- CZ has given a recap of the events following the Binance hack that cost millions in tokens
- He has stated that transparency with the community was key
One of the biggest stories of the last week was the hack that took place at Binance that led to the loss of roughly $40 million dollars in tokens. The hack was significant because Binance is one of the biggest exchanges in the world and since since it was announced, the crypto world has rallied behind the exchange and on May 9, 2019, CZ, the CEO of Binance, took to their official blog to give a security update of all the events of the past week as well as the lessons that have been learned.
Clearing the Air
The post started explaining what exactly took place on the exchange, as many rumors and speculations have been flying about. According to CZ, hackers took control of a number of user accounts on Binance and made several large withdrawals in such a way that the withdrawal risk management mechanism was bypassed. Fortunately, the post-withdrawal risk-management systems were able to pick up on the actions being taken and all in-process withdrawals were suspended. When this was discovered, the team did not immediately know what had caused the actions and as a precaution, Binance announced that the withdrawal service was undergoing maintenance while investigations were carried out.
After this, communication was sent across all Binance channels to inform users of the incident which had only affected a single transaction. Before Binance enabled withdrawals again from users, certain changes had to be made to the system in order to make sure that the hackers could not strike again using that method.
He also stressed the Importance of communication with users as they were always very upfront about the current situation and after the hack took place, CZ took part in a live video where he gave updates and eased the tension in the community and he has come out to state that it was a good idea in retrospect.
He has also stated that the amount of money lost, 7000 bitcoin, was an amount that Binance held and they eventually decided to cover the loss for the users affected. The had previously been a similar situation in 2017 when the Chinese government suspended ICOs and recommended that firms return the funds were used which would cost them $6 million to refund. At the time, it was 35 percent of their cash reserves but the goodwill generated from that decision brought in more users and now the $40 million that has been lost is a smaller percentage of their cash reserves.
CZ stated, in conclusion, that transparent communication with the community is a very important factor in the success of the company and that he hopes this incident will be a benchmark for how firms should communicate with their users in the future.