Secure Asset Fund for Users (SAFU)

[Husires]

When the Secure Asset Fund for Users (SAFU) was established, Binance committed 10% of all trading fees in order to grow it to a sizable level to safeguard users' interests, the release added.

Binance CEO Changpeng Zhao (CZ) published the wallet addresses: https://blockchair.com/bitcoin/address/1BAuq7Vho2CEkVkUxbfU26LhwQjbCmWQkD

And he said:

"We call on all centralised exchanges to do the same as it will benefit the entire ecosystem and demonstrate to governments, regulators and important stakeholders our collective commitment to uphold trust, integrity and transparency in the crypto ecosystem," he said. 

Binance isn't the only exchange which has taken this step. BitMEX is known for its large emergency fund: https://www.bitmex.com/app/insuranceFund


Source: https://www.theblockcrypto.com/linked/132443/binance-builds-up-1-billion-insurance-fund-to-cover-potential-hacks

Do you think that creating such funds would be good for users and sufficient as a hedge if there were hacks?
Do you think it has enough assets to cover all the technical problems that will occur? And what if all crypto exchange do this?

[1715204467]

1715204467

[1715204467]

1715204467

[1715204467]

1715204467

[Bitcoin_Arena]

Binance isn't the only exchange which has taken this step. BitMEX is known for its large emergency fund: https://www.bitmex.com/app/insuranceFund

Point of information. Bitmex's insurance fund isn't intended to act as an emergency fund in case of hacks or attacks on an exchange, just like the way Binance's SAFU works

It's mostly there to avoid Auto Deleveraging other trader's positions in case of huge market movements where certain positions may end up into bankruptcy instead of getting liquidated at particular prices.

If Bitmex was hacked, this fund would not help in such a situation. I think Bybit too has such a fund.

[dkbit98]

SAFU means fake safety, and that wallet can be hacked at any time with some insider leak attack.
Binance collected over 7,950 Bitcoins with only 10% from trading fees, so you can see how much they really earn with rest 90% and it's not including withdrawal and all other fees.

Do you think that creating such funds would be good for users and sufficient as a hedge if there were hacks?

I don't really trust Binance or CZ, and they have much more funds to cover all potential loses if they want to do it.
I am not sure what happened when they got hacked before and how they payed their customers.

Do you think it has enough assets to cover all the technical problems that will occur? And what if all crypto exchange do this?

This is obviously not enough to cover anything, it's just created as marketing propaganda for fake safety.

[Husires]

If Bitmex was hacked, this fund would not help in such a situation. I think Bybit too has such a fund.

I did not read about them in detail, in-short Binance is the only one who has such Fundl for (protecting money in case of hacking)
Do these Funds (Bitmex, Bybit) cover exchange bugs?

This is obviously not enough to cover anything, it's just created as marketing propaganda for fake safety.

From a legal point of view, the cooperation of the platform and its desire to return part or all of the hacked funds is considered sufficient for most of the community.
If there is a hack and Binance decides to return 30% of the money directly and 70% for the next 3-5 Years, part of the users will be happy and some may continue to use it.

Binance is expanding in a way that harms cryptocurrencies in the short term, so the existence and guarantee of such funds would be good.
at least making sure that it is subject to management from several parties and that the currencies are in cold storage.

[Bitcoin_Arena]

I did not read about them in detail, in-short Binance is the only one who has such Fundl for (protecting money in case of hacking)
Do these Funds (Bitmex, Bybit) cover exchange bugs?

The insurance Fund in most derivatives exchanges such as Bitmex and Bybit is used only for the derivatives market of particular exchanges. The fund does not help with anything outside the derivatives market such as exchange bugs, exploits or hacks.

Insurance fund is only used to reduce chances of Auto Deleveraging of positions due to rapid market movement leading to so many bankrupt positions that weren't liquidated at the required Liquidation price.

I don't know if you understand what I am saying.

[Darker45]

Of course, it is good. There should be no argument whether a sort of an insurance fund is good or not. But is this enough? I don't think so. If the exchange will fall to a hack, Binance will probably refund the victims using funds from SAFU. But what if my account fell to a hack? What if 5 or 10 or 20 accounts fell to a hack or whatever incident that is not due to the negligence of the owners? Could we then ask for a refund? I doubt. What if an insider would steal from a handful of accounts? What if, due to the data leak, an account is compromised? Would the owners of these accounts cite SAFU and claim for a refund?

[o_e_l_e_o]

It's a false sense of security, nothing more.

Even assuming you trust Binance to actually have a fund as they say they do, it will only protect against small attacks against Binance itself.
If your account is hacked, it doesn't help.
If Binance experiences a large hack, it doesn't help.
If Binance go bankrupt, it doesn't help.
If some rogue employees clear them out, it doesn't help.
If Binance are shut down by regulators, it doesn't help.
If they are hacked for your personal information and KYC documents (again!), it doesn't help.

There is no such thing as too big to fail in either the fiat world or in the crypto world (e.g. Mt. Gox). Binance can go on and on about SAFU, but the bottom line is that any coins stored on any exchange are at constant risk.

[DaveF]

It's a false sense of security, nothing more.

Even assuming you trust Binance to actually have a fund as they say they do, it will only protect against small attacks against Binance itself.
If your account is hacked, it doesn't help.
If Binance experiences a large hack, it doesn't help.
If Binance go bankrupt, it doesn't help.
If some rogue employees clear them out, it doesn't help.
If Binance are shut down by regulators, it doesn't help.
If they are hacked for your personal information and KYC documents (again!), it doesn't help.

There is no such thing as too big to fail in either the fiat world or in the crypto world (e.g. Mt. Gox). Binance can go on and on about SAFU, but the bottom line is that any coins stored on any exchange are at constant risk.

All of this, and although I hate to say it, is where the more regulations will get more investors, comes in.
@o_e_l_e_o is correct all of it does nothing.
But, and I have said it many times over the years, this is where big government makes people feel all warm and fuzzy.
I don't really care what happens to my bank. The FDIC will cover me to $250k
I don't really care what happens to my brokerage, the regulators cover me to an amount larger then I will ever have.
Yes it costs me money, since the banks and brokerages have to follow rules and that costs them profits, but it is what it is.

I can figure out a lot of risks and stuff myself in the crypto world, and do not want the government sticking it's nose into it.
But....there are a lot of people who can't and want that security and won't invest without it.

Is there another solution? I don't know.

-Dave

[o_e_l_e_o]

Is there another solution? I don't know.

You've pretty much given the two solutions there.

1 - Exchanges become regulated by the government, they get FDIC protection or similar, everyone leaves their coins on them, everyone trusts these third parties to hold their money, and bitcoin essentially becomes fiat 2.0
2 - We continue as we are doing with people leaving their coins on centralized exchanges with little to no protection and frequently losing their coins through hacks, scams, bankruptcy, locked accounts, etc.

The ideal solution as I see it would be for the government to keep their noses out of bitcoin and for people to stop trusting centralized exchanges to hold their coins, but neither of those things are ever going to happen, despite how often we repeat the mantra "not your keys, not your coins".