In a short time, cryptocurrencies have become popular all over the world. Despite its volatility, this asset class is extensively invested in by retail and institutional investors. They have become wary, however, in light of recent “black swans” incidents like the FTX scandal and others. They may feel confident knowing their money is safe with the exchange thanks to SAFU (Secure Asset Fund For Users).
It is a backup fund to protect owners’ interests when they buy digital goods. If a cryptocurrency exchange is hacked or impacted by other technological flaws, it is a safety net for investors. That seems intriguing. Let’s discuss what is SAFU in cryptos, its history, and how it protects your assets from losses.
What Is SAFU?
It is similar to an emergency fund. For example, the funds in this reserve fund could be given to investors as compensation for losses if a crypto exchange hosting SAFU is breached. Binance first developed it in July 2018 to provide consumers with additional protection. Binance sets aside a portion of its trading fee for this fund and increases it dramatically to protect its customers from losses or fraud.
The three elements of SAFU’s meaning are trust, honesty, and openness. Investors and retail traders place a lot of faith in centralized exchanges, and SAFU protects their money in case of a problem. The entire value of SAFU by Binance surpassed $1 billion in November of this year. However, since it is stored in BUSD, BNB, and BTC, this fund’s value changes in line with market trends exactly as the erratic cryptocurrency market does.
Since its inception, users and Binance have repeatedly used the term SAFU to guarantee their assets are secure in unfavorable circumstances. In 2018, Binance had its most recent security breach, which depleted investor funds and prompted the establishment of SAFU. This tragedy made it necessary to take precautions to safeguard exchanges and investors against similar occurrences.
The Origin of SAFU
The CEO of Binance, Changpeng Zhao (CZ), tweeted to users during unplanned downtime, saying: “Funds are safe.”
Following this, CZ started using the term “Funds are safe” often to let consumers know that their money was, in fact, secure. A YouTube user named Bizonacci posted a video in 2018 titled “Funds Are Safu.” It circulated swiftly and turned into a viral meme. Since then, the expression “Funds are SAFU” has been widely used.
The Need For SAFU
Even cryptocurrency giants are vulnerable due to the increase in fraud incidents. There is always a potential for a data breach, the exchange losing private keys, and other unanticipated circumstances. Here SAFU comes into play. It functions as an insurance policy that the business and users may depend on if such a catastrophe happens.
The public’s trust is crucial for a platform as large as Binance; if broken, users would be reluctant to open accounts. SAFU is an act of kindness and a wise business move to keep the public’s faith in Binance. It won’t take long for others to follow suit and launch their own SAFUs.
Conclusion
The SAFU fund’s storage in cryptocurrency is its main flaw. As a result, it is vulnerable to market corrections. Bear markets, like the one we’re in right now, may significantly impact the fund’s value. Other than that, it’s an excellent way to ensure that client money is SAFU, or secure and unharmed.
