Why the Binance Smart Chain is facing major accusations
Most rug pulls, mysterious bugs, heavy centralization: BNB has been facing harsh criticism for months.
Most rug pulls, mysterious bugs, and heavy centralization: BNB has been facing harsh criticism for months. These are the accusations.
The Binance Smart Chain (often called BSC) is now one of the most valuable blockchains in the world. More than 1,400 dApps sit in the ecosystem built by the largest crypto exchange, Binance. The blockchain runs on the coin BNB. It uses the Proof-of-Stake algorithm and is easy and fast to use. Transaction fees on the network are low, and tokens can be created without much background knowledge. The coin’s value rose from eight cents to just under $300, with an all-time high above $600 in November 2021. Current market cap: $45 billion. That makes BNB the fourth most valuable blockchain. But in recent months, the incredible success story has started to show cracks.
Dirty Bubble Media investigation
In January 2023, Dirty Bubble Media launched a major attack on the crypto exchange project. The mood: BNB is basically a scam, not much better than the infamous project OneCoin, one of the biggest crypto scams of all time. The criticism: The vast majority of BNB seems to be direct Binance ownership. Market analysis suggests the price is pumped artificially. Billions of dollars in so-called stablecoins pegged to the US dollar on BSC went weeks without real assets backing them. The codebase for BSC isn’t open source and appears to be directly controlled by Binance employees. And, more importantly, a deep dive into Binance Smart Chain suggests it might not even work as a blockchain.
According to their research, Binance currently owns between $28 and $31 billion in BNB. Most of that is traded on its own exchange, roughly 30% right now. Bitcoin Magazine editor Dylan LeClair thinks the BNB all-time high in 2021 was due to market manipulation, similar to what happened with FTX:
A blockchain researcher named @cryptohippo65 found a tool that lets developers rewrite the blockchain history, Dirty Bubble Media says. A violation of one of the core principles of the tech—immutability. Binance developers allegedly fixed manual "broken hashes." His takeaway:
If your blockchain has a 'state recovery tool' to rearrange hashes, it might not be a blockchain at all (...) If this isn’t really a blockchain, it means the person fixing these hashes is running the system, says @cryptohippo65.
Overall, BNB’s decentralization has long been under debate. Binance kept half of the coins for itself during the ICO. To this day, the chain has only 44 validators securing the network. Most of them are directly tied to Binance. For comparison, Ethereum relies on more than 500,000 globally distributed validators.
Besides these accusations, BNB faces another big issue: security. The blockchain security firm states in its Q1 2023 report: Most hacks and scams happen on the Binance Smart Chain. Almost two-thirds of all rug pulls occur there. Developers take investors’ money for a project—and run with it. Immunefi’s head of security’s verdict is damning:
"BNB Chain still has a serious problem with developers who fork code. The community lacks a safety-first approach and pulls in a lot of users looking for quick money. That’s why we continue to see most exploits and rug pulls in this ecosystem," said Adrian Hetman, Immunefi’s head of security.
Binance launched an anti-scam campaign in March 2023, together with Hong Kong authorities. Included: “Practical tips, examples of the most common scams, and relevant resources and contacts,” per an announcement. Binance says it has already "achieved massive success."
