Binance Reserve Data Shows 6% Ether Shortage Following Wallet Hack

Binance Wallets Backing Customer Assets Hit by Hack

A hack on Thursday targeted Binance wallets that the exchange uses to back customer deposits. The drainage of these specific wallets has left the platform's ether (ETH) backing approximately 6% short of its required levels. Binance is a crypto exchange, which is a platform for buying and selling digital assets.

Data from the exchange's own reserve reports indicates that the stolen funds were part of the assets meant to cover customer balances. While the exchange typically maintains full backing for user assets, the recent theft has temporarily lowered those ratios for several cryptocurrencies.

Important Details of the Drainage

• Wallets labeled "Binance 14" and "Binance 16" were the primary targets of the attack.
• The attacker moved approximately 204,500 ETH, worth about $442 million, into external addresses.
• Binance's ether backing is estimated to have dropped to 94% following the incident.
• Other assets, including USDC and several altcoins such as UNI and AAVE, are also likely below 100% backing.

How the Attacker Gained Control

The attacker utilized an Ethereum feature known as EIP-7702. This feature allows a wallet—a digital tool used to store and manage crypto—to hand over control to a piece of software. By obtaining a digital signature from the Binance wallet, the attacker turned it into a "sweeper" that automatically forwarded incoming funds to the attacker's own address.

Binance Response and Security Measures

Binance and its co-CEO, Yi He, have stated that user funds are safe. In the crypto industry, this usually indicates that the exchange intends to use its own corporate funds to cover the loss so that customers do not lose their balances. Additionally, stablecoin issuers Tether and Circle, along with Ripple and World Liberty Financial, have already frozen many of the stolen stablecoins. Stablecoins are digital assets designed to maintain a steady value pegged to a traditional currency like the U.S. dollar.

What the Reserve Data Confirms

A review of Binance’s October 1 proof of reserves confirms that the drained wallet "Binance 14" was officially listed as backing customer balances. Proof of reserves is a system where an exchange shows it holds enough assets to cover all customer deposits. On October 1, Binance held exactly enough ether to cover user balances, meaning the loss of 204,500 ETH has created a direct deficit in those reserves.

Why Asset Backing Ratios Matter

When an exchange's reserve ratio falls below 100%, it means the platform does not currently hold enough of that specific asset to cover every user balance if all customers tried to withdraw at the same time. While Binance has claimed funds are secure, the reserve data shows a physical shortage in the wallets that must be filled to restore a 1:1 ratio.

Upcoming Reserve Snapshot

The next official reserve snapshot is expected on November 1. This report will provide a clear look at whether Binance has replaced the missing assets and restored the backing of customer funds to 100% or higher.

Sources

• CoinDesk