Binance resumed the withdrawal of Bitcoin after two halts in less than 12 hours, blaming congestion on the blockchain for the interruption. The suspensions had a negative impact on cryptocurrency markets. To ensure the prompt processing of pending transactions, Binance increased fees for Bitcoin miners, who operate the network's computer rigs. Withdrawals were unavailable for more than two hours in Asia on Monday (May 8th).
The company stated that it has adjusted its fees to prevent similar disruptions in the future. It also mentioned that it will keep a close eye on on-chain activity and make further adjustments if necessary.
On Sunday (7th May), Binance suspended Bitcoin withdrawals for about 90 minutes, due to congestion on the blockchain. According to data from CryptoQuant, the platform experienced its largest daily net outflow of Bitcoin ever recorded on May 7, with a total of 175,646 tokens leaving the platform.
The largest cryptocurrency by market value, Bitcoin, experienced a drop of up to 3.1% before recovering some of the losses. As of 12:05 p.m. in Singapore, it was trading at around $28,230. Similarly, an index of the top 100 digital assets also saw a comparable decrease.
After its rival FTX collapsed last year, Binance became the dominant exchange in the digital-asset sector. According to data from CoinGecko, trading volumes on the platform exceeded $6 billion over the past 24 hours, which is five times more than the next closest platform, OKX.
Casey Rodarmor, a Bitcoin developer, introduced a protocol called Ordinals earlier this year, which enabled individuals to create non-fungible tokens on the network for the first time. This resulted in an increase in transactions on the Bitcoin blockchain.
Digital collectibles, also known as NFTs, are typically built on Ethereum, which is considered the primary commercial channel for cryptocurrencies. The introduction of NFTs on the Bitcoin network presents a novel use case for a blockchain that is predominantly recognized for its role in storing value and facilitating payments.
Ordinals led to a “massive run up in network fees and congestion,” said Hayden Hughes, co-founder of social-trading platform Alpha Impact.
The crypto market crash that occurred last year, coupled with bankruptcies such as FTX, eroded trust in digital-asset platforms, and skepticism about the industry still persists. In response, Binance and its competitors have intensified their efforts to alleviate concerns regarding the adequacy of their reserves.
The withdrawal fees charged by exchanges fell short of the fees charged by miners, said Stefan Von Haenisch ,head of sales trading at OSL SG Pte in Singapore.
“The queue of transactions pending verification for inclusion in the blockchain has experienced significant growth in recent days, causing an increase in transaction fees and confirmation times,” he said.
