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Increasing the Transparency of 1:1 Backing for B-Tokens

2023-01-18

Main Takeaways

  • Binance’s wrapped tokens are and have always been fully collateralized.

  • On occasion in the past, collateral assets had been stored in cold wallets not known to the public, or not moved speedily enough to the appropriate hot wallets. 

Further blog posts and media coverage have been asking questions about how Binance manages collateral for wrapped tokens. Although you can see here that we fully and even over-collateralize these assets, eagle-eyed industry analysts and journalists have noticed that there have been discrepancies on-chain in the past. So, let’s clear things up.  

Firstly, to catch you up on the terminology if needed: “Wrapping” tokens is blockchain terminology for creating versions of the original asset that are transportable to other chains for the sake of increasing interoperability and the interconnectedness of the digital asset space. Normally, the value of wrapped tokens is secured by locking the original assets as collateral, an example of this being Binance-Peg BUSD. For more details, please refer to this article: Understanding BUSD and Binance-Peg BUSD. 

Binance’s Assets Are Fully Backed

The most important thing to note is that assets on Binance are always fully collateralized. They are backed 1:1 and users are always free to withdraw their assets whenever they wish, as has been proven time-and-time again. 

Having said that, on-chain data highlighted by third-parties shows that the administration of hot wallets has not always been perfect. The simple fact is that, sometimes, collateral assets had been stored in cold wallets that were not known to the public, or not moved quickly enough to the appropriate hot wallets. This can give the impression that these wrapped tokens were under-collateralized at times, as the 1:1 backing was securely held in different wallets. 

This is a great example of the inherent transparency of blockchain and how the community works together to build trust. These issues have been addressed by our team to ensure best practice in the future. As a result, over the coming weeks and months, users will see wallets updated on the Proof of Collateral for B-Tokens page to further enhance transparency.