[sanxiyn]

CZ says the primary lesson is "never use a token you created as collateral", and Binance has never used BNB for collateral, and (by implication) FTX did use FTT for collateral.

https://twitter.com/cz_binance/status/1590103159506341888

As far as I can tell, this seems to be the correct analysis. The technical term for why you should avoid this is "wrong way risk".

[denlekke]

Devils advocate: how do we know binance hasn’t used BNB for collateral other than a tweet (which isn’t proof at all)

[sanxiyn]

We don't, but it's good for Binance, so we can expect Binance to do so out of self interest. Avoiding wrong way risk is standard part of risk management.

[rnk]

if it was a mistake for ftx to avoid that, it was a mistake for all the other firms, yet the other firms did it like ftx. Probably all these other firms would have claimed they did standard risk management, yet so many have died, one after another.

So it's not satisfactory to say surely binance wouldn't do that, because it seems many of these companies were doing similar things but always claiming they were safe.

[djbusby]

Aren't they publishing their books, or audits? IIRC them and CoinBase has/have/had audits to show 1:1.

[denlekke]

i don't think they've done either. binance has just today linked to some wallets of some of their holdings but haven't provided any info on any liabilities they have