Dialogue with Fantom CEO: What have we learned from the Multichain failure event?
整理 & 编译:深潮 TechFlow
In the episode of Corey Costa Crypto Coins aired on July 17, 2023, Corey Costa invited Michael Kong, CEO of Fantom, to discuss the development history and future plans of Fantom on Multichain, as well as to share his views and comments on the recent negative events surrounding Multichain.
Here are the main points of the conversation, compiled by 深潮:
Host: Corey Costa, Syscoin Ambassador
Speaker: Michael Kong, CEO / CIO of Fantom Foundation
Fantom's Innovations, Multichain Collapse, and Remedies
Corey asked Michael to introduce Fantom and explain why he believes Fantom is innovative compared to other Layer1 projects, as well as how he became the CEO of Fantom.
Michael explained that his interest in Fantom began with Andre, who was exploring different ideas around distributed ledger technology (DLT). Andre was interested in Byzantine Fault Tolerance (aBFT) consensus mechanisms, which allow transactions to be executed simultaneously.
He likened it to boarding a train, explaining that "having multiple people board at the same time is faster than boarding one by one, just like how transactions are processed in Fantom."
He described how he got involved with the Fantom project, initially helping to connect other developers to the project, and through hard work, he became the CEO. He also mentioned the launch of the Fantom mainnet in December 2019.
Corey discussed the recent issues surrounding Multichain (formerly known as Anyswap) and asked Michael to clarify what exactly happened and whether Fantom was the only affected chain.
Michael explained that many chains were affected because Multichain integrated with many different chains. He described Multichain as one of the earliest cross-chain bridges, allowing connections and asset transfers between different Layer1s. He mentioned that Andre had previously worked with the Multichain team but made it clear that Andre had not collaborated with them recently.
He described how Multichain received support from well-known investors and integrated with many other bridges, but problems arose when the Multichain team announced that their CEO had disappeared.
Multichain had assured that operations would continue as usual, but in hindsight, Michael believed they should have advised everyone to leave Multichain immediately. He admitted that they did not know the CEO could access these funds through a backdoor, leading to the crisis.
Michael believes that these funds are currently held by the Chinese government or its insiders. He explained that they are seeking clarification through a well-known Chinese law firm and hope to recover the funds.
Corey acknowledged the predicament the Fantom Foundation found itself in after hearing about the disappearance of the Multichain CEO. Michael mentioned that they were not aware of the full extent of the risks at that time. If they had known, they would have told everyone to stay away from Multichain immediately.
Corey recognized the impact of the Multichain collapse on Fantom investors, especially regarding the unpegging of stablecoins within the Fantom network. He asked what plans the Fantom Foundation had to restore confidence in Fantom DeFi.
Michael explained that when they were informed of the transfers on July 6 or 7, 2023, they immediately contacted the Multichain team. They were told that some local law enforcement might have forcibly transferred the funds. The Fantom team tried to understand the situation and requested that Multichain not use their services. They communicated regularly with the Multichain team to try to resolve the issue.
Michael discussed Multichain's plan to transfer the remaining funds to a wallet controlled by Zhaojun's sister and how they planned to hack themselves to redeploy the service. However, the plan was hindered because the funds could not be accessed due to Zhaojun's sister being questioned.
The Fantom team is currently consulting with a law firm for advice on the next steps, which may involve contacting investigative teams in China. Looking ahead, Fantom is exploring ways to repay the funds. Alternative bridges such as Axelar and LayerZero have also been deployed on Fantom.
Corey asked how Fantom planned to restore existing stablecoins from the current bridges. Michael explained that it is a daunting task, and they are currently discussing the most appropriate course of action with lawyers.
Michael added that the Fantom team is working hard to move forward and continue the work they were doing before the Multichain collapse. They are focused on technical development, such as launching a demo network on the new Fantom virtual machine and storage system.
Fantom is also developing a new client that can significantly shorten transaction confirmation times and plans to fund more hackathons.
