Binance BSC: Who Controls the Blockchain?

Within a few days, the Binance Smart Chain (BSC) fell victim to a massive hacker attack, ceased operations in the meantime and finally carried out a hard fork. The quick intervention prevented the loss of several hundred million US dollars. Now the question is: Is the central control of the blockchain the real evil?

What happened?

A bridge hack occurred on Binance Smart Chain on Friday. The “BSC Token Hub”, the blockchain bridge between the BNB Beacon Chain (BEP2) and the BNB Chain (BEP20 and BSC) was affected. An exploit on this apparently led to the incorrect minting of additional BNB tokens.

The hacker almost escaped with the entire roughly 2 million BNB tokens, nearly $572 million. A race against time ensued. Ultimately, he had to settle for just $100 million, seven million of which was frozen. The reason for his misery: Binance’s quick action. The network was shut down within a very short time. More about this here.

Yesterday, October 12th, the hard fork happened. The adjustment of the test and mainnet is an “urgent patch to defuse the cross-chain infrastructure between the beacon chain and the smart chain,” according to GitHub. In other words: the 100 million US dollar hack was rendered harmless. After the drastic network update took binance resume normal operation.

BSC has only 44 validators

Users pay for this fast and discreet form of troubleshooting. Not with monthly subscription payments – but in the form of decentralization. The amazing speed with which Binance was able to shut down the network and hard fork just six days later is troubling. Jonathan Miller, head of crypto exchange Kraken in Australia, agrees:

In such an unfortunate situation, both the decentralization and the security of the BNB chain were called into question. It showed that the network has a single point of failure and the trust of fewer people is required to keep the network running.

Jonathan Miller opposite forcast

This sprint was possible because the BS chain of only 44 validators is controlled. In fact, it only took 26 of these to coordinate the campaign so purposefully. For comparison: Ethereum’s “Proof-of-Stake” network now has more than 442,000 active validators. Miller then even compared the Binance chain to the Solana protocol, which claims to have 3,400 network auditors but is not under a lucky star.

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advocate argue meanwhile, that the BSC was deliberately designed to facilitate intervention in critical situations.

Objection comes from Binance CEO

The centralization at large crypto exchanges like Binance is well known. It is no secret that the blockchain of such a market giant is also managed centrally. The situation only becomes critical when the CEO and founder Changpeng “CZ” Zhao philosophizes about decentralization three days before an important hard fork.

in one blog post he describes several examples that should make it clear that decentralization is characterized by “many different aspects”. For example, he names Bitcoin mining pools, which together make up over 51 percent of the hash rate. Even Ethereum would have weaknesses: According to CZ, the blockchain would have a clearly assigned founder in Vitalik Buterin. He also has an answer to the question of why decentralization is important.

Because we don’t want a few centralized entities having unlimited power over us, charging us exorbitant fees, controlling how we spend our money after taxes, etc. We want to give people power, control and freedom.

Also true. That would be nice. Binance was still in control of the hard fork.

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