In the fast-paced world of cryptocurrencies, where tangible facts are often elusive, a collective of crypto participants is springing into action. Their goal is to safeguard their interests amidst rising concerns about Multichain, a powerful platform facilitating asset transfers across different blockchains.
Multichain’s Technical Difficulties Stir Widespread Speculation
Only four days after the onset of technical glitches that hindered some users from withdrawing tokens from the system, outlandish conjectures concerning Multichain’s security and the destiny of its team have started to fill the void left by the platform’s lack of communication. A solitary tweet attributing cross-chain interruptions to “force majeure” has only stoked speculation, suggesting that all may not be as it seems.
In this environment, where concrete information is scarce, many organizations choose to mitigate their risk, irrespective of Multichain’s actual circumstances.
The resulting actions underscore the potential for significant harm that crypto bridges could inflict – a risk profile that extends far beyond the most common and widely recognized danger: hacking threats, such as those posed by North Korea.
Multichain: A Key Player Amid Crypto Bridges
Multichain’s preeminence among bridges further complicates the situation. It ranks as the third-largest bridging protocol in terms of transfer volume and total value locked, as revealed by data from Messari and DeFiLlama.
Like most of its counterparts, Multichain employs a mint-and-lock mechanism to facilitate asset transfers across the 92 blockchains it interfaces with. To illustrate, if a USDC stablecoin holder transfers the asset from Ethereum to Fantom using Multichain, the token is locked in an Ethereum smart contract and then reissued on Fantom as a “wrapped” token dubbed anyUSDC.
The Impact of Multichain’s Wrapped Tokens
Multichain’s anyUSDC, along with other similar wrapped USDC tokens, command a substantial 50% of Fantom’s stablecoin market, as per DeFiLlama’s data. This is despite all USDC on Fantom being “bridged” rather than “native” assets directly issued by Circle onto the chain. Consequently, the value of all USDC tokens on Fantom hinges on the bridges’ functionality.
However, this system only operates efficiently as long as the bridge remains functional. Unfortunately, this was not the case during the peak of Multichain’s recent difficulties, resulting in wrapped USDC tokens on Fantom deviating from their dollar peg.
Binance Highlights Risks of Non-native Assets
Binance, the world’s leading crypto exchange, highlighted the risks associated with non-native assets in a tweet on Friday, encouraging traders to verify their trust in the issuers of the stablecoins they hold.
Despite the Fantom ecosystem’s considerable reliance on Multichain, market participants have not been scared into a large-scale departure. Metrics such as the total value locked have largely remained stable, even in the face of some asset outflows to other chains.
Binance Suspends Deposits in Multichain-bridged Tokens
Multichain’s approach of wrapping assets to bridge them has raised alarms beyond the stablecoin markets. In a recent development, Binance announced a temporary suspension of deposits in 10 Multichain-bridged tokens, pending further clarity from the Multichain team.
In the face of ever-changing circumstances, crypto stakeholders are left to navigate the turbulent seas of the crypto sphere, hoping that the stormy weather surrounding Multichain will soon clear.
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