Popular cryptocurrency exchange Binance on Monday briefly suspended ETH and ERC-20 token withdrawals on its platform. This decision by the exchange was fueled by the unprecedented price fluctuation recorded in the entire cryptocurrency space, which subsequently led to a spike in Ethereum gas prices.
In response to this turn of events, Binance announced the suspension of withdrawals of ETH and ERC-20 tokens. The exchange formerly made this announcement via a tweet on its official Twitter account. However, shortly after the announcement, Binance rescinded its decision.
#Binance has temporarily suspended withdrawals of $ETH and Ethereum-based tokens due to high network congestion.
Rest assured funds are #SAFU and we apologize for any inconvenience caused.
Ethereum currently stands as one of the world’s most popular blockchains. Despite its many benefits, the network currently faces huge scalability issues. These issues have driven gas prices to heights never seen before.
In addition, the Ethereum chain currently suffers from network congestion. Also, the network is generally slow. The exchange, in its announcement, pinpointed this as the reason behind the suspension. However, the exchange added that users’ funds were safe. Also, the founder and CEO of Binance, Changpeng Zhao, disclosed that the entire system was stressed by the spike in gas prices.
The congestion following its decision to suspend ERC-20 and ETH transactions increased by over 1,200 gas alongside over 151,000 pending transactions.
ETH is super congested now, at 1200+ gas. @Binance have suspended withdrawals.
There was a conspiracy theory that Binance is deliberately making ETH gas fees high. 😂 Let’s see it come down a bit. pic.twitter.com/tNK9b3b9OK
About 37 minutes after the first announcement and following serious criticism from traders, the crypto exchange was forced to reverse its decision.
Many theories currently trail the ever-increasing ETH gas prices on Binance. One theory accuses Binance of purposely driving gas prices to attract more traders to its recently-launched Binance Smart Chain (BSC) platform. This claim is, however, hard to validate due to the high fees the exchange has to pay to Ethereum every week.
CEXs, DEXs, and Increased Crypto Usage
Ethereum scalability issues and subsequent network congestion, high gas fees, etc. has, to a large extent, shown that centralized exchanges may be unable to support the current inflow of crypto investors. Many investors are moving towards liquidity aggregators. These aggregators pull together liquidity from both centralized and decentralized exchanges. They, however, can pose huge security risks.
Protocols like Orion have, however, further improved this method creating liquidity by pooling together CEXs, DEXs, and also AMMs (automated market-makers) all in a unique way.
At the time of writing, ETH was trading at $1,499.55, with a market cap of $172,183,473,786 and a 24-hour trading volume of $34,261,098,406.