Binance: excitement around the new token standard
After a temporary suspension, bitcoin withdrawals have returned to Binance, albeit with higher fees. The world's largest crypto exchange is also in the spotlight of the US federal authorities.
The world's largest cryptocurrency exchange is once again causing a stir. Binance temporarily suspended bitcoin payments late Sunday night and again for a few hours early Monday morning. The break was justified by an "overload problem". This inevitably led to massive speculation about the state of the stock market on social media.
However, Binance has since resumed bitcoin payments on the platform. Transactions are showing up as successfully sent on users' wallets.
Binance attributed the network congestion to unconfirmed transactions in the mempool. They reached a record high on Monday morning, when there were 444,000 pending transactions. Pending bitcoin transactions are those that have been sent by users but have not yet been added to the blockchain by the network's miners.
The hype around the so-called BRC-20 tokens is blamed for the congestion problems. This ensures a high level of activity and thus pushes the Bitcoin network to its limits. Bitcoin transaction fees have risen sharply as interest in the new token standard has grown. The average transaction fee has increased almost fivefold since March, reaching its highest level in two years.
The so-called gas fees are the costs that blockchain users pay to validators when they want to perform transactions on the network. The costs increase as more and more users try to fit their transactions into the limited capacity blockchain.
In response to the large number of pending transactions on the blockchain, Binance has increased its BTC withdrawal fees. Miners prioritize transactions with higher fees when the demand for blockchain space is competitive.
To avoid similar scenarios in the future, Binance is also working to allow bitcoin withdrawals through the Lightning Network, a layer 2 network designed to speed up and reduce the cost of transactions.
Despite this incident, there were more negative headlines surrounding Binance and its boss Changpeng Zhao over the weekend. According to Bloomberg, citing sources familiar with the matter, the US federal authorities are investigating whether the crypto exchange violated US sanctions. The US Department of Justice's investigation is focused on whether the company was used to allow Russians to evade sanctions.
This is a new investigation. Binance is currently involved in a number of investigations. In addition to the Department of Justice, the crypto trading center is also under pressure from the US Securities and Exchange Commission, which is becoming increasingly tough in its investigations after the FTX fiasco.
The Commission, headed by Gary Gensler, initiated a total of 30 cryptocurrency-related enforcement actions in 2022, a 50 percent increase over 2021. In the first months of this year, the SEC has again increased its pace and has already taken 13 enforcement actions.