3 - 5 minute read
The DeFi ecosystem on the Fantom blockchain (FTM) has been thrown into chaos due to concerns over the mounting bridging crisis at Multichain (MULTI), a bridge-builder for moving popular cryptocurrencies in and out of the on-chain economy. The fear is that the value of wrapped assets, including USDC and ETH, could devalue or even get stranded due to Multichain’s faltering infrastructure and AWOL CEO. As a result, some DeFi protocols have begun moving crypto to other networks out of fear that their tokens’ value could be imperiled. For instance, Beethoven X sent $300,000 in treasury stablecoins from Fantom to Ethereum, while Byte Masons did the same with ether and USD coin it used in trading pools.
As previously mentioned, the Multichain bridge is fully operational and safe with Fantom. There's been no change. Fantom was not listed as one of the affected chains in Multichain’s tweet.
— Fantom Foundation (@FantomFDN) May 31, 2023
Nevertheless we are looking at native coin issuance and continue to be (as we have always… https://t.co/lxte0iVHaV
Multichain’s importance to Fantom is critical, with nearly 40% of cryptocurrencies on the Fantom network, excluding FTM itself, getting there by way of Multichain’s Fantom bridges. If anything were to happen to that connection, those wrapped assets could de-peg and, in the worst case, get stranded. The situation has caused fear, uncertainty, and doubt (FUD) to spread fast, with community members and project leaders growing increasingly concerned with the state of Multichain and how its crisis could batter Fantom.
Despite the situation, no one is talking about abandoning Fantom outright. Instead, the teams taking the most aggressive measures remain publicly committed to the ecosystem, a major outpost for DeFi traders. They’re looking to the Fantom Foundation to broker new partnerships that would solve the current dependency on Multichain. One surefire way to solve the crisis would be to bring a native form of the USDC stablecoin to Fantom, thereby eliminating the need for wrapped versions whose fates are dependent on the bridges that issue them.
The situation has also led to some protocols moving away from Multichain-linked assets. For instance, the DEX Equalizer (EQUAL) has begun incentivizing traders toward USDC issued by bridge-builder Axelar over that of Multichain, the ecosystem’s predominant stablecoin. The team building Hector (HEC) has told its community that stablecoin airlifts to other chains are on the table. At decentralized lending protocol Tarot (TAROT), the team said Thursday it is “reevaluating” its risk framework for integrating bridged stablecoins. A depegging of USDC could spell trouble for derivatives protocols reliant on tokens meant to trade for $1 staying at that level.
The current situation has severely impacted the entire Fantom ecosystem, with the chaos at Multichain stirring concern. However, Michael Kong, the CEO of the Fantom Foundation, has assured traders that the “Multichain bridge is fully operational and safe.” Nevertheless, the situation is fluid, and traders must remain vigilant to avoid any potential risks.
The Bottom Line
Traders operating on the Fantom blockchain must remain aware of the ongoing crisis at Multichain. While the situation may appear precautionary for now, the fear, uncertainty, and doubt surrounding Multichain have severely impacted the entire Fantom ecosystem. Traders must continue to monitor the situation to avoid any potential risks. Additionally, traders should look to diversify their assets away from Multichain-linked assets and explore other protocols. Finally, the Fantom Foundation must broker new partnerships to solve the current dependency on Multichain.
