Home/ Technology / News/  Off-chain transfers between WazirX and Binance disabled

Off-chain transfers between WazirX and Binance disabled

Off-chain transactions are used by crypto firms to avoid ‘gas fees’ on blockchains
  • The ED probe has shed light on the deal between Binance and WazirX in 2019. Then, both cos had announced Binance had acquired WazirX
  • Off-chain transactions are used by crypto firms to avoid gas fees on blockchains (Photo: Reuters)Premium
    Off-chain transactions are used by crypto firms to avoid gas fees on blockchains (Photo: Reuters)

    Crypto exchange Binance, which had earlier said that it does not own equity in the operating entity behind Indian crypto exchange WazirX, said it had disabled “off-chain fund transfers between the two platforms from 8 am on 8 August. The move comes after the enforcement directorate (ED), on 5 August, said it had frozen assets of WazirX worth 64.67 crore.

    “As a result of the recent regulatory action taken against Zanmai Labs Pvt Ltd, in relation to their operations of the WazirX Exchange, it has come to our attention that some users were given to believe that funds deposited in WazirX were managed by Binance. This is not the case," said Patrick Hillmann, chief communications officer, Binance.

    Disabling off-chain transactions does not mean that users will not be able to transfer funds between the two platforms. However, they will now need to use “on-chain" transactions. This means they will have to enter their Binance wallet address on WazirX and the transaction will be recorded on the relevant blockchain, such as Bitcoin for BTC transfer and Ethereum for ETH transfer.

    Off-chain transfers are among the key issues cited by the ED, according to people aware of the development. “Despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech APP companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also," the ED said in a press release on 5 August.

    Off-chain transactions are used by crypto firms to avoid gas fees on blockchains. By enabling such transactions, WazirX users could transfer crypto assets between the two platforms without tapping the underlying blockchain. The gas fee is the fee used to compensate miners on a blockchain. This cost is dynamic and can change on the basis of network congestion, increasing when there’s more traffic on the network.

    Such transactions allow assets to be transferred by entries being made only in the internal ledgers of the two companies, explained Kashif Raza, co-founder of crypto education platform Bitinning. “The abrupt manner in which they have done it isn’t right though. They should have informed users first," Raza said.

    Prasid Banerjee
    An engineering dropout, Prasid Banerjee has reported on technology in India for various publications. He reports on technology through text and audio, focusing on its core aspects, like consumer impact, policy and the future.
    Catch all the Technology News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
    More Less
    Updated: 09 Aug 2022, 06:05 AM IST
    Recommended For You
    Get alerts on WhatsApp
    Set Preferences My Reads Watchlist Feedback Redeem a Gift Card Logout