Binance security update - Some Facts and Thoughts of CZ

kingscrown (81)in #binance • 5 years ago

Since the text may change im putting it here so we can have it and discuss. I just remind - coins on exchange are never yours. Hence if you love Binance (i sure do!) there is few places with some different pairs (or occassions to trade vs Binance) and its good to split coins between them - KuCoin, BiBox and BitMax plus many others but i trade just those 3 from GUI of this type. Just right click on each and open in new window to not forget making accounts (documents not needed).

I have cut some of emotional parts of the text just to keep facts for us.

A group of hackers was able to gain control of a number of user accounts and made some large withdrawal requests in such a way that they bypassed our pre-withdrawal risk management checks. Our post-withdrawal risk monitoring system caught the actions immediately and suspended all subsequent withdrawals. While things are crystal clear in hindsight, at that moment, we weren’t 100% sure as to what exactly happened. Was it an actual user action, a glitch in the system, or maybe a hack? As we were still evaluating the situation at the time, we decided to proceed with caution. I put out a tweet saying the withdrawal servers are in unscheduled maintenance mode, while the team continued to investigate what happened. After confirming it was a hack, more questions followed

After 10 seconds of the “F, F, F***” state, I did a quick mental calculation. 7000 BTC, fine, I know we have more than that in our own BTC funds alone. There is enough. Mentally, a second calculation eased my thinking. The amount was about the same as a quarterly burn we did about a year ago.

Also, this is not a single outlay of cash percentage-wise by Binance. Back in September 2017, when the Chinese government issued a letter banning ICOs and “recommending” projects to return money to investors. The news alone caused many tokens to drop below their ICO prices, and many project teams couldn't return the whole amount to users. While BNB stayed strong at about 6x of the ICO price, Binance did help a number of projects raise money on our platform, and they were affected by this policy. So we did a quick calculation: if we were to help cover the loss for our users and for those projects, it would cost us roughly US$6,000,000. Putting this in perspective, while we only raised US$15,000,000 two months prior, we spent a bunch of money and were barely cash flow neutral at the time. We decided to do it anyway. I was in a moving subway when the team called me, and we made that decision together in less than 5 minutes. That was more than 35% of all the cash we had at that time. The goodwill that decision generated eventually brought us many users from China and all over the world and helped to fuel our growth. So, this time, this $40m represented a much smaller % of our cash reserves, plus we had the SAFU fund that could fully cover it.

Speaking with various team members, and as correctly analyzed by community members, such as Gautam Chhugani, this incident may actually be a good thing for us in the long run. Security is a never-ending practice. There are always more things to do in security, and we have implemented many of them in this last week and will continue to implement more in the future. Given this incident, Binance has actually become far more secure than before, not just in the affected areas, but as a whole.