With technical difficulties affecting users’ ability to draw tokens from Multichain, the platform’s silence has given rise to wild rumors and speculation about its security and the destiny of its team. The lack of concrete information has prompted entities to address potential risks, highlighting the vulnerabilities inherent in crypto bridges that go beyond the risk of hacking, media reports, said.
Multichain holds a significant position among bridges, ranking third in terms of transfer volume and full value locked. The platform utilizes a mint-and-lock tool to facilitate asset transfers across the 92 blockchains it connects with.
For instance, when bridging the USDC stablecoin from Ethereum to Fantom via Multichain, the token is locked in a contract on Ethereum and issued as a “wrapped” token called anyUSDC on Fantom. Wrapped USDC tokens, including anyUSDC, account for 50% of Fantom’s stablecoin market.
The recent issues with Multichain resulted in a loss of dollar peg for wrapped USDC tokens on Fantom, leading to a temporary discount in their value. Some arbitrage dealers took advantage of the situation, purchasing enveloped USDC tokens with 30% discount. Binance, the world’s largest cryptocurrency exchange, highlighted the risks associated with non-native assets, urging traders to verify their trust in the issuers of stablecoins.
Despite the challenges faced by Multichain, the Fantom ecosystem has not experienced a group exodus. Absolute value locked remains relatively stable, with only minor flows to other chains. Squid Router, a bridging protocol utilizing swaps inspite of wrapped tokens, reported increased activity during Multichain’s troubles, as bridge dealings on Axelar, the platform on which Squid Router is built, saw a significant uptick.
Nevertheless, Multichain’s wrapping method has raised concerns beyond the stablecoin markets. Binance temporarily suspended deposits in ten Multichain-bridged tokens, awaiting clarification from the Multichain group. Li.Fi, the bridging accumulation service, proactively implemented precautionary measures by halting permit to Multichain.
Despite the uncertainty surrounding Multichain, Michael Kong, CEO of the Fantom Foundation, reassured users that the bridged assets on Fantom remain unaffected and emphasized the safety of the Multichain bridge within the Fantom ecosystem. However, Multichain’s reputation has taken a hit, as its namesake investment MULTI experienced a 54% fall in value since the concern of confidence began.
