The main weaknesses of the crypto industry are mostly related to threats and hacks. Chainalysis reported $2.2 billion in losses through hacking exploits in 2024, up 21% from the year before. This guide describes everything about SAFU, including its origins, significance, and underlying principles.

What is SAFU?

SAFU denotes Secure Asset Fund for Users, which Binance initiated in 2018 to safeguard user assets from hacks or other technical difficulties. It acts as a backup fund that compensates users in unfortunate circumstances, such as malfunctions.

The term ‘SAFU’ came into existence following a tweet by Changpeng Zhao, the former CEO of Binance, which read ‘Funds are safe’ while a maintenance update was in place. It was also popularized by a YouTuber, Bizonacci, who humorously mispronounced SAFE in his video, ‘Funds Are Safu,’ and the trend took off.

Why Does SAFU Exist?

There were numerous hacks and scams on different exchanges in the earlier days of cryptocurrency, and users were always afraid of losing money. Paying attention to the situation and whether it was in any case of worry or not, a ‘trusted’ exchange needed to be established.

In July 2018, Binance created this Fund, ensuring that 10 percent of all trading revenues were directed to a protected fund in a distinct cryptocurrency wallet. In this way, Binance assures users that it will protect their funds regardless of a security breach.

SAFU was founded to reassure users of the security and dependability of the exchange and their money, not a marketing plan.

How Does It Operate?

When a breach or hack occurs, Binance kicks in this Fund to pay back those who lost money. A prime example is the hack in 2019 when Binance was hacked, and the malicious actors made away with 7000 BTC, or $40 million.

Using SAFU, Binance paid the amount directly to the users, proving their funds were secure. This Fund can be viewed from three angles:

• A bailout to users during financial turmoil, providing them with loss coverage.
• A means of trust, ensuring the funds are secure.
• The exchange’s perspective — ensuring that other exchanges follow a similar policy.

How This Fund Influences the Crypto Industry

After its successful implementation by Binance, other exchanges followed suit:

• The Bitfinex Insurance Fund: After being heavily hacked in 2016, Bitfinex set up a fund to ensure integrity and cover losses.

• OKX’s Risk Reserve Fund: OKX has set aside a reserve to protect user assets in the event of market or security irregularities.

• KuCoin User Protection Fund: This Fund was established after the KuCoin hacking in 2020 to compensate users affected by other hacking incidents.

Benefits of SAFU

This Fund has many advantages:  

• User Protection: If a security breach occurs, for example, during a hack, SAFU compensates user funds.

• Enhanced Trust: By creating a fund in that manner, Binance has instilled trust in its users.

• Industry Leadership: This Fund exemplifies how a leader encourages its competitors to do the same.

• Transparency: By allocating 10% of its trading fees to SAFU, Binance demonstrates its commitment to its users’ safety. 

How To Keep Your Funds Truly SAFU 

SAFU protects you; however, you must still secure your crypto assets using other means. Here are some recommendations:

• Choose Reputable Exchanges: Stick to platforms like Binance that care about your funds’ security.

• Enable Two Factor Authentication (2FA): Always enable 2FA on all your accounts to make them more secure.

• Be Skeptical: Do not entertain suspiciously too good-to-be-true deals. Always check the authenticity of projects and exchanges.

• Conduct Your Investigation: Find out the security measures of the wallets or exchanges you intend to use at any time.

Conclusion

SAFU illustrates how crypto platforms keep user funds safe despite their challenges. Despite the crypto ecosystem’s volatility, security and trust remain essential.

Binance has shown through SAFU that protecting its clients’ money is part of instilling trust in its users.