The token price of cross-chain router protocol Multichain (MULTI) experienced a major drop of 30% over a 24-hour period on May 24, 2023. The sudden sell-off occurred after users reported that their Multichain funds had failed to arrive, due to a backend node upgrade that “took longer than expected.” A Multichain admin, in the discord channel, wrote that most routes were working as usual, but some routes like Kava, zkSync, and Polygon zkEVM were temporarily suspended. The admin also apologized for the inconvenience caused.
At the same time, the wallet address linked to layer-1 blockchain developer Fantom Foundation reportedly removed 449,740 MULTI ($2.4 million) from liquidity on the decentralized exchange SushiSwap. Unverified rumors also seem to have fueled the sell-off. A tweet by a user, which has been viewed over 300,000 times since publication, claimed that the Multichain team had been arrested by the Chinese police with control over $1.5 billion in contract funds.
Blockchain analytics firm Lookonchain also reported at least $3 million worth of MULTI outflows linked to smart money accounts on the same day.
Founded in July 2020 in Singapore, the Multichain protocol was created to address the need for inter-blockchain communications. Since then, it has surpassed $1.59 billion in total value locked and experienced peak TVL of $10.5 billion in early 2022, before the onset of the cryptocurrency bear market. In December 2021, Cointelegraph reported that Multichain raised $60 million in a seed round led by Binance Labs, the venture capital arm of cryptocurrency exchange Binance. Earlier in May 2023, Multichain pledged a $100-million ecosystem fund to accelerate native Multichain projects.
The incidents on May 24th seem to have exposed some vulnerabilities in the Multichain protocol, with users reporting abnormal delays in cross-chain assets. BitKeep Wallet tweeted a warning explaining that there has been a problem with Multichain’s cross-chain bridge transactions. Furthermore, just one month earlier, on April 11th, Multichain became the subject of scrutiny with the discovery of a vulnerability that allowed for multiple withdrawals of funds, despite only being entitled to a single withdrawal within a certain time period.
The vulnerability, discovered by auditing firm Halborn Security, has since been fixed. But it raised concerns about the security and stability of Multichain, as well as other blockchain networks, at a time when interoperability is becoming more important.
It’s important to note that the rumors of the Chinese police arresting the Multichain team and controlling billions of dollars in contract funds remain unverified. Nevertheless, the events of May 24th raise questions about the transparency and reliability of Multichain’s handling of cross-chain funds. The incidents also underscore the risks associated with investing in cryptocurrencies, which are highly volatile and subject to price fluctuations due to rumor and unsubstantiated claims.
In conclusion, the drop in the token price of Multichain is just another example of the unpredictability of cryptocurrencies. While blockchain technology has the potential to revolutionize financial services, there are still many issues that need to be addressed before it can become a mainstream technology. Companies like Multichain must ensure the security and stability of their networks to build trust among investors and clients. Moreover, regulators need to establish clear guidelines for the industry to address issues such as cross-chain interoperability, data privacy, and investor protection. Only then can blockchain technology reach its full potential and become a trusted and reliable alternative to traditional financial services.
