Binance Smart Chain Halts Operations After $100M Hack on Network

Jethro Sandico

Oct. 07, 2022

Reports of a 2 million $BNB ($600 million) hack on a Binance Smart Chain user’s account, exploded on the internet on October 7, 2022. According to experts in the space, the attacker is sending funds across liquidity pools, while using several bridges to reach higher ground.

The veracity of the reports were confirmed when stablecoin platform Tether blacklisted the said account. 

Furthermore, crypto exchange Binance founder and CEO Changpeng Zhao (aka CZ), also tweeted about the situation. Following the attack, the company has asked validators to temporarily suspend Binance Smart Chain, to prevent further damage.

“An exploit on a cross-chain bridge, BSC Token Hub, resulted in extra BNB. We have asked all validators to temporarily suspend BSC,” CZ stated. “The issue is contained now. Your funds are safe. We apologize for the inconvenience and will provide further updates accordingly.”

Earlier movements on the charts point to a $600 million loss. However, CZ has since stated that the funds taken off BSC are only between $100 million – $110 million. As of this writing, the company has already frozen around $7 million.

“Let’s give the devs time to fully understand the root cause, implement the fixes, test them thoroughly, and then resume. Let’s not rush it now. Thank you for your understanding, patience, and support,” CZ added.

Meanwhile, some critics disapprove of Binance’s capability to instantly pause any kind of operation on the protocol if they wish to. Some experts believe that CZ and his company’s total control of the space contradicts the main purpose of decentralization (one of the foundations of blockchain technology).

On the other hand, a DeFi/NFT analyst named foobar, lambasted members of the community for criticizing Binance’s move to turn off the network.

“Lots of people dunking on the chain freeze as proof that BSC is centralized. If you were unable to figure this out a long time ago, before the hack, crypto isn’t for you,” tweeted foobar (who has a following of over 74,000 on Twitter).

Hackers on the Blockchain

Hacks on the blockchain space are quite common since the technology is still in its nascent stages. In 2022 alone, an alarming number of networks and platforms have experienced several attacks. One of the most recent high-profile hacks happened in early August, when attackers drained $5 million worth of $SOL and $SPL tokens across 8,000 accounts on Phantom (a Solana-based crypto wallet). 

However, blockchain-focused companies are putting in tremendous efforts in making Web3 more secure for users. An effective way to ensure that a protocol or network is invulnerable to exploits is to offer bug bounties to white hat hackers. Ethical hackers usually test systems and expose their weaknesses.

ImmuneFi is an example of a company that has dedicated itself to providing bug bounties and other security services on their platform. The fact that ImmuneFi raised $24 million in late September to fund their initiatives, shows how crucial Web3 user protection is. Companies such as Electric Capital, Polygon Ventures, and Samsung Next, supported ImmuneFi in the Series A funding round.

Governance Voting

Leveraging the power of Decentralized Autonomous Organizations (DAOs), Binance is setting up an on-chain governance voting round (using governance tokens). According to the team’s latest ecosystem update, the procedure will decide on these four factors “for the good of BNB”:

  1. The DAO will decide whether to freeze the hacked funds or not.
  2. Another issue is whether to use BNB Auto-Burn to cover the remaining hacked funds or not.
  3. A proposed Whitehat program that will reward hunters $1 million for each bug found.
  4. Binance can also award a bounty (up to 10% of the recovered funds) for catching hackers.

About Binance

Binance is the largest cryptocurrency exchange in the world in terms of trading volume. Chinese-Canadian business executive Changpeng Zhao founded the platform in 2017. The billionaire CEO belongs to Forbes’ 2018 list of “The Richest People in Cryptocurrency.”

In early September 2020, Binance launched its new protocol known as the Binance Smart Chain (BSC). The blockchain ran in parallel to the much older Binance Chain network. BSC enables the creation of smart contracts, as well as the staking mechanism for the ecosystem’s $BNB token

Basically, BSC is an Ethereum Virtual Machine (EVM)-compatible blockchain which utilizes a Proof-of-Staked-Authority (PoSA) consensus mechanism. Boasting its high performance and scalability, Binance Smart is a blockchain that rewards users, developers, token holders, and validators, for their participation.