You might have noticed the hashtag SAFU while you were cruising through your Twitter feed. We know there’s a lot of crypto lingo to keep up with, but this one has a particularly interesting backstory. Not only will this post tell you a darn good story; but seeing this hashtag will bring you a sense of relief if you are currently holding crypto. Not sure where we’re going with this? Let’s just say this is the hashtag you want the CEO of your cryptocurrency project to be sending out when bad news is on the horizon.
The origins of SAFU
The SAFU acronym seems fitting for what it is, so you may have a hard time believing this wasn’t intentional. SAFU was born shortly after the hacking of cryptocurrency Binance. Popular exchange wanted to quickly answer the question: Is Binance safe? To assure those using the platform that funds were indeed safe, CEO Changpeng Zhao (CZ) sent out a quick tweet. In an all too common Twitter mishap, CZ shared the tweet “Funds are safu” misspelling of the word ‘safe’. With the tweet spreading quickly across the crypto community, YouTuber, Bizonnaci, was quick to release a mocking video in response. This video went viral, resulting in the birth of a new crypto meme which has since been added to the official urban dictionary.
The acronym “SAFU” came to stand for “Secure Asset Fund for Users”. This means an emergency reserve is held to protect any invested assets. This money would then be used to pay back investors in the event of a hack or other event resulting in the loss of user assets. Although not common, thefts are not foreign in this industry. This is evident in light of Binance’s Bitcoin hot wallet being hacked to the tune of 7,074 BTC.
Crypto memes do not hinder CZ
Rather than letting this video get CZ down, Zhao became one of the biggest supporters of this meme. He even continued to reference “SAFU” in his future tweets. This accident turned acronym had now become a sign of relief for those holding cryptocurrency. Investors could now rest a little easier with a new sense of SAFU. Certainly a welcome sign in the highly volatile crypto markets.
Like any investment, it is nearly impossible to guarantee that all our funds are completely safe. But, that is likely not a deterrent from investing in cryptocurrencies. After all, this alternative is still more enticing than taking our chances with traditional stocks and bonds. If this is the case; why do we still need the assurance that our holdings are being managed safely?
The very concept that we value a non-government-regulated set of assets is still relatively new in theory. Ultimately, blockchain technology is “safe” due to the belief that the majority of the crowd is honest. This means that the value tied to our cryptocurrency only holds value because the majority of people believe it does. But this whole concept is relative. Blockchain allows us to avoid using the bank as a third-party intermediary. But to some extent, we must still place trust in a third party. Therefore, our trust that the investments we make are safe are still at the mercy of whatever company is holding our funds.
Don’t be alarmed even though this does sound scary. But have comfort in knowing that all good investments come with risks. As any finance student would tell you, greater risk means the potential for greater reward. As an industry defined by constant growth and improvement, your potential earnings are unfathomable. Not just because it is hard to predict the new implications of this technology.
Is Binance exchange safe for trading?
Remember earlier when we touched on Binance’s Bitcoin hot wallet having 7,074 BTC stolen? Yes we know, that’s the equivalent of about $40 million dollars. Despite this event, Binance is still considered a safe way to exchange crypto. To meet the ongoing demand for security measures in the fact of hacks and thefts, Binance released the following claim:
“To protect the future interests of users, Binance will create a Secure Assets Fund for Users (Safu) in which 10% of all trading fees will be kept in reserve in case the cryptocurrency is hacked.”
Many have since begun to question the security of the trading platform. Some suggest this announcement was more than necessary to instill confidence in a Taiwanese company which currently has 155,536,713 of its coin in circulation. To those who have continued to use this platform faithfully, the previous history of overall security does bode well for the company. This is because Binance is taking some of the uncertainties of Bitcoin into their own hands. This is evident as due to the technological nature of Bitcoin, Jeremy Gardner of Ausum Ventures suggests “a vulnerability in their security system is not just a bug in the system but a feature of Bitcoin itself”.
Transparency must go beyond the safe meme
Concerning validity, we should consider that only 10% of funds are supposedly backed by Binance. This leaves 90% of assets still unprotected. Furthermore, Binance has still yet to reveal exactly how much is being held in their SAFU fund. Even if the company is truthful, it is hard to say with complete certainty that these funds will be used for backing up consumer’s investments. Binance has recently been a part of four major acquisitions including India-based company WazirX in November 2019 and been in a part of a major project, releasing HTC’s Binance edition smartphone. Both endeavors are believed to have required high capital to execute.
Ensuring your funds are SAFU
After reading these warnings, you might be thinking if I haven’t invested already it might not be worth it now. The cryptocurrency trading game is governed by FUD after all (sorry, just one more acronym or you – “fear, uncertainty and doubt”). But, we do have one tip to ensure that your funds are SAFU.
Investing safely requires research. Not just the research that involves doing what a popular blockchain influencer advises you to do. Learn as much as you can about the company that you are investing in. This includes information about who their management team is and how the company ensures you are making a safe investment. Prepare yourself to accept the risks associated with your investment decisions. Therefore, we recommend you know first hand just what you are getting yourself into.