Binance, the largest crypto exchange in the world by daily trading volume, is trying to fix a technical issue triggered by a software upgrade last week that resulted in a number of erroneous dogecoin transactions.
Binance said the DOGE must be returned by the users or they won’t be able to withdraw or use funds on their balances. The problem, users say, is they don’t have access to those dogecoins they sent two years ago, and in some cases don’t even know where those coins ended up.
“Due to the complex nature of the issue, we expect DOGE network withdrawals to be suspended for the next 10 to 14 days” as of Nov. 15, an according to an updated blog post by Binance on Monday. However, some users told CoinDesk they can’t withdraw any of the crypto they have in their accounts.
The news is a fresh reminder of the old paradox that, while cryptocurrencies are decentralized by design, centralized services dominating this market are in full control of users’ funds. Or, in the words of the old saying, “not your keys – not your coins.”
How a Dogecoin upgrade triggered a Binance glitch
The problems have been ongoing since last week, when some Binance users found all their withdrawals frozen due to a technical glitch.
“As a result, we have temporarily suspended DOGE network withdrawals until this issue is resolved. Binance is actively working with the DOGE project team to resolve the issue,” the blog post said.
The same day, users started reaching out to CoinDesk to complain their entire accounts were frozen due to transactions they had not initiated.
In the meantime, Dogecoin developers published a thread on their Twitter account Thursday explaining that due to the latest software update, old transactions that were stuck on the network due to insufficient fees had been automatically resent.
Last week, the devs released an upgrade that imposed “a new minimum fee recommendation” for all participants on the network, the GitHub page dedicated to the update said. Therefore, the old, unsuccessful transactions could have been sent anew, even though the users themselves did not initiate them.
“We instructed Binance to use the inputs to the stuck transactions to force them to be invalidated by the replacement transactions. We were not notified as to whether or not they followed these instructions,” the thread said.
On Monday, the exchange sent emails to the affected users, reiterated the demand them to return the DOGE and later repeating it in a blog post:
“We have written directly via email to the very small number of users directly impacted by the upgrade where previously failed DOGE withdrawals transactions got resent after the recent update that was done on 11-10-2021. Please note that no asset is debited from users account for the resent withdrawal transactions. We are kindly requesting those users to return the asset,” said an email from Binance shared with CoinDesk by a user named Javid.
Customer support told Javid he now could make withdrawals but part of his balance would remain temporarily frozen. Back in 2019, he sent DOGE from his Binance account to several different addresses, one of which belonged to himself – those DOGE he returned right away, Javid said. However, Binance now wants him to retrieve the tokens from other addresses Javid doesn’t control, he said, as a condition for unblocking his withdrawals.
“We will now reinstate your withdrawal function, but a portion of your assets equivalent to the DOGE amount sent out will be still locked temporarily,” according to a screenshot of a customer support chat, shared by another user in a Telegram chat of participants affected by the incident.
Some users said they do not have as much DOGE in their accounts as they once did. Furthermore, their entire balances are worth less than the DOGE they “owe” Binance now. DOGE has appreciated around 200 times since November 2017, which makes paying back the asset even harder than it would have been.
“I have $2,500 on my account and they want $7,300 from me [to unfreeze withdrawals],” Dmitri, another affected user with a Telegram handle twenty_one_percent, told CoinDesk. He also shared screenshots of his chat with Binance customer support, where he was told he needed to find the person to whom he sent DOGE back in 2019 and return the funds.
“I used to cash out via various OTCs [over-the counter trades] often, so I had dozens of transactions like that, and I have no idea what was that address and whom it belongs to,” Dmitri said. “I tried to find those transactions in my emails but couldn’t find them. I’m not sure I used the same email back then.”
According to the Telegram group of affected users, a couple of people were able to withdraw their funds. However, on Monday afternoon UTC, most of the group, counting 26 members now, have been waiting to regain access to their crypto since Thursday.
Binance did not return CoinDesk’s request for comment by press time.