Is the Fantom blockchain at risk?

Fantom is struggling with the chain reaction of the multichain implosion. Founder Andre Cronje has his back against the wall.

Multichain: a DeFi bridging protocol that wasn’t really on the radar until recently. Now Multichain is causing a chain reaction throughout the crypto sector. For the theft of US$126 million on the platform is causing liquidity shortages for the blockchains linked to it. Fantom, the project of DeFi Star developer Andre Cronje, has been hit particularly hard. The project’s Total Value Locked (TVL) imploded in the wake of the multichain heist. Now there are doubts about Fantom’s survival.

"Multichain was a big hit"

"As you can imagine, the [Fantom] Foundation and all of our employees were exposed to the [Multichain] assets," explained Andre Cronje on the Fantom forum. According to the report, the Multichain team had given Fantom assurances about the decentralization of the servers and access to them. But these are now apparently under the control of third parties. And with it, so are large parts of the ecosystem and the assets trapped within it. The incident is "a big blow," says Cronje. "Don’t trust, verify," he accused himself.

The fact that these statements come from the DeFi guru himself does not inspire much confidence. And illustrates the gravity of the situation. The Fantom Foundation owns many linked tokens and stablecoins that have lost their ties to real assets since the crackdown. The USD coin (USDC) is now trading at just $0.18 on some of Fantom’s DeFi exchanges. Meanwhile, the companies behind the stablecoins, Tether and Circle, have frozen the stolen funds. According to Cronje, the Fantom team is working with them to get them back. However, the chances of this happening are slim, as one Twitter user pointed out regarding similar incidents in the past.

Meanwhile, the Fantom Foundation "all options" to stop the bleeding, Cronje said. This would then be about Fantom’s "treasury. However, the treasury is also in trouble and has already shrunk from US$87 million to US$72 million in the course of the drama. Much stands and falls on the FTM price. If it continues to fall, the value of the Foundation’s assets will decline - a liquidation spiral could follow. As recently as November, Andre Cronje confidently disclosed the Foundation’s assets, which he claimed were "for another 30 years" would go along with it. Now he has his back against the wall.

Keeping an eye on exchanges

Meanwhile, the community is watching deposits of FTM tokens at major exchanges. Data from Nansen would already indicate increased sell orders. Further sales are thus on the horizon. According to the community, this means the death sentence for Fantom has been pronounced. Andre Cronje, on the other hand, urges a constructive solution for all. The situation does not remain "as it is now" in "we do everything in our power to make everyone happy". There would be a "action plan" are presented as soon as "verifiable information" is available. So there is still hope that the Foundation can save its coin and with it the blockchain. And as we all know, there is always a chance. Best example: Solana, which is back on its own feet despite the FTX debacle and strict regulation by the SEC. This is why community support is crucial for Fantom. "We appreciate your efforts and continue to support you," said one member on the forum. The next few weeks will be crucial for Fantom and the project’s survival.