Binance Minted New ETH Staking Tokens Without Burning the Old Ones?

By 0xGorki 09/27/23 4:59 AM

In a recent turn of events, the cryptocurrency community has been buzzing with skepticism regarding the minting and burning of token staking assets on the Ethereum network, particularly involving Binance’s WBETH and BETH tokens. On-chain data reveals that Binance recently minted a total of 318,180 WBETH tokens over the course of a weekend, totaling over $500 million USD in value. Following this minting process, these tokens were transferred to an address labeled “Binance 6,” which is a cold wallet where the exchange holds user assets.

WBETH, or Wrapped Beacon ETH, represents an upgraded version of BETH and serves as a wrapped token used to replace ETH when users participate in staking Ethereum through Binance. Binance introduced WBETH in April 2023 and subsequently announced measures to enhance new tokens while restricting the old ones, including gradually burning BETH tokens within the Binance wallet.

This means that when Binance mints a certain amount of new WBETH tokens, they are supposed to burn an equivalent number of BETH tokens from their wallet. However, the recent minting actions by Binance have stirred controversy because they did not burn BETH tokens immediately after minting. It wasn’t until Conor Grogan, the Director of Product and Business at Coinbase, pointed out the issue that Binance took action.

Binance minted >$500M of “Wrapped Beacon ETH” over the weekend and deposited it at the exchange

Anyone know what they wrapped? This is a number almost 50% of all BETH supply and I didn’t see any movement/burning on chain

No movement in the Binance ETH2 depositor either 🤷‍♂️ pic.twitter.com/8V9ycAl18q

— Conor (@jconorgrogan) September 25, 2023

Binance explained in a post that these transactions were part of a previously announced initiative to gradually convert BETH into WBETH, as previously mentioned.

In fact, this is not the first time Binance has raised eyebrows with its minting and burning practices. In late 2022, the exchange burned only 98.5% of the 100 million BETH tokens that had been issued. Some in the community have pointed out that Binance minted 100 million BETH tokens, equivalent to 85% of the Ethereum supply, back in 2020 when the Binance Smart Chain (BSC) was launched. This discrepancy was only noticed and addressed in 2022 when they burned 98.5% of that supply.

It gets a lot more fun, Binance minted 100M $BETH (85% of $ETH supply) in 2020 when BSC launched

And they only noticed that last year in 2022 when they burned 98,5% of that https://t.co/AvPQt0eCjW pic.twitter.com/uQhcluhf3E

— Wazz (@WazzCrypto) September 26, 2023

This recent instance of minting without burning by Binance has sent shockwaves through the crypto community, witnessing an influx of $500 million USD, temporarily pushing the total value locked (TVL) to $1.2 billion USD.

Binance currently holds 1.2 million ETH in staking, making it one of the largest participants in the Ethereum staking network, trailing only behind Lido Finance and Coinbase, according to 21Shares. As of now, the amount of WBETH representing ETH stands at approximately $765,000 USD, according to data from DeFiLlama.

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