- A flurry of transactions from Binance wallets sent Ethereum gas fees soaring Thursday morning.
- The transaction spree cost Binance over $844,000.
- Last year, a near identical event occurred, but Binance gave prior notice that time.
A flurry of transactions from Binance-connected crypto wallets sent Ethereum fees soaring Thursday morning, leaving onlookers confused.
At around 10:30 a.m. in London, data from blockchain explorer Etherscan showed hundreds of long-inactive wallets that simultaneously started sending Ether to a single wallet tagged as Binance 14.
The transactions continued for approximately 20 minutes, and caused Ethereum gas fees to jump from around 15 to 300 gwei. This caused the cost to process simple peer-to-peer Ether transactions to shoot up from around 40 cents to over $10.
A Binance spokesperson told DL News the transactions were part of a “routine consolidation” of Ether to one of its wallets. “Any impact to gas prices was unintentional but quickly resolved,” the spokesperson said.
On Ethereum, “gas” refers to the fee associated with the computational work necessary to process transactions or execute smart contract operations. Its cost, or “gas price,” is typically expressed in gwei. Just as a dollar is divided into 100 cents, one Ether is divided into a billion gwei.
Binance spent over $844,000 on the transactions, according to Etherscan data.
It’s not the first time Binance has clogged Ethereum with transactions.
In December, a near identical event occurred, but for transfers of Tether’s USDT stablecoin. But unlike today’s spike in gas fees caused by Binance activity, that one came with a prior notice.
Just before the activity, Binance said that it was consolidating funds from various deposit addresses in preparation for a Proof of Reserves audit.
“As a result, during this time you may notice temporary increases in ETH gas fees,” the post said at the time.
Proof of Reserve audits are where centralised crypto exchanges create a cryptographic proof to show they hold enough assets to back all users’ crypto deposits. Exchanges do this to reassure depositors that they will be able to withdraw all the crypto they hold there at any time.
Binance 14 is one of several Binance exchange wallets. It’s a non-custodial wallet controlled by Binance where the exchange stores crypto deposits from its users.
An error?
Binance’s choice to again conduct numerous simultaneous transactions is puzzling, given that spacing them out could have prevented network congestion and resulted in lower fees.
In the aftermath, some onlookers pointed out that Binance had overpaid for the transactions. If the exchange had spread out its transactions, instead of firing them all off at once, it could have avoided clogging the network and paid less in fees.
That’s because Ethereum gas fees — small amounts of Ether paid to the blockchain to process transactions — increase as activity on the blockchain increases.
When there are many transactions waiting to be processed, Ethereum automatically ups the cost to submit new transactions. Such a feature is necessary to protect Ethereum from spam attacks.