Binance Halts Bitcoin Withdrawals Twice, Blames Surging Network Fees and Pending...

Crypto exchange Binance experienced two instances of halted Bitcoin withdrawals on May 8 due to high network fees and a massive backlog of pending transactions. However, with the Bitcoin mempool swelling to nearly 485,000 transactions, Binance mitigated the situation by increasing transaction fees for pending withdrawals and announcing plans to enable withdrawals via the Lightning Network.

Binance’s Temporary Halt to Bitcoin Withdrawals

On May 8, Binance temporarily suspended Bitcoin withdrawals due to many pending transactions. The crypto exchange revealed the reason behind the halt through a tweet, stating that its “set fees did not anticipate the recent surge in [Bitcoin] network gas fees.” As a result, the exchange found it necessary to temporarily halt withdrawals to accommodate the increasing demand.

Approximately two hours after the initial announcement, Binance updated the situation. It was “replacing the pending [Bitcoin] withdrawal transactions with a higher fee so they get picked up by mining pools.” This move aimed to expedite pending transaction processing and allow users to access their funds more quickly.

Nearly three hours after the first tweet, Binance announced that Bitcoin withdrawals had resumed, with pending transactions now being processed at higher transaction fees. The exchange also noted its ongoing efforts to enable withdrawal via the Lightning Network. Doing so could prevent such withdrawal halts by offering a more efficient and cost-effective solution.

Previous Bitcoin Withdrawal Suspension on May 7

Before the May 8 events, Binance had temporarily suspended Bitcoin withdrawals on May 7. It cited an overflow of transactions on the blockchain. However, after addressing the issue, the exchange managed to reopen withdrawals approximately an hour and a half later.

At the time of the first withdrawal halt, the Bitcoin mempool contained around 400,000 transactions awaiting processing, which later increased to nearly 485,000 by the second withdrawal suspension.

Understanding the Bitcoin Mempool and Binance Outflows

The Bitcoin mempool is a holding area for transactions on the Bitcoin network, where they “wait” before being verified by each blockchain node. A significant backlog in the mempool can result in delays and increased transaction fees, as witnessed during the Binance withdrawal halts.

On May 7, Binance saw considerable net negative outflows of Bitcoin, with approximately 175,650 BTC (worth around $4.95 billion) leaving the exchange, according to data from CryptoQuant. Binance later clarified that this outflow data represented the movement of Bitcoin between its hot and cold wallets.

Conclusion

Binance’s temporary halts on Bitcoin withdrawals on May 8 highlight the challenges that can arise from surging network fees and a backlog of pending transactions. To address these issues, Binance increased transaction fees for pending withdrawals and is working on implementing the Lightning Network for future withdrawals. These efforts aim to ensure a smoother user experience and prevent similar withdrawal suspensions in the future.

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