Following the FTX and Alameda implosion, Willy Woo – a famous Bitcoin on-chain analyst – has raised concerns over the Binance insurance fund. According to Woo, Binance’s use of BNB coin as part of the crypto insurance fund is much more like FTX using FTT tokens for the same purpose. Hereby raising concerns over the 1,230,769 BNB ( ~$367 million) included in the Binance insurance fund.
Woo calls out the Binance cryptocurrency exchange for using BNB in its insurance fund instead of including more Bitcoins. Notably, Binance’s SAFU insurance fund has allocated approximately 24 percent – worth around $276 million – to the Bitcoin market.
Nonetheless, Binance Smart Chain proponents have argued that BSC has more intrinsic value than FTX cryptocurrency exchange. Furthermore, according to data from DeFillama, BSC has approximately $5.59 in TVL with 502 decentralised application protocols.
Closer Look at Binance SAFU Fund
Centralized cryptocurrency exchanges are fighting to retain traders as more flee towards DEXs like Uniswap and PancakeSwap. Moreover, the FTX fallout has significantly shattered crypto traders’ confidence in CEXs. Given the circumstances, centralized cryptocurrency exchanges are publishing their proof-of-reserves with the support of on-chain data. Mind you; blockchain data has the characteristic of being incorruptible.
Binance, the largest crypto exchange by daily traded volume, has led in CEX transparency. The company established its Secure Asset Fund for Users (SAFU) in 2018 to protect users’ funds.
Over the years, the company has gained regulatory trust for protecting customers’ funds and reporting bad actors to law enforcement. As a result, the company takes pride in over 120 million registered users. Notably, the crypto market houses around 300 million global users.
The Binance ecosystem has outperformed most crypto projects following the FTX fallout. According to our latest crypto price oracles, BNB exchanged hands at around $299, up 11.5 percent in the past seven days. With a market capitalization of approximately $48,765,145,681, the BNB market reported a 24-hour trading volume of around $903 million.
Binance CEO Changpeng Zhao (CZ) has continued to advocate for transparency and security in the blockchain industry. Following the FTX collapse, Binance topped its SAFU fund to $1 billion.
Nonetheless, the urgent and persistent question is whether Binance should have BNB coins on its SAFU fund. From my perspective, Binance should not use BNB as part of the insurance fund. However, this element is arguable and depends on your crypto interaction.
Written by: Qadir AK