CZ, CEO of Binance, wants to introduce Proof-of-Reserve as a new standard for centralized exchanges. This activity gives an untrustworthy impression if Binance regularly blocks ADA withdrawals from exchanges in between Cardano epochs. Now people are starting to complain that withdrawals from the exchange are being blocked even during the epoch. Binance shows users a message claiming that the Cardano network has a problem. The Cardano network certainly does not have a problem that involves sending transactions. Something fishy is going on at Binance. Do not stake ADA on Binance or any other centralized exchange. TLDR Binance wants to have as much ADA as possible by the time the Cardano network takes a snapshot. Cardano network certainly has no problems that would cause a loss of assets. Binance is displaying a false message. If the exchange is blocking withdrawals, it may mean it has liquidity problems. Why does Binance block ADA withdrawals regularly? Binance operates over 60 staking pools and the exchange's total stake is around 2.75 billion ADA coins. This exchange has almost 11% staking share. Binance stakes ADA which people hold on the exchange. People have no control over the coins and can lose them at any time if the exchange goes bankrupt or is robbed. They also give up the ability to vote in Catalyst (and get rewarded for voting), participate in ISPO, use ADA coins in DeFi, or choose to support their favourite staking pool operators. Holding ADA on a centralized exchange is very disadvantageous to owners. Some people are afraid of self-custody and centralized exchanges are the solution for them. It's not ideal from the Cardano perspective since the exchanges centralize the network to some extent. But the reality is that a portion of the population will use a centralized solution. If you are one of those people, choose an exchange that won't block your ADA withdrawals on a regular basis. Cardano has liquid staking. You can sell ADA coins at any time, even in the case of staking. This also applies to exchanges. The Cardano network takes regular snapshots every 5 days when there is a transition between epochs. The network records the balance of ADA in the accounts. The snapshot serves as input for the epoch. The network keeps track of staking pools and all delegations and is able to calculate rewards after the epoch ends. Binance wants to have as much ADA as possible by the time the Cardano network takes a snapshot. That's why it blocks ADA coin withdrawals during the transition between Cardano epochs. Binance does this on its own decision and there is no reason for it from the network's point of view. Cardano will allow you to sell ADA coins at any time, including during the snapshot. When Binance blocks a withdrawal, it displays the following message to users: The network is currently experiencing issues, withdrawals have been paused to prevent assets from getting stuck in processing and/or loss of funds. Withdrawals for this asset will be resumed shortly. This pretends to be a universal message for all assets. Cardano network certainly has no problems that would cause a loss of assets. This is an unprofessional approach on Binance's part. Either they cannot reliably monitor the Cardano network, in which case they should not participate in staking, or they deliberately do not want to share the real reason for blocking withdrawals from the exchange. Both are the fault of the exchange, not the Cardano network. Why does Binance block withdrawals during an epoch? People are starting to complain about Binance blocking ADA withdrawals even during an ongoing epoch. They are also complaining that after withdrawing ADA from the exchange, it takes a few days for the ADA to reach the user's wallet. Binance support claims to have security reasons for this. We have no explanation for this and can only speculate. If the exchange is blocking withdrawals, it may mean it has liquidity problems. Binance may well be the next FTX. This can never be ruled out. Bear markets tend to be long and interest in trading wanes. Crashes by strong players can have a domino effect and some of it may fall on Binance. The exchange should never block withdrawals for no reason. I assume they don't even want to do it because of the reputational risk. If it's happening, it's suspicious. Proof-of-Reserve is useless to users if the exchange blocks withdrawals. Exchanges should publicly explain the reasons why the blocking is occurring and strive to keep it to a minimum. Blocking withdrawals on a regular basis because of staking is unacceptable and may be a violation of some laws. Binance is reportedly the only exchange that blocks withdrawals. It doesn't happen on any other exchanges, or at least not as often. Our advice is as follows. Do not stake ADA on centralized exchanges. If you are afraid of self-custody and it is the only solution for you, leave Binance (if you use it) for another exchange. At best, split the stake across multiple exchanges to spread the risk. Conclusion Staking on Cardano is easy and intuitive. You can stake ADA from both of the most widely used HW wallets Trezor and Ledger. There is no reason to hold ADA on centralized exchanges if you plan to stake for an extended period of time. Binance seems to be the worst exchange you can stake on. If you don't want to be prevented from accessing your money, go to another exchange that behaves fairly.
