When Gautam Chhugani, wrote a tweet on the recent Binance hack he might not have known how much his words would inspire the Binance CEO. Talking about the impressive way the exchange CEO handled the whole debacle, Chhugani tweeted that “it seems the Binance hack became a blessing in disguise for Binance. Users got to see how Binance stands up to a challenge. Trust is built when the rubber hits the road”.
Binance CEO Changpeng Zhao mentioned Chhugani’s tweet as he summarized his security incident briefing and recap. He also concluded that perhaps the loss Binance took, did create some room for more security improvements. Changpeng Zhao said that “given this incident, Binance has actually become far more secure than before, not just in the affected areas, but as a whole.”
The exchange suffered a recent hack and lost $40 million worth of Bitcoin. The hackers infiltrated the Binance system, stealing API keys and two-factor identification codes as well. They then accessed 7,000 BTC from a hot wallet and transferred it to their own. Zhao said that once a security alert went out, the exchange had no choice but to suspend withdrawals to nip the situation in the bud. He added that his exchange’s principles in such times call for the protection of users first and transparency.
Changpeng Zhao: We had a SAFU fund
The billionaire CEO did deliver on these two core values by making an explicit notification to the public of the hack. They also sent their users that they would suspend withdrawals for one week and began to work hard to meet that set timeline. To alleviate panic, the CEO kept a 4-hour interval update running.
Zhao said in his recap that being transparent with his clients actually brought on more support than he expected. The firm went further and promised its investors that it would cover the lost assets. Changpeng Zhao said that that move brought on plenty of goodwill from all around the world further fuelling the crypto exchange growth. Of his lesson learned, the CEO said that “money can always be earned later, do the right thing first.”
Changpeng Zhao and His Dirty Word
But perhaps what cooled most heels the most was that Zhao went on with an earlier scheduled AMA. He said that once the investors saw him on the live stream, keeping it together, the community eased up. However, during the AMA, the CEO mentioned something he later referred to as a dirty word. A Bitcoin Core developer had floated to the exchange the idea of a transaction rollback or “reorg.”
The process would enable the exchange track down the hacked funds and freeze them. The idea at first seemed great to Changpeng Zhao who not being a coder probably was not well versed with Bitcoin’s fundamentals. He, therefore, must not have known that such a move was akin to the dreaded denigration of Bitcoin’s fungibility.
Most ardent Bitcoiners felt very strongly against the “reorganization” even though it meant that the Bitcoin’s stolen would be blacklisted or forcefully taken away from the criminals. They felt that classifying the digital currency on its clean or dirty aspects would eventually separate digital assets to good and bad crypto. Fiat, whether used for crime or not, is a viable medium of exchange and Bitcoin should not be any different. Since no one investigates what activities have been done through fiat, then Binance or any other exchange had no business investigating the coins either. Zhao, however, apologized for the mishap saying, “I sometimes say the wrong stuff, dirty words like “reorg,” for which I apologize.”