Welcome to Valid Points. In today’s issue, Sam Kessler questions whether Binance can be trusted. For an extended version of this article, view the web post here.
Monday’s arrest of Sam Bankman-Fried (“SBF”) capped off a historic period in the world of memes, money and mayhem that is the cryptocurrency industry. The arrest of the FTX exchange founder drew mainstream headlines that greatly overshadowed the other big crypto story of the day: questions around the solvency of Binance, the largest cryptocurrency exchange by trading volume.
If the collapse of FTX was catastrophic for the burgeoning crypto industry, a collapse of Binance would be apocalyptic.
FTX – at one point the third-largest crypto exchange by spot volume – processed around $37 billion in spot trades in October, the month before it collapsed, according to CryptoCompare. The second-largest exchange, Coinbase, processed $47 billion that month. Meanwhile, Binance’s spot trading volume in October totaled a whopping $390 billion.
For over a month, Binance CEO Chanpeng Zhao (“CZ”), like other exchange leaders, has been on a quest to convince users that his product is wholly different from FTX – the SBF-led exchange that became insolvent after misusing user funds.
Like FTX, though, Binance is largely unregulated, and not everyone is buying CZ’s repeated assurances of propriety. Over the past week, a shoddy audit of the exchange’s reserves – followed by news of criminal investigations into Binance executives – alarmed users enough to catalyze record withdrawals from the platform.
While Binance appears to be weathering the storm so far (there are no glaring signs that the exchange has misappropriated user funds FTX-style), recent events have drawn attention to the fact that Binance, which exists beyond the scope of regulators and tracks customer holdings on its own servers rather than on public blockchains, asks for a tremendous amount of trust from its users in order to operate. In the “trustless” world of cryptocurrency, this is a bit hard to square.
Still, some users continue to trust Binance. Compared to FTX, the exchange offers a relatively tame feature set and has a longer record of success (by two years). Also, on-chain data from Nansen – which can provide a limited window into an exchange’s health – suggests that Binance is far better capitalized than FTX ever was.
While one can find some differences between Binance and FTX, it’s impossible to know what’s really going on at Binance behind the scenes.
The Binance founder – in a manner not dissimilar to one-time-nemesis SBF – has been increasingly active on Twitter of late. It’s not hard to figure out why: For an exchange that is barely regulated, PR becomes the only way to convince users that things are humming along as promised.
But, of course, a PR-blitz is also a double-edged sword. Just as CZ’s “all is well” tweet threads might well convince some users that his platform can be trusted, his statements will be viewed by others as a sign of desperation.
If Binance is undercapitalized – however unlikely such a scenario might be – it surely won’t want users to panic-withdraw and find out for themselves.
Celsius Network LLC, et al., have established bar dates for submitting proofs of claim. Persons and entities that agree with their claim as listed in the Schedules [Docket No. 974] need not submit a proof of claim. Otherwise, all persons and entities that assert a claim against Celsius Network LLC and its affiliates must submit a proof of claim before the applicable bar dates outlined in the Bar Date Notice [Docket No. 1368-1].
Pulse Check
The following is an overview of network activity on the Ethereum Beacon Chain over the past week. For more information about the metrics featured in this section, check out our 101 explainer on ETH metrics.
Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network.
WHY IT MATTERS: On Dec. 6, readers gained the opportunity to earn DESK by reading articles, watching videos and other interactions on CoinDesk.com. We built DESK to be a mechanism for returning the value of engagement directly to users who create it. CoinDesk has no plans to monetize DESK. DESK does not have a limited supply, making it inflationary by design. Furthermore, buying, listing or selling DESK on decentralized exchanges is against our Terms of Service to protect users from treating DESK as an investment product. Read more here.
WHY IT MATTERS: The trading debut for the new fund, under the symbol “DEFG,” comes as the shares of Grayscale’s largest fund, the Grayscale Bitcoin Trust (GBTC), are trading at a record 50% discount to the value of the underlying cryptocurrency. CoinDesk and Grayscale are both subsidiaries of Digital Currency Group. DEFG tracks the CoinDesk DeFi Index (DFX), which includes the likes of Aave, Uniswap and Compound. Read more here.
WHY IT MATTERS: Polygon’s non-fungible token (NFT) market is currently experiencing significant increased adoption, thanks to its collaborations with name-brand companies such as Reddit. The surge in first-time and returning buyers in Polygon’s ecosystem comes even as NFT ecosystems on other chains such as Ethereum and Solana have a decreasing number of users per week. Martin Lee, senior data journalist at Nansen, tweeted, “My view is that the current adoption path … at @0xPolygon helps to remove the current stigma and idea that NFT’s main value is speculation.” Read more here.
Factoid of the Week
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Open Comms
Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post.
You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is:
