Solana Sunday: Holding Sol on Binance Custody
With FTX’s collapse reaching a new chapter following the arrest of Sam Bankman-Fried, Solana has continued to falter and struggle as the popular competitor to Ethereum keeps dropping in price. The issue stems from FTX’s fall because FTX was a large supporter of the network and helped fund many of the projects on the Solana blockchain.
Now, with SOL seemingly in free fall, Binance has announced cold storage services for businesses that have SOL as an asset through its custody service branch.
Solana cold storage
By adding Solana to their custody services, Binance is positioning themselves to fill the void left by FTX for many of the projects that began on Solana because of its lower gas fees and high transaction speeds. Now that incentives provided by FTX are gone, confidence in Solana is reaching an inflection point.
Many well known businesses such as Magic Eden and Dust Labs are still growing despite the issues. However, there are many smaller web3 businesses on the network that have more to lose and would benefit from Binance Custody’s services.
Using Binance Custody
Binance Custody is a branch of the Binance exchange that allows businesses to hold their assets in cold storage solutions provided by the company. The service is helpful for institutions that need more security than what personal wallets such as Ledger and Trezor are able to provide.
While hardware wallets are the best way to protect private keys from bad actors online, vulnerabilities still exist offline where people can still break into the wallet if they have the PIN. Cold storage solutions mitigate that risk by placing the storage device in secure locations that are much harder to break into.
Concerns about custody are also solved with dedicated hardware wallets being created for each customer and given full control over it in a decentralized environment, unlike standard crypto exchanges which hold funds in non-custodial wallets that belong to the exchange.
Issues plaguing exchanges
Holding crypto on any exchange has widely been considered a mistake by those within the crypto community because it ignores the concept of ownership which is so vital in the world of web3.
Not Your Keys, Not Your Crypto is a well known phrase that speaks to the importance of custody and the FTX collapse shows us all what can happen if too many people ignore it.
When funds are left on a centralized exchange, they still possess a layer of risk that is relative to the status of the exchange’s solvency. That is why it is always recommended to have your assets sent to a custody wallet as soon as possible because they are less safe when left on an exchange.
Binance’s Proof-of-Reserve criticisms
Although Solana’s addition to Binance Custody is a good thing for businesses and DAOs on the Solana network, there is still a growing concern that assets at Binance may not be as concrete as believed.
Mazars, the auditing firm that works with Binance, has announced they will be ending all services for crypto exchanges worldwide. This includes other businesses such as KuCoin and Crypto.com.
While many are speculating whether Binance is headed down the same path as FTX, it appears that this is a decision being made by Mazars alone as they search for a way out of the crypto economy which has continued to plummet throughout the year.
