BSC experiences Rug Pull, Binance Exchange and Binance Bridge both blocked.

Binance Smart Chain (BSC) experienced a Rug Pull incident, where a platform made off with funds. A highly niche DeFi platform, Meerkat Finance, siphoned off $31 million worth of crypto assets. Instead of dissecting how the hack occurred, the community is more concerned about how Binance will respond.

For more information on Rug Pulls, you can refer to the article: 20 English Words You Must Know in the DeFi Craze

Quick Overview of the Meerkat Finance Incident

The development team of Meerkat Finance announced in their Telegram group yesterday at around 5 p.m. that their smart contract had been compromised. Approximately 13 million BUSD and around 73,000 BNB were withdrawn, totaling around $31 million, and the funds were transferred to different new addresses. According to on-chain data, it is likely that the platform developers' private keys were stolen, or they were the perpetrators themselves.

Following the incident, Meerkat Finance promptly deleted its website and Twitter account, leaving doubts about whether it was a Rug Pull.

How Does Binance Respond?

Binance founder Changpeng Zhao and the official Binance Twitter account commented on the incident. In the official Binance Chinese group, a Binance Angel mentioned that the abnormality had been detected and was being investigated in coordination with the Binance security team. Security firms Certik, Peckshield, and SlowMist are also involved in the investigation. Binance has provided a forum for affected users to report their situations.

Additionally, according to a report by CoinDesk, a Binance spokesperson stated that the Binance security team is currently monitoring the funds. They mentioned:

"If the funds flow into the Binance exchange, they will be frozen immediately. BSC is an open-source ecosystem, and Binance does not have direct connections with the projects on top."

Anticipating Binance to Roll Back the Blockchain?

With the increasing attention on BSC, many criticize it for being quite centralized and question whether Binance would use its centralized power to control the blockchain after a hacker incident, such as rolling back transactions to rectify erroneous trades. Such actions would be detrimental to an ecosystem that claims to be "public blockchain."

A prominent Twitter account, DeFiGod, known for calling out wash trading on BSC, has suggested that some Ethereum supporters have created problematic protocols to force Changpeng Zhao to exert dictatorial power to shut them down or subject them to review.

https://twitter.com/DeFiGod1/status/1365825460123353090

However, reports indicate that beyond BSC's decentralized network, there is a sort of artificial moat: Binance Bridge. Binance may not need to disrupt the decentralized garden it has cultivated. This is because:

"Assets within BSC are BEP-20 standard tokens. These assets have two paths to escape from the BSC network: either to the Binance exchange or from Binance Bridge to wallets on other networks."

If funds return to the Binance exchange, they will be directly frozen; attempting to escape via Binance Bridge already has daily limits, and since the incident, the path through Binance Bridge has been sealed off.

Binance Bridge Sealed Off

Looking at the current status of Binance Bridge, starting with BUSD, it is currently impossible to transfer BUSD from the BSC network to Ethereum because the original route has been disabled.

Similarly, in the case of ETH, it remains in a state where it can only be deposited but not withdrawn.

Such measures may impact regular users of decentralized networks, but funds without doubts can still be traded by transferring to the Binance exchange or subsequently withdrawing them. For advocates of decentralization, this design may not be well-received. As always, the balance between "security" and "freedom" is being determined by the market.