Binance has just transferred about 1 million eth, worth circa $140 million, from what appears to be a cold wallet into presumably a new cold wallet.
retweeting again. https://t.co/KKEIHt0Mwu
— CZ Binance (@cz_binance) February 25, 2019
There were indeed two small transfers. Then ◊80,000 was sent, ◊200,000 and ◊700,000 moved out of the address.
All of it for a fee of 4 cent, with it unclear why they’re moving these huge sums, but this isn’t the first time Binance has done so.
The practice begun in October 2018 when Binance moved 1 million eth for the first time. Changpeng Zhao, Binance’s CEO, said at the time they were moving them just for extra security precautions.
Its repeat today might suggest this will become a bit common, with other exchanges usually not moving their cold storage as you’d have to set up a new secure system.
Details of how exactly Binance secures their coins are sparse for obvious reasons. Some, like Xapo, hide them in deep Swiss bunkers. Coinbase chops them up in numerous addresses of ◊5,000 or 10,000 eth. While Binance appears to keep them all in one address.
Proof of Solvency?
The first movement of coins by an exchange was done by Mark Karepeles of MT Gox who moved 424,000 BTC to prove solvency in 2011.
After Gox went bankrupt in 2014, a number of exchanges moved their coins again to prove solvency.
It may thus be that Binance is moving them to show they have this much eth in custody, but it is a bit interesting that the sum hasn’t changed much since October.
You’d expect it to go up or down rather than remain at a nice round number, indicating this might be just one cold wallet.
Exchange Ranking by Coin Holdings?
Another reason why these might be moving might be for the purpose of ranking exchanges based on how much crypto they hold rather than through more fakable indicators like how much volume they handle.
That method, however, would have its own problems because Poloniex, for example, moved some 2 million eth in February 2018 after being acquired by Circle.
They’re hardly handling much trading volume for eth at just about $5 million compared to the current total of $6 billion in the past 24 hours.
Hence an explanation for them holding double the amount of Binance is the fact that at the beginning Poloniex was effectively the only eth exchange back in 2016.
That shows a lot of people use exchanges as a sort of bank account where you just park money even though that has caused problems in the past and will probably continue to do so in the future because if you don’t hold the private keys, then technically it’s not your coins, but a promise by the exchange that you’re entitled to them, a promise they might not be able to keep.