Rumors create panic over $1.5B blockchain bridge Multichain

Concerns about the stability of Multichain and its total value locked (TVL) of $1.5 billion triggered a large sell-off of the project’s token, MULTI, yesterday.

The panic was sparked by a tweet that claimed users were reporting delays in receiving assets across the bridge and that an insider was dumping tokens.

A transfer of nearly 500,000 MULTI (worth approximately $3.2 million at the time) was made from an address suspected to be either a Multichain team member or an investor. The tokens, which had not been touched since they were first received over a year ago, were sent to the centralized exchange Gate.io, where users assumed they would be sold.

The tweet then became reported of a Chinese-language account, which began to catch on due to ambiguity in Twitter’s automated translation“When Multichain heard the news, it is said to have been arrested, and the cold wallet was checked, with approximately 1.5 billion funds.”

Rumours then began spreading that the team had been apprehended by Chinese authorities and that assets locked in the bridge may have been compromised.

Multichain had published an announcement the day before, warning that some routes would be subject to delays due to a back-end upgrade; on the other hand, the team’s communication in response to the concerns left much to be desired.

Eight hours after 0xScope’s original tweet, Multichain responded to the rumors with a statement that only raised more questions:

Read more: Explained: Why hackers continue to exploit cross-blockchain bridges

The panic, combined with the lack of clarity from the team, resulted in a large sell-off of the project’s tokens. The price of MULTI, which had already fallen since the weekend, fell from around $6.50 to below $4.90 at the time of writing.

Today, users are still waiting for a more detailed statement from the team, MULTI continues to fall in priceand Binance has announced a temporary suspension of deposits for certain Multichain assets.

Blockchain bridges have $10 billion in assets

Multichain is a source of popular DeFi tokens, such as WETH and USDC, on chains where such tokens are not native. This means that the value of Multichain tokens on these other chains is derived solely from their counterparts locked on the Ethereum side of the bridge.

The blockchain that relies the most on multichain-backed assets is Fantom. Almost 200 million USDC, 230 million other stablecoins (MAI, fUSD and DAI), and $50 million worth of WETH on Fantom are Multichain tokens, according to the project’s dashboard.

If Multichain were to be compromised (or hacked, which happened in 2021 before a rebrand by Anyswap), the bridged tokens would quickly become worthless without the support of the main network.

Blockchain bridges have a combined $10 billion in assets, making them the fourth largest category of DeFi protocols, according to DeFiLlama. They are critical infrastructure for moving assets between blockchains, each of which is a closed system.

Read more: DeFi has tough weekend with Aave and Tornado Cash chaos

Any problems with bridges tend to cause panic; entire ecosystems can instantly find themselves cut off, with bridged assets suddenly “stuck” and separated from their support.

In the middle of yesterday’s panic over Multichain, Jump Crypto published a report about a vulnerability in Celer’s cBridge that put $130 million at risk.

The huge concentration of funds also makes bridges into one main target for hackers. Last year saw a number of nine-figure bridge exploits, including Binance’s BNB Bridge, Nomad, Ronin and Wormhole.

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