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Multichain 'Force Majeure' Dilemma | Connext Chain Abstraction | Celer's $130M Vulnerability & More!
Last Week In The Multi-Chain Ecosystem (22 - 28 May '23)
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Multichain Protocol experiences disruptions in some cross-chain routes due to unforeseen circumstances, causing temporary unavailability. The timeline for normal services to resume remains unknown, but Multichain has announced it will compensate affected users (details haven’t been announced yet).
Jump Crypto uncovered a critical vulnerability in Celer's State Guardian Network (SGN), prompting a swift code patch deployment by Celer to address the issue. Celer plans to propose funding a bug bounty grant to Jump Crypto in recognition of their discovery.
Connext introduces chain abstraction to allow users to effortlessly access and interact with dApps across various chains, eliminating the hassles of network selection, asset bridging, and gas token acquisition.
Injective and Eclipse have collaborated to introduce IBC-enabled rollups. Cascade, an interchain SVM rollup, serves as a proof-of-concept, pushing the boundaries of IBC implementation.
5. LI.FI Integrations and Updates 🦎
UNO, a yield-farming aggregator, has updated its implementation of LI.FI’s widget to support bridge insurance to provide its users with a stress-free bridging experience.
Oasis, a DeFi platform that allows users to earn, borrow, and multiply your crypto assets, has integrated LI.FI’s Widget inside their dApp. With the integration, Oasis users can bridge & swap any token across Ethereum, Arbitrum, & Optimism in just a few clicks.
DeCommas, an automation layer for chain-agnostic DeFi strategies, integrated LI.FI inside their dApp. With the integration of LI.FI, DeCommas users can now seamlessly earn yield on Aave without worrying about bridging or swapping between deployments.
Multi-Chain Ecosystem Updates
Fantom has launched its Gas Monetization Program, offering eligible dApp developers an opportunity to earn an extra income. Under this program, developers can receive 15% of the gas fees generated by their dApps, providing a valuable incentive and recognizing their contributions to the ecosystem.
Euro Coin is now live on Avalanche. With Euro Coin, users on Avalanche can now easily mint, purchase, swap, trade, sell, and redeem native $EUROC tokens. Furthermore, developers can integrate Euro Coin into their dApps, expanding the range of options available to cater to user needs on Avalanche.
Polygon zkEVM’s forthcoming optimizations are set to significantly decrease fees by approximately 20%, all achieved without compression techniques.
Solana has extended its grant program, now valued at $10 million, to foster the integration of AI with blockchain tech. This initiative positions Solana as the first-ever Layer 1 blockchain to incorporate AI capabilities, exemplified by its integration with ChatGPT.
Murphy Labs launches Strateg, an omnichain social yield infrastructure revolutionizing DeFi. With Strateg, users can easily create and implement complex yield strategies across multiple chains, while sharing them with their communities, democratizing access to advanced yield strategies.
The Multichain Dilemma: From Rumours to Onchain Reality
Crypto is no stranger to drama and uncertainty, and the recent events surrounding Multichain have once again shown that the industry may still be experiencing growing pains, but is quite resilient.
Here, we take an unbiased, on-chain data-based view of the events and how they changed the dynamics of the ecosystem.
Let’s dive in!
Where it all Started: Rumours on Crypto Twitter
The drama began with rumours circulating on Crypto Twitter, bringing to light alleged uncertainty surrounding Multichain.
The founder of Multichain was reportedly arrested in YunNan province, leaving $1.5 billion in cold wallets inaccessible. [Source: 0xfleet]
Additionally, a Multichain team member was accused of transferring a significant amount of MULTI tokens to a centralized exchange. [Source: Scope Protocol]
These rumours immediately stirred up concerns and created a sense of uncertainty among investors and users.
Further adding fuel to the fire, users experienced delayed transfers via Multichain for certain returns, leading to speculation that the platform was unable to complete bridging transactions. [Source: The Block]
However, Multichain addressed the issue, attributing it to an upgrade and assuring users that the team was actively working to rectify the situation. Nevertheless, the incident heightened concerns about the platform's stability and reliability.
Onchain Impact of the Event
Impact on Multichain
Multichain witnessed a surge in the number of transactions and trading volume on the day of the incident.
This could be because Multichain was one of the few bridging options for users looking to bridge to/from Fantom.
The number of transactions increased by 66.28% in 24 hours, while the trading volume rose by a staggering 379.57%.
Surprisingly, there was no significant impact on the Total Value Locked (TVL) in the Multichain bridge. This suggests that while users were apprehensive about Multichain's future, LPs did not rush to withdraw their assets from the platform.
Impact on Fantom Ecosystem
Fantom, with its extensive exposure to Multichain and its assets, was at the center of attention during the drama. The statistics below highlight the significant dependence of the Fantom ecosystem on Multichain:
Approximately 35% of the TVL on Fantom was locked on the Multichain bridge.
Around 40% of all Fantom assets, excluding native FTM, were issued by Multichain, amounting to $650 million.
