Andre Cronje describes the slump in Fantom TVL as a significant setback caused by Multichain.

Andre Cronje describes the slump in Fantom TVL as a significant setback caused by Multichain.

The Multichain Debacle: A Blow to the Blockchain Industry

The blockchain industry is known for its decentralized nature, providing users with a secure and transparent platform for various applications. However, recent events have unfolded that have shaken the confidence of investors and users alike. One such incident is the Multichain debacle, which has had a significant impact on the smart contract platform Fantom.

Fantom’s co-founder, Andre Cronje, described the Multichain debacle as a “big blow” to the platform. This unfortunate event has led to a sharp decline in activity on Fantom in recent weeks. Data from DefiLlama shows that Fantom’s total value locked (TVL) dropped from over $364 million in early May to about $70 million on July 14. At its peak in 2022, Fantom’s TVL reached an impressive $7.5 billion. Alongside the decline in TVL, the price of Fantom’s native coin, FTM, also experienced a decline from $0.41 to $0.28 over the same period.

The impact of the Multichain debacle on Fantom is evident, and Cronje expressed his disappointment in a forum thread. He stated that he had received assurances from the Multichain team regarding server decentralization, access, and geolocation distribution. However, these assurances turned out to be misleading. This serves as a reminder for users and developers to adhere to the principle of “don’t trust, verify.”

Multichain’s problems started when its CEO, the sole person in control of Multichain’s servers, was arrested in May. With its leadership arrested and technical challenges mounting, Multichain became vulnerable to exploitation. On July 6, over $125 million worth of cryptocurrencies were withdrawn from multiple wallets, impacting the Ethereum side of Fantom, Moonriver, and Dogechain bridges. These withdrawals accounted for the majority of funds held on each bridge.

The vulnerabilities in Multichain’s system became apparent as it was revealed that all shards of its private keys were stored in a “cloud server account” controlled solely by the CEO. Someone gained access to this account and drained funds from the protocol, leading to significant financial losses.

The repercussions of Multichain’s issues extended beyond Fantom. The lending protocol Geist Finance, which relied on Multichain, had to permanently shut down due to losses from the exploit. Prior to the hack, over $29 million worth of crypto assets were locked in contracts running on the Fantom network. Geist Finance’s closure had a massive impact on Fantom’s TVL.

In response to the exploit, stablecoin issuers Circle and Tether took action by freezing over $65 million in assets tied to the attack. Fantom is now actively engaging with both companies to explore options for native issuance and reviewing rollups for native bridge infrastructure. The aim is to recover as many assets as possible and prevent similar incidents from occurring in the future.

The Multichain debacle serves as a wake-up call for the blockchain industry. It highlights the importance of robust security measures and decentralized systems. This incident also emphasizes the need for thorough due diligence when selecting platforms and protocols to ensure the safety of users’ assets.

In conclusion, the Multichain debacle has had a significant impact on Fantom and the broader blockchain industry. It has resulted in a decline in activity, a decrease in TVL, and financial losses for users and platforms relying on Multichain. This incident highlights the importance of trust but verify, as well as the need for continuous improvement in security measures within the blockchain industry. It serves as a reminder that even the most promising platforms can face unforeseen challenges, and it is crucial to remain vigilant in this rapidly evolving landscape.

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