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Congestion on the chain in early February! Binance suspends withdrawals, interpreted as a declaration of war against Ethereum. Zhao Changpeng: ERC20 wallets have been upgraded.

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Congestion on the chain in early February! Binance suspends withdrawals, interpreted as a declaration of war against Ethereum. Zhao Changpeng: ERC20 wallets have been upgraded.

Binance announced the suspension of Ethereum and all ERC-20 asset withdrawals on 2/19, although it lasted for less than an hour. This move, given the recent rise of Binance Smart Chain (BSC) as a competitor to Ethereum, has sparked discussions within the community due to its sensitive timing.

Withdrawals Suspended Twice

Breaking news: Binance announced on the evening of the 19th that:

Due to congestion issues, Binance will suspend withdrawals of Ethereum and ERC-20 tokens, emphasizing that all funds are safe.

Reiterating the same content, Binance made the announcement again at 5 a.m.:

Although the impact time was short, Binance only attributed it to congestion issues on the Ethereum chain without providing further explanation.

BNB Surges Immediately After Withdrawal Suspension

Binance's platform token, Binance Coin (BNB), has been the best performer among all platform tokens, with a peak increase of 700% in February.

Coincidentally, after Binance announced the suspension of withdrawals last night, BNB once again experienced a surge, reaching a historic high of $348. According to CoinGecko data, the token has seen a 1219.8% increase over the past year and 827.4% in the last 60 days.

Area marked in red is around the time of the incident. Source: tradingview

Although the Ethereum blockchain is indeed quite congested, based on data from Duneanalytics, the average transaction fees on February 19th were much lower than at the beginning of February, leading to suspicions about Binance's motives.

Source: Duneanalytics

Controversial Timing

Due to the high transaction fees and slow speed on the Ethereum network, Binance Smart Chain (BSC) has gained a significant advantage recently, leading to suspicions within the crypto community that Binance's decision to suspend withdrawals was not straightforward. Researcher Hasu from Deribit pointed out:

This feels like a declaration of war against Ethereum.

The Block's Director of Research, Larry Cermak, stated last night that, as a Binance user, it's hard to resist the platform's best user interface and deep liquidity. However, he has gradually been moving his assets to the FTX exchange and believes that Binance is to blame for this situation.

When Binance suspended withdrawals again this morning, he criticized even more strongly:

I've been waiting for the final outcome. I've moved all my assets on Binance to FTX. I can't trust this company anymore. They're shooting themselves in the foot with this nonsense.

Larry and some users pointed out that Binance resumed withdrawals within about 20 minutes, but suspiciously, during that time, transaction fees did not fluctuate significantly. Transaction fees were around 130 Gwei in the morning and rose to 190 Gwei in the afternoon. Besides arbitrary withdrawal suspensions and market manipulation, they can't think of any other reasons.

Larry further predicted: "BSC's usage compared to Ethereum will be virtually gone in 5 years."

Zhao Changpeng: Growing Together

Binance CEO Zhao Changpeng CZ also tweeted stating:

Not surprising that the increasing adoption of BSC has made Ethereum enthusiasts quite "enthusiastic" about me. I have no prejudice against Ethereum, and Binance supports, trades, and mines Ethereum. They don't need to attack BSC. Both Ethereum and BNB are continuing to rise, let's make the crypto industry even bigger together.

He mentioned that Binance is still the 11th largest Ethereum mining pool and that he only holds BNB and BTC, so he will continue to support BSC and BNB.

Binance's official account also announced the optimization and upgrade of ERC20 wallets to address blockchain congestion issues. CZ emphasized that the design of most official project wallets is of a completely different level than the current load they are facing, and growth in the industry comes with inevitable pain.