Fantom token was down 6% while the Multichain token plunged 5% following the news that Binance plans to halt the use of some Multichain tokens soon.
Crypto exchange Binance announced on Wednesday that it would no longer support the deposits and withdrawals of several tokens linked to the Multichain protocol, starting from July 7. The decision will be effective until further notice is issued.
Customers with frequent use of Multichain and familiar with the following tokens might want to take notes: Polkastarter (POLS), Alchemy Pay (ACH), Beefy.Finance (BIFI), Harvest Finance (FARM), Alpaca Finance (ALPACA), SuperVerse (SUPER), Spell Token (SPELL), and Travala (AVA).
However, users can still deposit and withdraw those affected tokens through other supported networks, according to the announcement.
A Preemptive Move
While the crypto giant cited the complex state of the Multichain protocol, it did not offer specific reasons behind the decision. The lack of transparency surrounding Binance’s decision and the issues with Multichain have raised concerns among investors.
Multichain chaos surfaced in May after news spotted the disruptions in Multichain’s cross-chain transfers. Rumors that the team was under arrest fueled users’ frustration. As a result, Multichain’s native token, MULTI, experienced a significant decline of 50% within a month.
The disruption also greatly affected the Fantom network. Research conducted by Thanefield Capital reveals that 35% of Fantom’s assets are issued through Multichain, making up a staggering 80% of the total stablecoin market capitalization.
This high dependence on Multichain highlights the vulnerability of the Fantom network to potential negative consequences arising from the recent developments surrounding Multichain.
Following the incident, Binance temporarily suspended token deposits via the Multichain bridge, affecting several token pairs including POLS/BSC, ACH/BSC, BIFI/FTM, SUPER/BSC, AVA/ETH, SPELL/AVAXC, ALPACA/FTM, FTM/ETH, FARM/BSC, and DEXE/BSC. However, users could still deposit these assets on other networks, providing alternative trading methods and minimizing disruption.
Last time, the exact reason for the temporary suspension wasn’t disclosed by Binance. The team stated that it is awaiting clarity from the Multichain team before resuming operations. This cautious approach underscores Binance’s commitment to the safety of user funds; however, concerns still rose.
To address user concerns, Multichain released a statement on its website acknowledging the issues and assuring affected users of compensation. Although specific details of the compensation are yet to be fully disclosed, Multichain was active in solving the situation.
On June 5, the Multichain protocol reopened the previously affected bridges, providing a ray of hope for investors. However, ongoing challenges faced by Multichain have raised doubts about the long-term viability of the protocol.
Concerns Surrounding Cross-Chain Bridges
Multichain, previously known as Anyswap, is a cross-chain bridge development project that enables the transfer of crypto assets across different blockchains. The project raised $60 million in funding from prominent investment funds such as Binance Labs, IDG Capital, Sequoia, DeFiance Capital, and Circle Ventures.
While cross-chain bridges help streamline interactions and transfers across different blockchains, there were warnings about relying on these solutions. Vitalik Buterin, the co-founder of Ethereum, wrote in a blog post that users should try to minimize their dependency on bridges, suggesting users keep assets on the chain where they are derived.
Currently, Multichain supports a range of 65 different chains and enables the trading of nearly 3,000 tokens. As of July 2023, the total value locked (TVL) in Multichain protocols has reached approximately $1.31 billion, according to data from DeFiLlama.
The recent market reaction reflects the challenges faced by Multichain, with its price experiencing a 5% decline. Additionally, Fantom (FTM), a blockchain network associated with Multichain, also saw a 6% decrease in its price.
While crypto prices are up, there is still a lot of uncertainty in the markets. There may be more turbulence ahead as regulators continue to flesh-out crypto policy globally.
