Binance Creates Protection Fund Following Syscoin Attack
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Binance has confirmed it was attacked yesterday with hackers manipulating buy and sell orders for Syscoin (SYS), and in response the exchange has created a new fund to protect users in the future.
In an official statement released on Wednesday, Binance said it detected irregular SYS trades with API users at around 18:00 GMT on Tuesday; and suspended withdrawals and other account functions, citing ‘system maintenance’. A request for comment was not returned.
Binance allows traders to buy and sell cryptocurrency through its servers but also offers Application Programming Interface (API) trades that allow developers to write software and trades. Through this process, API traders create keys that act as credentials and authenticate trades.
The attack is not believed to be a consensus attack. Syscoin Block Explorer highlighted that a billion SYS had been mined from a single block and sold through a single account. By hijacking a large number of API keys, hackers were able to buy SYS through other accounts, artificially inflating the price and enabling them to profit with a reported $50m.
Binance has said that it has removed existing API keys, with traders requested to make new ones. The exchange has also offered traders who bought SYS during the attack zero fees for a two-week period and offered a 70% rebate for other traders over the same timescale. The rebate will be paid in Binance Coin (BNB).
The exchange has also committed to putting aside 10% of future trading fees for a Secure Asset Fund for Users (SAFU). Funds allocated will be used in the future as compensation for users who are victims of attacks in the future.
“Binance has achieved explosive growth in the first year,” the exchange said in an official statement. “With this growth, we also experience many problems. We must reflect upon these problems, learn from them, and improve ourselves.”
Syscoin is a platform offering a decentralized marketplace for users to buy and sell a wide variety of items on a global scale.
A hardfork from Litecoin, Syscoin claims to have fast transaction speeds and at the end of June, announced a partnership with Sendwyre for merchants to settle crypto transactions in fiat.
This is not the first time Binance has been attacked this year. Back in early March, the exchange managed to prevent a well-organized hack where stolen API keys were used to grossly inflate the price of Viacoin (VIA).
Although the exchange didn’t take further action following the attack in March, the creation of SAFU is a new step for a crypto exchange all too wary of the possibility of the next attack. The exchange posted profits of $200m in the first quarter of the year.
Although it does little to prevent or disincentivize further attacks, Binance hopes SAFU will act as something of an insurance policy for its users in the future.
Disclaimer: The author is not invested in any cryptocurrency or token mentioned in this article, but holds investments in other digital assets.