, freezing specific user accounts, assisting regulators with user information, and intervening in the BNB Chain, the community has differing views on Binance's policies.

Just recently on December 11th, an intervention event occurred. Binance stated that abnormal trading activities took place in specific token pairs such as SUN, ARDR, OSMO, FUN, GLM, attributing these activities to cases related to compromised APIs. Zhao Changpeng also stated that these activities should be considered market behavior. However, some measures were taken to restrict withdrawals from certain accounts. They aim to achieve a balanced intervention in a neutral market.