Cryptocurrency exchange Binance faced an unexpected halt in bitcoin withdrawals for several hours on Monday, citing heavy volumes and a surge in processing fees before clearing them at a higher cost. Late on Sunday and again early on Monday, the world’s largest crypto exchange stopped bitcoin withdrawals, saying that a glut of pending transactions was pending because it hadn’t offered so-called miners a high enough reward to log the trades on the blockchain.
The halt pushed bitcoin lower, although the losses were marginal, with the cryptocurrency last down about 1 per cent to $28,162, its lowest in nearly a week. Binance said in a tweet, “Our set fees did not anticipate the recent surge in (bitcoin) network gas fees. We’re replacing the pending bitcoin withdrawal transactions with a higher fee so that they get picked up by mining pools.” Gas fees refer to payments made to crypto miners whose computing power processes transactions on the blockchain.
“If the withdrawal amount is large, the gas fee required to process the transaction may also be large, especially during times of high network congestion,” said Joshua Chu, group chief risk officer at blockchain technology group XBE, Coinllectibles and Marvion. “We need more information as to what has led to the large withdrawals.”
After an hour-long stoppage late on Sunday and several hours on Monday, Binance said withdrawals resumed. “To prevent a similar recurrence, our fees have been adjusted.” In a separate tweet, Binance denied there had been large outflows from the platform.
In March, Binance had suspended deposits and withdrawals citing tech issues. Twenty-four-hour trading volume on Binance was $6.9 billion according to analytics site CoinMarketCap, more than eight times the next-largest venue, Coinbase.
According to industry experts, the recent rise in bitcoin’s price has led to a surge in demand for transactions, leading to delays and higher processing fees. Bitcoin is up nearly 50 per cent since the start of the year, driven by increasing institutional adoption and mainstream acceptance.
Binance’s halt in bitcoin withdrawals highlights the issues faced by crypto exchanges during times of high demand. In the past, other exchanges, including Coinbase, have also experienced temporary halts in trading and withdrawals due to technical issues and high traffic volumes.
Binance’s move to raise fees to clear pending bitcoin transactions has sparked concerns among users, with many taking to social media to express their dissatisfaction. Some have argued that Binance should have anticipated the surge in demand and adjusted its fees accordingly, while others have criticized the exchange for not providing adequate information about the reasons behind the halt.
Despite the concerns raised by users, Binance’s decision to increase fees appears to have been successful in clearing the backlog of pending transactions. However, the incident serves as a reminder of the risks associated with cryptocurrency investing and the need for caution when using crypto exchanges.
In conclusion, Binance’s halt in bitcoin withdrawals highlights the challenges faced by crypto exchanges during times of high demand. While the incident was resolved relatively quickly, it serves as a reminder of the need for exchanges to be prepared for sudden surges in demand and to take steps to ensure that their systems can handle the load. For users, the incident serves as a reminder of the risks associated with cryptocurrency investing and the need to exercise caution when using crypto exchanges.
The incident with Binance also highlights the importance of understanding the underlying technology behind cryptocurrencies and how transactions are processed on the blockchain. Gas fees, which are payments made to miners for processing transactions, can fluctuate depending on the level of demand for transactions. As more people transact on the network, the gas fees can rise, which can lead to delays and higher costs.
