Poloniex has launched a mass account cancellation campaign focused on XRP wallets, deleting over 85,000 XRP Ledger addresses in just four days.
Following the strange account deletion, the exchange built a new wallet to manage the recovered tokens. The move generated questions among affected XRP community members, including prominent YouTuber Eri, over Poloniex’s legal standing to take this action.
Question @Poloniex – you deposited MY #XRP from a 2017 wallet reserve into your new wallet on June 15, growing your wallet >opened on June 14th that now has 1.5M XRP. Correct me if I'm wrong – but can you really do that? @PoloSupport pic.twitter.com/lzjLX0khyN
— 🌸Crypto Eri 🪝Carpe Diem (@sentosumosaba) June 18, 2023
The XRP reserve deposit scheme, as well as the antiquated practice of generating new addresses for each deposit transaction, are at the heart of the problem. Even though the destination tag technique eliminated the need for it, Poloniex continued to use the previous model.
The XRP community’s complaint of Poloniex charging a 20 XRP fee for each wallet established prompted Ripple CTO, David Schwartz, to write to the exchange on many occasions requesting that it switch to the destination tag format. Poloniex, on the other hand, has remained silent.
I know. We've asked @Poloniex to fix their deposit process several times and have gotten no response.
— David "JoelKatz" Schwartz (@JoelKatz) January 25, 2018
Since introducing the destination tag scheme, Poloniex has begun removing previously generated addresses, necessitating the burning of 2 XRP with each account cancellation.
According to Thomas Silkjaer, Head of Analytics and Compliance at the XRPL Foundation, the account deletion and recovery process took four days, costing Poloniex 1.55 million XRP and resulting in the greatest burn on the XRP Ledger. Concerns have been raised about whether Poloniex will refund consumers who paid the account creation cost for the wallets.
Looks like they're done, 85566 accounts deleted, 1.553.159 XRP recovered, 171.132 XRP burned. @PoloSupport
— Thomas Silkjær (@Silkjaer) June 18, 2023
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No Official Statement Yet
While Poloniex has stated that the move was required owing to outmoded practices, the impact on the affected people of the community has yet to be addressed.
Poloniex has not made any official remarks on whether it intends to reimburse the XRP tokens to its customers, leaving affected users in the dark. The incident emphasizes the importance of cryptocurrency exchanges communicating explicitly with their consumers, particularly when taking big measures that affect their customers’ financial holdings.
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