Above and Beyond for Users: Upholding Ecosystem Integrity
Main Takeaways
In order for the blockchain ecosystem to flourish, its integrity must be protected. Through upholding ecosystem integrity, industry players can nurture user trust, thereby encouraging growth.
Aligned with this vision, Binance has cultivated a user-focused culture that defines everything we do. We put it into practice by helping users recover misplaced and lost digital funds whenever possible, as well as by freezing and clawing back ill-gotten funds that make their way to our platform.
Defending against bad actors requires the coordination of multiple parties across the ecosystem. On this front, Binanceâs Security team froze and/or recovered an estimated $55 million in user funds throughout 2023.
The rise of digital assets marked an unprecedented shift in how people organize financial activity. With any such paradigm shift, particularly one involving new technologies, trust becomes a key resource in securing progress and adoption. At such critical junctures, burgeoning new ecosystems and industries are vulnerable to bad actors looking to exploit their nascency. Early in the history of digital finance, we witnessed some notorious crypto fraud cases that, in turn, led to misguided perceptions of cryptocurrencies being primarily used for crime.Â
To nurture the ecosystemâs growth in its still-early period, industry leaders like Binance should use their reach and resources to lend support to other participants in the emerging marketplace, protecting users and upholding the integrity of the space. Since the beginning, Binance has been dedicated to taking on this responsibility, which is an important part of our vision of always placing users first. It remains our duty to prioritize the community and uphold ecosystem integrity.
Nurturing a Vibrant Ecosystem
Ecosystem integrity is what ensures that users are protected as they engage with the world of digital assets. To uphold an ecosystemâs integrity is to protect the members inhabiting it and thereby support its growth. With the right tools and techniques, a leader like Binance can play a key role in this process by protecting users from malicious attacks on the ecosystem and mitigating the impacts of such events if they occur.Â
While Binance hosts its own range of platforms, products, and services, it is only a small part of the wider global digital-asset community. From the protocols that form the infrastructure layer to the users, developers, and intermediaries that inhabit it, multiple entities coexist to form the global blockchain ecosystem.
In our early days, we faced criticism for trying to secure the ecosystemâs integrity by protecting users and recovering their funds. Critics generally favored a more âhands-offâ approach aligned with blockchainâs decentralized nature and code-centric foundation. In a decentralized, permissionless network, code governs the flow of funds and information rather than any central entity. When a centralized exchange such as Binance takes on responsibility for recovering lost funds or working to overcome the negative effects of security breaches, its actions are sometimes seen as going against the law of the underlying code. Yet, when the code fails, leaders in the space must step up to secure it.
Despite the criticism, we powered on with our user focus, becoming one of the first exchanges to establish vigilant user protections against scams, hacks, and rug pulls, as well as proactive recovery efforts in the aftermath of such incidents. We were also one of the first to actively collaborate with law enforcement agencies globally to tackle crypto-related crime. The communityâs trust and support, both on and off our platform, has always fueled our success. In turn, we continue to nurture the ecosystem, furthering this harmonious cycle of growth.
Helping Individuals
Navigating the world of cryptocurrency can sometimes be daunting, especially when starting out. Sometimes, transactions don't go as planned or coins go missing. Here lies the potential for upholding ecosystem integrity: securing and recovering individual usersâ assets. As many in the industry know, blockchainâs immutable nature can make fund recovery difficult. Tokens sent to the wrong address are usually lost once the transaction is complete.Â
Nevertheless, Binance's Customer Service (CS) team offers a wide range of coin recovery services for a variety of potential mishaps. These spread across various scenarios, from tokens failing to credit due to network issues, blockchain upgrades, or wallet maintenance to incorrect deposits to wallets, unlisted tokens, or unsupported networks. They also handle recovery issues related to delisted tokens, deleted accounts, regulatory constraints, wrongly deposited coins, and even lost NFTs.Â
Mistakes happen, but our CS agents are there to help rectify them, making the process safer and more user-friendly. Throughout 2022 and 2023, the team has successfully handled 381,616 appeals, recovering and refunding to our users some $4.35 billion worth of crypto that was deposited but not credited for various reasons. Their efforts help create a secure trading environment even for novice crypto users, thereby contributing to the overall ecosystemâs integrity and robustness.Â
Users are the foundation of the ecosystem, and user trust is the most important resource that fuels our innovative space. Thankfully, Binanceâs CS team is here to create a friendly and secure environment for them.
