It turned out that the exchange does not support the new addresses of a bc1p format

​Binance user lost bitcoins when withdrawing to a Taproot-enabled address

28.12.2021 - 12:25

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1 min

What’s new? On the StackExchange forum, a user said that he lost bitcoins while withdrawing from Binance. He used a new bc1p address format for the transaction but the exchange replaced it with another one when he withdrew it.

Post on the StackExchange forum

Why did Binance mishandle the transaction? The Taproot update for the Bitcoin network came out in mid-November and added a new address format. But it turned out that Binance does not support the new format and automatically “converted” the wallet address to the supported one during the transaction and then sent coins there. The user lost $7 000. Even before Taproot was activated, the exchange said it would support all the features of the new update.

How did Binance react to this situation? At the moment, there is no information on compensation from the exchange yet. Developer Peter Wülle said that bitcoins cannot be returned:

“I am afraid the coins were burned. P2TR addresses encode a public key, while P2WSH addresses encode a script hash. Using P2TR addresses as P2WSH addresses is completely infeasible, if this were possible, SHA256 would be spectacularly broken. This is not your fault, and you should demand your funds back. P2TR addresses, like all addresses, have a checksum, and its calculating algorithm was changed with the Taproot update. The fact that they accepted this address at all shows extreme incompetence on the side of the sender.”

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