The recent surge in cryptocurrency prices has led to an extraordinary increase in network fees from rising transaction volumes. As a result, the Binance exchange restricted withdrawals for Ethereum (ETH) and ERC-20 tokens.
High ETH network congestion
The exchange explained that it decided due to the high Ethereum network congestion. But Ethereum assured users that their funds are safe.
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Binance has since reversed its decision after the network normalized. The suspension lasted for about 40 minutes, but users didn’t spare Ethereum for its decision.
The increase in Ethereum gas costs as well as the escalation of backlogs to more than 150,000 pending transactions prompted Binance’s decision.
Binance chief executive officer Changpeng Zhao (CZ) also pointed out the situation. He said gas shot past over 1200 during the last congestion.
Some users have even accused Binance of deliberately causing the congestion to send more users to its Binance Smart Chain (BSC).
But the claim is unlikely true, given the high transaction volumes and the gas fees the exchange pays to the Ethereum network weekly.
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Scaling now more important than ever
The latest service outage as well as the well-documented AWS issues last week shows the need for a more scalable network. It begs the question of whether the latest upsurge in investment flows can be managed by centralized exchanges.
It has paved the way for a continuous demand for Ethereum 2.0 launch. Many market participants also feel the answer for a scalable network depends heavily on liquidity aggregators.
For many years, periods of volatility have been accompanied by service interruption. However, aggregators that pool liquidity from decentralized (DEXs) and centralized (CEXs) exchanges have provided a workable solution.
A good example of such a projects is the Onion Protocol, which has aggregated DEXs, CEXs, as well as automated market-makers (AMMs). But there is still the issue of blockchain interoperability and the security of their custody.
