The industry’s largest crypto exchange Binance published a blog announcement on Monday stating that it would be “removing the off-chain fund transfer channel between WazirX and Binance.”
Binance said that from August 11, it will terminate support for the function with WazirX Exchange, but noted that on-chain deposit and withdrawal functions will remain accessible for users.
While an on-chain transfer exists as an immutable entry on a publicly-visible blockchain ledger, an off-chain transfer—the opposite of such a case—refers to a transaction that occurs outside of the remit of the blockchain network.
A good example of an off-chain transaction is that of Bitcoin’s Lightning Network, a peer-to-peer decentralized network that lets users transfer small amounts of BTC aside from the core network via a secondary-layer protocol.
Following this, these large numbers of transactions can then be consolidated together and verified on the blockchain as a single record.
Alternative methods of transferring crypto off-chain can also be achieved through a pre-existing agreement between two parties, the sending of private keys to another person, as well as using a third-party service to facilitate the transaction.
It is unclear, however, which of these specific methods Binance and WazirX used. Decrypt reached out to both, but was yet to hear back at the time of publication.
Binance distances itself from WazirX
In the days following India’s Enforcement Directorate (ED) freezing $8.14 million in assets from WazirX, Binance’s CEO Changpeng Zhao publicly distanced his firm from the India-based exchange.
Indeed, it’s likely that Binance took the decision to close the off-chain route in a bid to enhance the transparency of interactions between it and WazirX.
“If you have funds on WazirX, you should transfer it to Binance. Simple as that,” said Zhao after claiming that Binance’s endeavors to purchase WazirX back in 2019 did not finalize.
If you have funds on WazirX, you should transfer it to Binance. Simple as that.
We could disable WazirX wallets on a tech level, but we can’t/won’t do that. And as much debates as we are enduring, we can’t/won’t hurt users. 🙏
— CZ 🔶 Binance (@cz_binance) August 5, 2022
A flurry of back and forth tweets followed in which the founder of WazirX Nischal Shetty refuted Zhao’s claims, stating that Binance has root access to the Amazon Web Service (AWS) server on which the exchange’s website is built, and thus can technically shut down the exchange.
In response, Zhao reiterated Binance’s organizational duty to its users’ safety, before informing on the nuances of the centralized AWS ownership.
People playing deception wording games. We can shut down the domain. It just hurts users. We do NOT have control of the trading system. You just gave the AWS login, no source code, no deployment capability. You also retained access to the AWS account, source code, deploy, etc. https://t.co/Zpp6MYlHtp
— CZ 🔶 Binance (@cz_binance) August 6, 2022
Alongside the news of withdrawal suspension, Binance also clarified that it will fully cooperate with the ED in all matters concerning the WazirX investigation.
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Source: https://decrypt.co/107068/binance-shutters-off-chain-fund-transfer-path-wazirx-exchange
