Since launching in September 2017, Binance has been seen as one of the top exchanges in the cryptocurrency space. It constantly has good volume, has an ever-expanding list of features, and has proved itself to be innovative yet reliable in its time.
However, the past year has seen its star waning somewhat – the exchange was hacked in May 2019, their IEO model has been roundly criticised, and recent performance issues have had users considering a move away from the platform. So what has gone wrong for Binance, and are they in danger of causing their own downfall?
IEO Model Criticized
Binance revolutionized the Initial Coin Offering (ICO) in 2019 by creating the Initial Exchange Offering (IEO), a token sale that would take place on the new Binance Launchpad platform. This was ideal for both parties – projects could ensure a listing on a top exchange and Binance got paid a healthy sum, plus the added bonus of commission fees from trading after the launch.
The IEO, initially for BitTorrent, immediately drew criticism due to its design, which artificially raised the price of the exchange’s BNB token prior to the listing. The format also drew ire later in the year when the fees Binance allegedly charged were leaked, which ran into the millions of dollars, although the ‘leaks’ were denied by CEO Changpeng Zhao.
If that wasn’t enough, the crypto space is littered with punters who bought IEO tokens only to see them crash and burn upon launch, giving rise to suggestions that the team behind the projects simply used Launchpad to ditch their tokens. Binance were accused of failing to do due diligence on the projects they listed, being painted as a money-hungry giant who took on anyone who could pay the fee. Again, Zhao denied this, saying his exchange didn’t list “shitcoins”.
Binance created and rode the IEO wave in 2019, and they have washed their hands of any losses encountered by token buyers with the same ‘buyer beware’ message. However, the entire IEO process has left a sour taste in the mouths of many, and as the chief proponent Binance has suffered some reputational damage given just how much they gain from each listing while token buyers more of than not miss out.
A Binance hack was one of the few inevitabilities in the cryptocurrency world up to May 2019. The bigger it got, the more of a target it was for hackers, who saw the millions of dollars’ worth of tokens sitting in the exchange’s hot wallets as nothing more than a pocket to be picked.
After a couple of near misses, that month hackers used a variety of methods to orchestrate a “very advanced” and “persistent” attack on the exchange, resulting in ₿7,000 being stolen from the exchange, as well as some user information, such as identity credentials and 2FA logins.
Zhao put the hack down to “a variety of techniques, including phishing, viruses and other attacks” which hackers used to target high net-worth accounts and drain them. The exchange was criticized for knowing about the user information leak and still persisting to trade, but the bigger impact was the knowledge that Binance, considered the safest exchange in the space, was just as vulnerable as the rest.
After being shafted by Launchpad IEOs and potentially having their tokens stolen from the platform, many users have taken a recent drop in performance as a sign that Binance has bitten off more than it can chew.
The last week has seen a raft of complaints within cryptocurrency circles from users who have been unable to execute orders, potentially losing out on profits or worse, or view their balances in real time, causing some to worry they had been hacked. Other users have reported that multiple refreshes were required to confirm simple tasks. This has acted as the final straw for many users:
Fucking @binance acting up again. Look at this shit. My balance is -$7,298. Tf. I don’t even have my funds on my margin account right now. I’m withdrawing my funds off Binance. Fuck this shit. pic.twitter.com/huTy1kKFOb
— CяуρтoCαʝ ???? (@CryptoCaj) February 16, 2020
Stunning how broken the Binance trading interface is.
No surprise most shitcoiners lose money. Platform is clearly designed for amateurs.
Positions regularly show inaccurate size or NA, fills don’t update and can require multiple page refreshes, everything is clunky.
— Alex (@classicmacro) February 15, 2020
This performance drop is unusual for Binance, and they are taking steps to remedy it – Zhao has laid out a number of short-, medium-, and long-term solutions, but it really shouldn’t have got to this point. Issues like this that require long-term solutions don’t just appear out of nowhere. Did the exchange rest on its laurels and fail to keep up with its own high standards? Was it too focused on pushing margin trading to take care of its core business? It wouldn’t be the first company to do so, having led the field for so long. Complacency is a rot that is sometimes hard to detect,
Binance Can Recover
Fortunately for Binance, they have time, and in Changpeng Zhao they have the master of customer service. They are not the most liquid exchange and other exchanges have more market pairings, but it is arguably their ‘personal touch’ that has kept users coming back – Zhao is a regular contributor to debates on Twitter, and when things do go wrong he places himself front and center and fesses up to mistakes made.
This approach was novel when Binance was first launched, and has quite rightly won them admiration. However, other exchanges have raised the bar to meet the threat, and the one thing that Binance can’t afford with a new bull market on the horizon is performance issues that they could, and perhaps should, have seen coming.
Binance’s star has indeed waned over the last year, but they still have time to put it right.
Over to you, CZ.