Choosing the withdrawal network in the cryptocurrency world is a very critical but easily overlooked issue. For many beginners, this concept may be somewhat complex, so today we will use simple language and vivid metaphors to help everyone understand: what is a withdrawal network, how to choose one, what are the consequences of choosing incorrectly, and how to resolve issues.
At the end of 2022, the 'Circle USDC withdrawal incident' involved a large number of USDC (USD stablecoin) users suffering losses due to choosing the wrong network. In this incident, many users mistakenly withdrew USDC from the Binance Smart Chain (BSC) to the Ethereum (ERC-20) network. Due to the different protocols and asset storage methods of these two networks, these assets were permanently locked and could not be recovered through normal means. Another typical case occurred in early 2024, involving a cross-chain error between the Ethereum (ETH) and Polygon (MATIC) networks. An investor mistakenly withdrew their MATIC tokens from the Polygon network to an Ethereum network address, resulting in the transaction being unrecoverable due to incompatible network protocols, causing losses of tens of thousands of dollars.
1. What is a withdrawal network?
The withdrawal network refers to the 'path' you choose when withdrawing digital currency from an exchange or wallet. You can think of it as a means of transportation or a road. If you are starting from one city (exchange) to another city (wallet or other platform), you need to select the appropriate means of transportation (network).
Just like when you travel to a city, you can choose to fly, take a train, or a bus, and different means of transportation (networks) have different characteristics: some are fast but expensive, some are cheap but take longer, and some may encounter congestion during peak times. Choosing the wrong means of transportation (network) may lead to wasting time and money or even missing your itinerary (losing funds).
2. How to choose a withdrawal network?
When selecting a withdrawal network, you should mainly consider the following factors:
1. Which networks are supported for the digital currency you want to withdraw?
Different digital currencies can be transferred on different blockchain networks. For instance, Bitcoin (BTC) can only be withdrawn through the Bitcoin network, and Ethereum (ETH) can only be withdrawn through the Ethereum network. Some digital currencies can choose multiple networks, such as USDT (Tether), which can be transferred on the Ethereum network, BSC (Binance Smart Chain), and Tron network. You need to ensure that the withdrawal network you select supports the assets you hold.
2. What are the fees and speed of the network?
Different withdrawal networks have significant differences in fees. For example, the Ethereum network (ERC-20) may incur high gas fees during busy times, while networks like Binance Smart Chain (BSC) and Polygon (MATIC) are relatively cheaper and faster. Therefore, if you need to transfer quickly and at a low cost, choosing BSC or Polygon may be more suitable.
3. Is the network stable?
Some emerging networks may experience congestion or instability, which could lead to delays or failures in withdrawals. Choosing a stable and widely supported network can help avoid unexpected issues during the withdrawal process.
3. Consequences of choosing the wrong network
If you select the wrong withdrawal network, the consequences can be very serious. Here are a few common mistakes and their consequences:
1. Loss of funds
The most serious consequence is the loss of funds. If you choose a network that is not supported or withdraw to an incompatible address, your funds may be permanently lost. For example, if you withdraw USDT from the Binance Smart Chain (BSC) but select the Ethereum network, it could result in your funds being unrecoverable.
2. Transfer failure or delay
If you choose a congested network, you may encounter transfer failures or delays. For example, the Ethereum network can be very congested during peak trading times, leading to very long confirmation times for withdrawals, and you may even need to pay higher fees to ensure the transaction is successful.
3. High transaction fees
Some networks (like Ethereum) experience surging fees during busy trading times. If you do not set the gas fee reasonably, your transfer may be delayed or fail, and the transaction fee could be much higher than you expect.
4. Assets frozen or unable to be withdrawn
Some exchanges do not support specific withdrawal networks. If you choose a network that is not supported, your assets may be frozen or unable to be withdrawn.
4. How to avoid choosing the wrong network?
To avoid choosing the wrong withdrawal network, you can follow these steps:
1. Confirm the supported withdrawal networks for the assets
Before withdrawing, first confirm which networks are supported for the digital currency you wish to withdraw. For example, USDT can circulate on multiple networks such as Ethereum (ERC-20), BSC, and Tron, so you need to check which specific networks are supported on the platform.
2. Choose the appropriate network
If you are not in a hurry to transfer funds and wish to save on fees, you can choose a network with lower fees and relatively stable performance. For example, BSC and Polygon offer lower fees and faster transfer speeds. If you need to trade quickly, you can opt for these networks.
3. Conduct small amount tests
Before making large withdrawals, it is recommended to conduct a small amount test. By performing a small test, you can ensure that the selected network is functioning properly and avoid unexpected losses.
4. Contact customer service for help
If you are unsure how to choose a network, you can contact the exchange's customer service for consultation to ensure you select the correct network for withdrawals.
5. Real case analysis: painful losses caused by choosing the wrong network
1. The FTX incident
In early 2024, FTX exchange experienced a liquidation incident. Some users, when withdrawing funds, chose unsupported networks without carefully checking the withdrawal network, resulting in their funds being unrecoverable. Although FTX has multiple supported withdrawal networks, users did not understand clearly, leading to their funds being frozen or lost.
2. High fees on the Ethereum network
In May 2024, users attempted to withdraw funds during peak times on the Ethereum network. Due to not adjusting gas fees in time, transfers failed, and the transaction fees far exceeded expectations. Some users even abandoned their withdrawals due to the high fees, resulting in wasted funds.
3. Incorrect choice between ERC-20 and BEP-20 networks
In September 2024, a user withdrew their USDT from the Binance Smart Chain (BSC) to an Ethereum network (ERC-20) address, resulting in loss of funds. This was due to the different protocols of the two networks, making automatic conversion of assets impossible, and there was no cross-chain bridge available for direct recovery.
Choosing the correct withdrawal network is very important as it relates to the safety of your assets and the smooth execution of transactions. By understanding the characteristics and fees of different networks, avoiding blindly choosing unfamiliar networks, and conducting tests and consultations in advance, you can effectively reduce losses caused by selecting the wrong network. Through today's explanation, I hope everyone has gained a clearer understanding of withdrawal networks. In practical operations, remember: 'A cautious driver can navigate safely for a lifetime,' and always confirm the network is correct before each withdrawal to ensure the safety of funds. This article uses metaphors and specific cases to explain the selection of withdrawal networks and common issues in a more accessible way, which I believe will help novice users better understand this important concept.