Fantom has a gas monetization plan, where $FTM is allocated to the top 20 applications. The community votes to decide the treasury allocation, and this plan also supports the development of the Fantom blockchain.
Michael acknowledged that while these initiatives are beneficial for the future, they do not directly address the Multichain issue. However, he emphasized that Fantom is committed to finding solutions and supporting those affected.
Fantom Decentralized Finance: Community Building, Technology, and Trust
Corey stated that no matter how innovative a blockchain is, there is no foundation without a community. He emphasized that focusing on the community is crucial for the future of Fantom DeFi.
Michael hopes to see Fantom at the forefront of technology by the end of 2023. He recognized that the mistake made by the Fantom Foundation was being overly trusting and not taking sufficient measures to protect the foundation. He acknowledged the importance of proactively protecting the foundation and its users. He mentioned that Fantom plans to issue a new stablecoin called $fUSD within its ecosystem.
Michael assured that while they did suffer some losses, a significant portion of the funds remains intact, and there is enough capital for Fantom to continue its projects in the future.
Michael highlighted the addition of new members to the team, including a new marketer and a senior technical expert, who will help drive Fantom forward.
Corey inquired about the banking project. Although Michael could not provide a specific timeline, he clarified that the bank would be an entity independent of the foundation due to regulatory reasons.
Michael discussed the security of Fantom's assets. He explained that, unlike the situation with Multichain, Fantom's assets are not controlled by one person but by multiple individuals, each operating independently of the foundation. This helps protect Fantom from similar tragedies.
Michael stated that Special Fee Contracts (SFC) are typically related to network control and are only responsible for allocating rewards to validators. They do not grant access to validators on the network. Michael mentioned that they plan to eliminate the SFC to reduce risks and reliance on Ethereum technology.
Michael stated that while they do not develop IoT and mobile applications themselves, they plan to fund hackathons targeting these areas. He believes the most important use cases for blockchain technology are applications based on DeFi, mobile devices, and gaming.
When asked about the funds trapped on Multichain and potential recovery or refund plans, Michael stated that they will address these transactions and prioritize individuals who are trapped after transferring funds from Multichain.
Corey inquired about the recovery of frozen funds. Michael stated that they are in discussions with Circle and Tether to achieve the best outcome. Most of the $USDC and $USDT have been frozen to prevent malicious actors from accessing them.
When asked about the timeline for deploying Fantom's stablecoin, Michael stated that they do not have it yet, but it will definitely be achieved this year.
Corey asked if they had received a response from Circle or Tether. Michael stated that they are waiting for a reply and need a court order to freeze the remaining assets.
When asked if the foundation plans to hire a risk management team, Michael stated that they have many internal checks and rigorous testing processes to prevent issues.
Michael confirmed that three different locations control the multi-signature of the EOA wallet.
Corey asked who would be compensated in the event of fund recovery. Michael said it is difficult to determine and depends on the results they can achieve.
Corey asked about the cost of using financial resources to compensate user losses. Michael said it is hard to determine but at least several tens of millions of dollars.
Regarding the migration from EOA to multi-signature, Michael stated that there is no EOA controlling the SFC, and they plan to eliminate the SFC.
When asked about regaining TVL on-chain, Michael stated that they are working with Axler and LayerZero and plan to issue more stablecoins on Fantom. They plan to ensure that the projects they collaborate with consider regulatory and geographical risks.
Michael stated that several protocols have already been deployed on Fantom, and he believes that lending protocols will grow and recover. He also acknowledged that rebuilding trust with the Fantom community is a long process.
Corey inquired about address 0XD68, which is said to be able to reverse anything that happens on-chain. Michael stated that there is no such address that can reverse transactions or control validators on the Fantom network.
Corey asked Michael if the Fantom Foundation first discovered the Multichain incident in May. Michael recalled that it was when Multichain announced the news.
Michael admitted that they made the wrong decision, but in hindsight, it was beneficial. He said the lesson learned is that if there are signs of problems, immediate and severe action should be taken.
Michael apologized to the Fantom community for the incident. He emphasized his commitment to finding solutions and moving forward.