Binance creates “SAFU” asset fund, Syscoin releases postmortem
Everything was doing what it was programmed to do, but it was doing it all at once.
Funds can now be formally SAFU on Binance. After the recent Syscoin irregularities and unexpected downtime highlighted the potential for unexpected trading activity at any time, and as part of a solid PR move, Binance has created a Secure Asset Fund for Users (SAFU).
Starting on 14 July, 10% of all trading fees will be transferred to the SAFU fund, securely held in a separate cold wallet. Assuming Binance trade volume remains at the current US$1 billion every 24 hours (it won't) and the trading fees are set at 0.1% in all cases (they aren't), that would be a cool $100,000 per day into the SAFU fund.
Syscoin and Binance have both done their own postmortems, and it looks like a combination of loosely-related and unrelated events that happened to happen almost simultaneously. The short version is that there was no hacking, and everything was working exactly as intended, just not with the results intended.
The details are based on the separate announcements issued by Binance and Syscoin, so there's no guarantee that this is exactly what happened or that the details aren't being misunderstood here.
On Syscoin's side
It started with the recent release of Syscoin version 3.0.6, almost two weeks ago. It was a mandatory update to fix a fee calculation bug, but not everyone updated. Some of the miner nodes that didn't update eventually couldn't mine blocks, as intended, until they updated manually. At the same time, the majority of Syscoin miners, in the larger mining pools, had their own default fees set above Syscoin's default transaction fees. This meant that only transactions with higher fees were going through these miners, while the default fee transactions started backing up and going through in batches whenever smaller miners with lower minimum fees won a block.
These combined factors were causing a lot of network congestion and creating a backlog.
On Binance's side
The main events on Binance's side are the 96 BTC Syscoin purchase, and the 7,000 BTC withdrawal from Binance right before it went down for surprise maintenance. No real explanation has been given for these. The 96 BTC order might just have been another expensive case of fat fingers, while the 7,000 BTC withdrawal seems to be entirely unrelated.
However, the enormous 1.2 billion Syscoin block, was the result of someone queuing up withdrawals from the Binance hot wallet.
With the congestion after the Syscoin update, the sudden artificial price inflation from the ludicrous 96 BTC purchase and someone trying to set up chained withdrawals from the Binance wallet for a large amount of Syscoin, there was a cosmetic error showing it as 1.2 billion. But it was all still more than enough to trip some red flags, so Syscoin urged exchanges to halt trading while Binance went for a maintenance break to be on the safe side.
Binance also said it rolled back "irregular trades," which probably means the Syscoin whopper, probably much to the extreme disappointment of one person and severe relief of another.
It's also said that users who were negatively affected by choosing to trade the artificially rising SYS price can get zero fee trading from 5 July to 14 July by sending a support ticket, while all other Binance users can get a 70% rebate on trading fees the exchange receives from them, not including referrals, between the same dates.
The recent Viacoin incident might also be fresh in its mind, because all existing API keys were removed to be on the safe side and will need to be re-created, urging those who don't regularly use them not to use APIs at all.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, NANO