In a move that is sending shockwaves through the crypto community, Binance has put everyone on edge by pausing withdrawals. This draws a very much real-life comparison and reminder that was the FTX scandal just a few months ago.
Should We All Be Panicking?
On May 7, Binance, the world’s largest crypto exchange (in case you forgot), suspended Bitcoin transactions. It cited network congestion and stated that it was working on a fix. A couple of hours later, the company reported that transactions had resumed again.
However, on May 8, Binance suspended Bitcoin withdrawals again “due to the large volume of pending transactions.” About an hour later, it stated:
“There is a large volume of withdrawal transactions from Binance still pending as our set fees did not anticipate the recent surge in $BTC network gas fees.”
Binance added that the team was working to accelerate the confirmation of all pending transactions.
Binance stated that it was replacing the pending BTC withdrawal transactions with a higher fee so that they get picked up by mining pools. The latest update from the company a few minutes ago read:
“BTC withdrawals are now resumed on Binance. Pending transactions are being processed by replacing them with higher transaction fees.”
Is All of This Because of Transaction Fees?
A surge in Taproot usage and ordinal inscriptions has put pressure on the Bitcoin network. This has caused transaction fees to skyrocket and the mempool to clog up.
Furthermore, Bitcoin transaction fees have exceeded the mining subsidy of 6.25 BTC for the first time since 2017. BTC pioneer Jameson Lopp commented,
“Block 788695 marks a historic moment in which transaction fees due to high demand for block space have exceeded the mining subsidy. It has proven the model for thermodynamic security is possible. The only remaining question is if this demand is sustainable.”
At the time of writing, there were more than 450,000 pending transactions, according to Mempool.Space data. Furthermore, average transaction fees had surged to over $15. If you have been in crypto for a long, you know is an absolutely absurd amount for gas fees.
Was This A Planned Attack on Binance & Bitcoin?
Hours before the Binance exchange reported the halt in withdrawals, a Twitter user who doubles as a major node operator @proofofjogi confirmed that Bitcoin is under a DOS attack. According to him, “high transaction fees are the chosen pain point by the attacker, probably to make Bitcoin unusable for smaller players.”
According to Jogi, the mechanism of the attack appears to be Ordinals shitcoining, and by his predictions, the whole attack may just be starting off.
Bitcoin is renowned as the most versatile protocol in the blockchain ecosystem. Someone may soon clear this recognition off since some smart contract functionalities are now being built on the network at this time. These smart contracts have a lot of attack vectors that may largely compromise the integrity of the network, just as is being experienced at the moment.
So is there a real reason to panic? In short, crypto is a complicated organism with many layers that are constantly growing, and we, as investors, have to do our best to remember that and act accordingly when situations like this occur.
