The token of Multichain, the fifth largest blockchain bridge, is plunging on rumors that the team was arrested. The MULTI token is down over 25% in the past twenty four hours.
WhaleChart, a news-focused Twitter account with almost 400,000 followers, posted at 9:30 a.m. New York time on Wednesday that Chinese police have arrested Multichain team members.
Multichain has yet to address the rumors on social media. The team also did not immediately respond to an email requesting comment.
Users in Multichain’s Telegram group are saying that they have been waiting on transactions for upwards of 24 hours.
China Crackdown
Dovey Wan, is a founding partner of the crypto investment firm Primitive Ventures and whose LinkedIn lists her as an investor in Multichain, said this morning on Twitter that local authorities are cracking down on crypto projects operating in mainland China.
“Any local gov can go after any crypto project they deem ‘rich’ or have sizable fund under custody,” she added, saying that Chinese founders should stay as anonymous as possible.
Compounding concerns, the Fantom Foundation, the company which launched the eponymous blockchain, removed roughly $5M of MULTI and ETH tokens from a liquidity pool on SushiSwap, a decentralized exchange. The trade prompted speculation Fantom will sell those tokens next.
Outsized Impact
Because they are connected to many blockchains, problems with bridges have a particularly large impact on the crypto ecosystem as a whole. As Multichain is one of the largest bridges in crypto — it has $1.56B worth of assets in its smart contracts as of May 24 — the potential for damage is especially high.
At $120M in the past week, Multichain also the fifth largest bridge by volume, according to DeFi Llama. It’s the second largest bridge by that measure when excluding bridges meant to just connect two chains. Multichain says it supports 92 blockchains on its website.
Multichain was originally known as Anyswap, a cross-chain exchange which launched in July 2020. The project was then rebranded to Multichain in December 2021. The project also raised $60M in 2021 from Binance Labs, the now-bankrupt Three Arrows Capital, and others.
MPC Nodes Risk
L2BEAT, which assesses the risks of bridges and Layer 2s, says that Multichain’s biggest risks involve its multi-party computation (MPC) nodes. MPC is a cryptographic technique that allows distributed parties to jointly compute a result without revealing certain private information.
If the MPC nodes collude, voluntarily or involuntarily, funds on Multichain can be frozen, censored or stolen, according to L2BEAT.