Binance loses 1/3 of its bitcoins in 24 hours?

Binance is facing massive withdrawals as well as transaction fees multiplied by the latest fashionable nonsense: the BRC-20…

Traffic jam in the mempool

Binance, the world’s largest exchange blocked bitcoin withdrawals for two hours this weekend. The reason for this was the “large volume of pending transactions” in the mempool.

The mempool (memory + pool) is a mechanism for storing pending transactions. By the way, there is not ONE mempool. In fact, each node has its own mempool that can be configured differently from the others.

Transactions are validated by nodes that verify that the UTXO is properly signed. Transactions are then propagated from one node to the next until they end up in the mempool of a miner’s node.

Of course, miners prioritize the transactions with the highest fees. And the more of them there are, the higher the fees.

There are currently more than 400,000 transactions in the queue. That is 1 GB of data. This bottleneck is such that you have to pay $4 to get your transaction into the mempool (which is only 300 MB).

It will even cost you 550 sat/byte (i.e., $33) to ensure that your transaction goes through to the very next block.

Binance loses 178,000 BTC in 24 hours

Mempool congestion is a reality. But after all, Binance’s withdrawal fees are regularly higher than the actual fees (0.0002 BTC, or ~$5).

So Binance could have saved itself the FUD by temporarily taking the fee hike on board. Or simply by raising the withdrawal fee immediately.

ERRATUM: THE FOLLOWING PARAGRAPHS ARE WRONG. BINANCE DID NOT SUFFER A WITHDRAWAL OF 178,000 BTC:

We’re aware that some data are showing a large volume of outflows from #Binance.

This ‘outflow’ are actually movements between Binance hot and cold wallets due to the BTC address adjustments.

— Binance (@binance) May 8, 2023

[But maybe Binance didn’t want to admit that it suddenly ran out of BTC. The reason for this was massive withdrawals that probably forced the exchange to take the keys of its cold wallets out of the safe.

Indeed, more than 178 000 BTC have been withdrawn from Binance in the last 24 hours. That is 30% of all the BTC that the exchange had until now!

BREAKING: #Binance outflow data confirms largest withdrawal in it's history, over 162,000 $BTC has left the exchange, valued at over $4.6 Billion.

Are Whales/Insiders jumping ship? 👀 pic.twitter.com/QSXYAEvHkt

— WhaleWire (@WhaleWire) May 7, 2023

Coinbase now has the largest reserve with 486,000 BTC. Binance comes second with 400,000 BTC. Bitfinex (355,000 BTC) and OKX (118,000 BTC) are next.

In total, more than 158,000 BTC have left all exchanges in the last 30 days. This trend has been unbroken since March 2020.]

According to Coinglass, there were 2.2 million BTC on the exchanges a year ago, compared to 1.9 million today. Which is great news. Not your key, not your Bitcoin!

In this regard, note that two thirds of BTC (out of a total of 19.4 million BTC) have not moved in the last year. A record high. This growing trend of investors holding their own Bitcoins is telling. Bitcoin is increasingly becoming a store of value.

And since the supply of bitcoins is fixed, fewer bitcoins are available to buy. This can lead to upward pressure on prices if demand increases.

Bitcoin under attack?

The mempool congestion is related to a new project. The “BRC-20 Experiment,” referring to Ethereum’s ERC-20 standard. As a reminder, the ERC-20 allowed the creation of thousands of shitcoins as useless as harmful.

BRC-20 is a technique for issuing Bitcoin-native shitcoins using the Ordinal protocol. This is done through “registrations” in special transactions that cause the current explosion in fees.

Many feel there is nothing to worry about. John W. Ratcliff (@jratcliff) soberly states:

“I think of a DDOS attack as flooding the peer to peer network with low fee transactions for the sole purpose of clogging up the network. If you are paying good money, that seems more like a use case and less like an attack.”

Granted, it’s hard to imagine that an attacker, be it a country, would be willing to spend so much money to clog Bitcoin. The bill would quickly become large.

But let’s not be foolish either. A suspicious mind will say that all it takes is a spark to set off a self-sustaining degen fad. Maximum damage for minimum cost.

Majority of tx's are currently just spamming the block space.

They're all 152.5vb in size transacting precisely 0.00000546 btc.

DDOS test? pic.twitter.com/l9yDTnkuL9

— Andrew (@dAnconiaMining) May 7, 2023

By the way, there is another threat lurking: STAMP (Secure Tradeable Art Maintained Securely).

Like Ordinal, the STAMP protocol proposes to link jpegs to bitcoin, but differently. Unlike Ordinal’s entries, which can be pruned, STAMP’s gunk is found directly in UTXOs.

“The data is preserved in such a manner that is impossible to prune from a full node, preserving the data immutably forever,” said the mysterious STAMP protocol creator Mike in Space on the project’s GitHub page. The developer is already in discussions with Emblem and Hiro Wallet to allow buying and selling STAMPs on OpenSea.

It’s a shame that the fees are becoming exorbitant just as the US banking system is crumbling. All this to popularize Jpeg scams?…