Collective Defense
Contrary to some popular misconceptions, only a tiny portion of crypto is used in crime-related transactions. According to Chainalysisâ 2024 crime report, illegal crypto transactions in 2023 only accounted for 0.34% of total on-chain transaction volume, down from 0.42% in 2022. Still, when crypto crime does occur, the global blockchain ecosystem rallies to combat it.Â
Binanceâs Security team collaborates with various partners, including other exchanges, services, blockchain analytics companies, user communities, and more. It is often a scramble to freeze as much of the stolen funds as possible, particularly when dealing with established criminal organizations. These are collective defense initiatives that play a crucial role in securing the ecosystem. Contributing to these efforts, the Binance Security team helped to freeze and/or recover over $55 million in user funds throughout 2023.
Hindering fraudsters
Rug pulls are a type of scam where developers attract investors to their seemingly lucrative project before suddenly abandoning it and selling or removing all its liquidity. Rug pulls are often associated with decentralized finance (DeFi) projects and decentralized exchanges (DEXs). While the decentralized and public nature of these spaces allows community innovation to flourish, it can also make policing and securing them more difficult.
On October 13, 2020, a DeFi project named WineSwap rug-pulled less than an hour after its launch. Its founders made off with an estimated $345,000 in user funds. The Binance Security team tracked the flow of funds across various blockchains to exchanges, where funds were eventually frozen. The next day, the team identified the suspect as a Binance user, who quickly agreed to cooperate in returning the funds to the victims. Ultimately, with the help of multiple parties across the ecosystem, we were able to return 99.9% of the stolen funds to their rightful owners.
Another significant rug pull occurred on March 4, 2021, when DeFi project Meerkat Finance disappeared a day after its launch. Fraudsters drained investor accounts of approximately $31.5 million in tokens. After being contacted by the BNB Chain community, Binance tracked the stolen assets across multiple addresses. The community reported the incident, and the Binance Security team inspected the scammerâs activities to successfully identify a suspect. At the end of the day, over 95% of the stolen funds were recovered, marking Binanceâs largest fund recovery at the time.
More recently, in May 2023, a project named XIRTAM initiated a rug pull, stealing an estimated $3.3 million in ETH from investors before depositing the funds into a Binance account. Our Security team promptly froze the funds, preventing the scammers from accessing them. Subsequently, the team analyzed the projectâs activities to identify victims, calculate losses, and make refunds available to over 1,750 addresses. By September 2023, we had successfully returned an estimated $2.3 million to victims, and the process continues today.
Combating hackers
Hackers exploit vulnerabilities in blockchains or associated platforms, such as wallets or exchanges, to illegally access funds and data. In these types of cases, Binance and other industry partners must act quickly to ensure these attackers do not get away with their crimes. It is a coordinated defense across the entire ecosystem.
In June 2022, Harmonyâs Horizon bridge was hacked, with attackers stealing an estimated $100 million in cryptocurrencies. The exploit was attributed to Lazarus, a North Korean cybercrime group. Subsequently, the Binance Security team assisted in tracking and freezing over $8.5 million of the stolen funds.
Another hack attributed to Lazarus occurred a year later, in June 2023, when the non-custodial platform Atomic Wallet was hit by a staggering exploit. An estimated 5,500 user wallets were compromised, leading to over $100 million in stolen funds. Binanceâs Security team helped track and freeze these funds as they arrived in Binance accounts and other exchanges that we alerted. Overall, we were able to freeze approximately $1.3 million in user funds.
Ultimately, these defensive efforts demonstrate the power of collective action, where a multitude of moving parts come together to secure the whole. This harmonious complexity characterizes the global blockchain ecosystem, and it remains our duty to serve it.
The Future of Integrity
Binance has always been driven by its dedication to users. Since day one, users have been our highest priority, and it was this commitment that led us to where we are now. Each of these cases highlights how we uphold ecosystem integrity, both independently and collectively with other players in the space. These would be impossible without our and our partnersâ shared mission of serving the ecosystem.Â
As we move to the next phase of global adoption, ecosystem integrity will only become even more of a priority. Binanceâs user-obsessed culture will continue to guide us as we go above and beyond industry standards to support the ecosystem. When integrity is secured, growth and development can flourish.