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Binance Hack Update: Controversy Around Binance’s “Centralized” Nature

8 Oct, 20222 min readOther
Binance Hack Update: Controversy Around Binance’s “Centralized” Nature

Justin Bons, the founder and Chief Investment Officer of Cyber Capital, has pointed out several controversies around the Binance Bridge hack that has seen attackers steal around $566 million on BNB Chain in a thread on Twitter.

The biting criticism by the self-styled "full-time crypto researcher" alleges that Binance has used "deceptive" design to make BNB Chain "seem decentralized to an untrained eye."

For one, Bons notes that Binance claims to have 21 validators to secure the Delegated Proof-of-Stake (DPoS) network. However, instead of validation being determined randomly, validators on BNB Chain take turns in adding new blocks to the chain in a predefined order set by an 11-member permissioned committee.

Bons alleges that while claiming that this committee is made up of third-party validators, the entities have obvious links to Binance. He adds that the arrangement is set up to allow Binance to argue plausible deniability in court — something Binance is notorious for, per Bons. He wrote:

Using separate entities might give Binance plausible deniability over controlling the network in a court of law. Thereby potentially escaping legal responsibility, something Binance is already notorious for.

Bons further highlighted other questionable features of the network, including that it is closed source, and that it has occupied a "comfortable ambiguous middle ground" by never claiming to be decentralized or outrightly admitting that it is centralized.

9/9) Binance is a consequence of the principles we promoted all of these yearsPartially unintended & unwanted but also largely requiredMy company is even a customer of Binance Exchange!However, that is entirely different from putting any faith in the centralized BNB chain!— Justin Bons (@Justin_Bons) October 7, 2022

Binance making frantic efforts to remedy the hack

The hack has been the latest damaging event in the crypto industry in 2022. U.Today reported that the hackers exploited a bug that compromised Binance Bridge verified proofs.

Binance has been coordinating efforts to get the situation under control. It has suspended transactions on BNB Chain while validators prepare to roll back the blockchain. Despite Whale Alert still noting large transfers of BNB tokens to the hacker(s) wallet, Binance says a portion of the stolen BNB tokens have already been frozen.

🚨 33,771 #ETH (44,699,426 USD) transferred from #BNB Bridge Hack to unknown wallet— Whale Alert (@whale_alert) October 7, 2022

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