Binance can't downplay the Syscoin debacle with a SAFU joke
On Tuesday, July 3, cryptocurrency Syscoin saw a series of odd activities that couldn't be initially comprehended. Among other things, there were large blocks with as many as 1.3 billion SYS on its blockchain. A unit of SYS token was also trading on Binance cryptocurrency exchange for as high as 96 BTC ($623,000 approximately at the time).
Syscoin suggested that its blockchain could've been possibly compromised and asked all cryptocurrency exchanges to halt the trading of its SYS coin. After a detailed investigation, however Syscoin confirmed that the odd activity on its blockchain was nothing dangerous and entirely unrelated to the odd trading on Binance. The company since asked exchanges to start the trading of its SYS coin again.
Meanwhile, Binance came up with five back-to-back announcements during this period.
Binance first announced a "System Maintenance." The exchange desk didn't hint at what could be possibly wrong that led them to halt trading on their platform without prior notice.
This was followed by an announcement that Binance is resetting all existing API keys "due to irregular trading on some APIs." It is worth noting that even here Binance made no mention of the Syscoin debacle, and didn't consider it appropriate to explain where the fault lies. If the irregularities are happening with a few APIs, why reset all API keys on Binance?
This was followed to two announcements that said the API reset has been enabled and the maintenance session is complete. Then came the last announcement that finally made a mention of Syscoin.
But here's the catch — it still didn't take responsibility for the messy state of affairs or gave a detailed account of what actually happened.
Instead, it simply announced a way to refund affected users and be done with it. All the fault was conveniently put on the naive users who didn't know better.
Binance's Secure Asset Fund for Users (SAFU) is nothing but a candy to keep people silent and drive everyone's attention away from what's the main issue — security.
If it was a so-called "mainstream" or "regulated" business — there's no way it could have made away with staying silent on a trading glitch that costed users to lose millions of dollars in funds.
It couldn't just sleekly announce a "system maintenance" and go back to functioning regularly joking about the incident as if it was nothing.
Now, I don't have a problem with it going to back to normal in that short amount of time. It is amazing if any business can recover from a loss worth millions of dollars in a manner of a few hours. But Binance needs to be asked the tough questions.
There's no way that it deserves to get away without explaining such a major trading error by making a "funds are SAFU" joke. Cryptocurrency community has grilled other businesses for less. Giving Binance a free pass just because it has come to dominate the market is bad omen for ensuring security of cryptocurrency funds in the future and holding businesses liable for the activities on their platforms.