A staggering 81% of the total stablecoin market cap on Fantom, equivalent to $458 million, was issued by Multichain
Despite the concerns, the TVL within Fantom's DeFi ecosystem only experienced a 13.24% fall, which can be attributed to the adjustment of outflows based on the price of FTM.
However, Multichain liquidity providers on Fantom appeared to derisk their direct exposure by withdrawing a net amount of $31.65 million from the bridge's Fantom pools.
This trend continued on the following day, albeit with smaller volumes. These actions indicate a cautious approach by users and liquidity providers.
Impact on Bridging Activity
The Multichain incident had a notable impact on bridging activity within the Fantom ecosystem. Here are the key observations:
1. On 24th May, there was a net outflow of $31.07M in bridging volume from Fantom. Users seemed to be withdrawing funds from the ecosystem to reduce their exposure to the event.
2. Multichain and Stargate were the preferred options for bridging to and from Fantom.
On that day, Multichain recorded a volume of $129.39M, marking a significant increase of 379.57% within 24 hours. Stargate, on the other hand, saw its volume reach $131.65M, experiencing a 57.51% increase.
However, Multichain's volume decreased on 25th May, while Stargate's volume continued to rise, reaching $133.78M. Most transfers took place via Stargate and USDC.
3. Squid, a token bridge built on Axelar, witnessed a surge in volume, with over $2.6M being routed. This increase is believed to be a result of Squid being one of the limited options available for moving tokens between Fantom, Kava, and Polygon. [Source: Fig]
4. Interestingly, more users sought insurance for their transactions due to the uncertainty. On Jumper.exchange, there was approximately a 300% surge in insured bridging volume, indicating a higher level of caution and risk mitigation.
Industry Reactions to the Event
The Multichain incident triggered various reactions within the industry. Here's an overview of the notable events and responses:
1. Binance temporarily suspended deposits for 10 bridged tokens on the BNB Chain and Fantom. The move was made in lack of clarity from the Multichain team regarding the situation. [Source: Binance]
“We are temporarily suspending deposits for the following bridged tokens-network while we await clarity from the Multichain team,” said Binance.
2. The Fantom Foundation withdrew 449,740 MULTI tokens worth $2.4 million from Sushiswap's liquidity pools as a precautionary measure. Fantom Foundation Director Andre Cronje justified the action, stating that it made little sense to provide liquidity during times of uncertainty.
"No point to LP at times of uncertainty," said Cronje.
3. Several projects, including LI.FI, temporarily disabled support for Multichain.
While the Multichain bridge continued to function smoothly, the uncertainty surrounding the situation, including the inactivity of Multichain's leadership and lack of clarity, prompted these projects to take precautionary measures.
4. Projects like Kyber Network encouraged users to switch from Multichain wrapped assets to native assets on different chains, due to the uncertainty surrounding Multichain.
5. Users expressed dissatisfaction with Multichain's response to the situation. Multichain cited "unavailable routes due to force majeure" and provided no definite timeline for service resumption. This lack of clarity and communication left users wanting more information.
6. Multichain's native token, $MULTI, experienced a significant price drop of approximately 47% from around $7 on 24th May to $3.7 at the time of writing on 26th May.
It would be interesting to see if a price drop in $MULTI will in any way impact the protocol’s performance as token incentives are tied into the protocol dynamics – users receive incentives and rewards for onchain usage related campaigns typically in $MULTI.
Moreover, Multichain’s governance is linked to the token as well. Token holders get rewards and voting power by staking $MULTI tokens in the form of VeMulti (Vote Escrow Multi).
Importantly, there are ~13.319M MULTI tokens locked in the Multichain bridge and price fluctuations of the asset directly impact the bridge’s liquidity.
However, Multichain’s net inflow (Deposits – Withdrawals) doesn’t ring any alarms as on the day of uncertainty (24th May), the amount withdrawn was larger than deposited by $18M, which is roughly 1% of Multichain TVL (~$179M)
7. Fantom took to Twitter to assure users that the Multichain bridge was operating normally. Many believe that this assurance by Fantom has prevented any major price correction in the FTM token.
The recent events surrounding Multichain have undoubtedly raised concerns and caused disruptions within the ecosystem, more so for protocols and ecosystems with direct exposure to Multichain's infrastructure and assets.
However, it is important to approach these circumstances with a balanced perspective. We hope for a swift resolution and a return to normalcy for Multichain in the coming days, but it is crucial to acknowledge the operational risks associated with bridges.
Bridging activities are integral to the multi-chain ecosystem, enabling users to access different chains. However, as demonstrated by this incident, operational challenges can arise that lead to temporary halts, withdrawals from liquidity pools, and cautionary measures by partner projects.
Despite these challenges, witnessing the industry's adaptability and resilience is encouraging. Projects swiftly adjusted their strategies, users sought alternative options, and ecosystems like Fantom provided transparency and assurances to maintain confidence in their infrastructure.
The community's ability to navigate through uncertainty is a testament to the strength of the crypto ecosystem and gives us more belief in the future of crypto.
We remain hopeful that Multichain will overcome the challenges it faces, address any underlying issues, and emerge stronger.
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