Binance’s chief strategy officer, Patrick Hillman, revealed that he thinks the company’s centralized exchange might not be a thing in 10 years due to the cryptocurrency market’s intense edge towards decentralized finance (DeFi).
Currently, the popular cryptocurrency exchange is striving to retain customers’ trust after the abrupt shutdown of rival exchange FTX by enforcing “proof of reserves,” which is a means to show users that their assets are fully secured and available on the exchange. However, the process towards enabling all of that has been sluggish, Hillman explained to Coindesk on Thursday.
“It will be a multi-step process, including bringing in a third-party auditor,” he said. “It takes time to go and be able to conduct an audit of the scope and scale that is required of Binance.”
Binance ongoing operations
Binance, in collaboration with other notable crypto-based firms, is involved in an “industry recovery initiative” for Web3 to offer funds to startups in the industry. The exchange revealed that it would offer roughly $2 billion from its corporate reserves, which Hillman explained are different from its custody reserves, where users’ funds are stored.
In addition, he said that the exchange is “confident” in its reserves. Despite not disclosing how much money is held in its corporate account, the exchange is implementing its Merkle Tree analysis, which is a way users can verify their assets on the platform.
Hillman said that while Binance is “larger than New York Stock Exchange, London Stock Exchange [and] almost the Tokyo Stock Exchange combined,” it’s “a little bit embarrassed” about how slow it has been to set up a proof-of-reserves system.
“In the end the marketplace is going to mandate this. That’s it. There’s no ifs, ands or buts about it,” Hillman said. “We should’ve seen this a long time ago, and now we’re playing catch-up.”
Binance noticed a slight surge in withdrawals
Binance CEO Changpeng Zhao revealed that the biggest cryptocurrency exchange by trading volume had suffered a slight rise in withdrawals. Though operations are running as usual after the dramatic collapse in digital asset prices after FTX’s meltdown,
Talking on a live “ask me anything” session on Twitter Monday, Zhao explained there had been “no news about significant withdrawals” from several “cold” cryptocurrency wallets the firm published details of in the wake of FTX’s bankruptcy.
Binance has seen a “slight increase in withdrawals,” said Zhao, but he added this was in line with typical activity during declines in the crypto market. “Whenever prices drop, we see an uptick in withdrawals,” Zhao said. “That’s quite normal.”
After months of bouncing stubbornly around the $20,000 level, volatility returned to bitcoin last week as news of a liquidity crisis at FTX roiled the market. Bitcoin was trading at $16,600 Monday afternoon in London, barely moving from the 24 hours prior.
“We have not seen like 80% withdrawn from our cold wallets, or 50% of funds flowing from our platform, whereas it maybe happened with some other platforms,” Zhao said. “For us, it’s still business as usual.”
The following reactions toward FTX’s meltdown have rather signalled a lack of trust in cryptocurrency exchanges. A good number of crypto-based firms might be considering closing up their exchanges if the number of users drops significantly going forward.
Binance seems stuck in that matrix, weighing its options against its pursuit of sustained relevance in the cryptocurrency ecosystem. Investors should be on the lookout for exciting updates in the cryptocurrency space. However, the market is still very much young.
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