Missing Multichain CEO Is Causing Ripples Across the Industry
Embattled Blockchain Bridge Holds $1.45B In Assets Across Dozens Of Networks
By: Jeremy Nation •DeFi News
The blockchain industry is starting to feel the repercussions of the missing CEO of Multichain, the largest blockchain bridge by assets, as service for at least 11 chains was interrupted. Security experts and founders say other chains could come next.
Multichain on Wednesday said it suspended services for Kekchain, PublicMint, Dyno Chain, Red Light Chain, Dexit, Ekta, HPB, ONUS, Omax, Findora, and Planq chains as its CEO remains absent.
While available data suggests top affected blockchains Ekta, ONUS, Omax, Findora, Planq, and Mint account for just over $55.5 million in market capitalization, Multichain also services Ethereum and Binance Smart Chain. There are $1.45 billion in assets held in Multichain smart contracts.
Impacts All Chains
If the Multichain bridge can't process transactions, it will have a negative impact on all chains connected to it, according to Reza Bashash, Co-Creator & Technical Lead at Sologenic and Coreum. He explained that the situation is particularly problematic for chains where Multichain acts as a custodian on one chain and a wrapped token issuer on another.
“Not only will the collateral be lost, but also the value of the wrapped tokens will become 0 as they cannot be converted back to the underlying token.”
Issues at Multichain began late last month when its CEO went missing, and yet unconfirmed rumors spread of his arrest in China.
In an industry built around the notion that blockchain networks should feature no single points of failure, it is perhaps ironic that a decentralized service connecting those networks, in fact, does.
Multichain did not respond to a request for comment from The Defiant.
Lack of Redundancy
Shahar Madar, head of security products at digital asset custody and settlement platform Fireblocks, said that it boils down to how Multichain implemented its network and systems in terms of two aspects: “One is the redundancy. And the second one is security.”
Despite being a decentralized protocol, the lack of redundancy in the case of Multichain’s centralized server access ultimately caused big ripples in liquidity downstream. As Madar points out, “One guy doesn't answer the phone for 24 hours, and suddenly everyone fears for billions of dollars potentially.”
Madar also said that since a single party with central access may be forced, influenced, or coerced by authorities and thus could be compromised, to what extent should any one person have critical influence over a decentralized platform?
Planning for the Worst
Affected parties are already planning for the worst.
Rather than wait any more after a week-long hiatus, Coreum found itself prompted to make a strategic decision, according to Bashash.
Coreum’s workaround is a “non-custodial solution” to “empower users to burn their Core tokens directly on the XRPL chain, which can then be retrieved on the Coreum mainnet,” said Bashash, adding that the objective behind the decision is to avoid future disruptions of this magnitude.
“If this situation is not promptly rectified, it could have substantial repercussions on the broader cryptocurrency market, causing a decrease in confidence in the security of DeFi platforms and bridges, leading to market instability,” said Bashash.
Coreum is currently trading up 2.7% in the last 24 hours at $0.19.
Bridge To Nowhere
The central point of failure resulting in a service suspension is among the reasons Brent Xu, founder and CEO of DeFi lending protocol Umee, points to bridges as “one of the main risks you need to look at.”
“The bridges right now are all really bad because they're very dangerous,” said Xu, adding that they can be hacked or allow for validators to be targeted, resulting in lapses of service.
Building Around Roadblocks
Madar said the developing situation with Multichain will come to stand as a future reference point to single points of compromise that will serve as a lesson for building “a more resilient ecosystem.”
Xu said that “anyone who's building other bridges or even improving on Multichain in the future will take lessons in the past,” he said. “But the problem is that the lessons of the past for crypto are very expensive.”