Podcast Notes | Interview with Fantom CEO: What Have We Learned from the Multichain Failure?
TechFlow Selected TechFlow Selected
Podcast Notes | Interview with Fantom CEO: What Have We Learned from the Multichain Failure?
No matter how innovative blockchain is, without a community, there is no foundation.
Navigating Web3 tides with focused insightsCompilation & Translation: TechFlow
On the July 17, 2023 episode of Corey Costa's Crypto Coins show, Corey Costa invited Michael Kong, CEO of Fantom, to discuss Fantom’s development journey on Multichain, future plans, and also share insights and commentary on Multichain’s recent negative incidents.
Below is the main content of this conversation, compiled by TechFlow:
Host: Corey Costa, Syscoin Ambassador
Guest: Michael Kong, CEO/CIO of Fantom Foundation
Video Credit: Corey Costa's Crypto Coins
Podcast: Link
Release Date: July 17
Fantom's Innovation, Multichain Collapse, and Remedial Measures
-
Corey asked Michael to introduce Fantom and explain why he believes Fantom is innovative compared to other Layer 1 projects, as well as how Michael became Fantom’s CEO.
-
Michael explained that his interest in Fantom began with Andre, who was exploring different ideas around distributed ledger technology (DLT). Andre was particularly interested in the aBFT (asynchronous Byzantine Fault Tolerance) consensus mechanism, which allows transactions to be executed simultaneously.
-
He used a train analogy, explaining, “It’s faster for multiple people to board a train at the same time rather than one by one—similar to how transactions are processed on Fantom.”
-
He described how he got involved with Fantom, initially helping connect other developers to the project, then eventually becoming CEO through hard work. He also mentioned the launch of Fantom’s mainnet in December 2019.
-
Corey discussed the recent issues surrounding Multichain (formerly Anyswap) and asked Michael to clarify what exactly happened and whether Fantom was the only chain affected.
-
Michael explained that since Multichain was integrated with many different chains, numerous chains were impacted. He described Multichain as one of the earliest cross-chain bridges, enabling connections and asset transfers between different Layer 1 blockchains. He noted that Andre had previously worked with the Multichain team but emphasized that Andre had not collaborated with them recently.
-
He described how Multichain received support from prominent investors and was integrated with many other bridge solutions, but problems arose when the Multichain team announced their CEO had disappeared.
-
Although Multichain assured users operations would continue as normal, in hindsight, Michael believed they should have immediately advised everyone to exit Multichain. He admitted they didn’t know the CEO could access funds via a backdoor, which led to the crisis.
-
Michael believes these funds are currently held by the Chinese government or its personnel. He explained they are working with a reputable Chinese law firm to seek clarification and hope to recover the funds.
-
Corey acknowledged the difficult position Fantom Foundation found itself in after learning about the disappearance of Multichain’s CEO. Michael mentioned they didn’t fully understand the extent of the risk at the time. Had they known, they would have told everyone to immediately leave Multichain.
-
Corey recognized the impact of the Multichain collapse on Fantom investors, especially regarding stablecoin de-pegging within the Fantom network. He asked what plans the Fantom Foundation has to restore confidence in Fantom DeFi.
-
Michael explained that upon being informed of transfers occurring on July 6 or 7, 2023, they immediately contacted the Multichain team. They were told some local law enforcement might have forcibly transferred the funds. The Fantom team tried to understand the situation and requested Multichain cease using their services. They maintained regular communication with the Multichain team attempting to resolve the issue.
-
Michael discussed Multichain’s plan to transfer remaining funds to a wallet controlled by Zhaojun’s sister, and their intention to hack into it themselves to redeploy the service. However, this plan was blocked when Zhaojun’s sister was questioned, rendering the funds inaccessible.
-
The Fantom team is currently consulting with a law firm for advice on next steps, which may involve contacting Chinese investigative authorities. Looking ahead, Fantom is exploring ways to repay funds. Alternative bridges like Axelar and LayerZero have already been deployed on Fantom.
-
Corey asked how Fantom plans to recover existing stablecoins from the current bridge. Michael explained this is a challenging task, and they are currently discussing the most appropriate course of action with legal counsel.
-
Michael added that the Fantom team is focused on moving forward and continuing the work they were doing before the Multichain collapse. They are concentrating on technical development, such as launching a demo network for the new Fantom Virtual Machine and storage system.
-
Fantom is also developing a new client that can significantly reduce transaction confirmation times and plans to fund more hackathons.
-
Fantom has a gas monetization program where $FTM is allocated to the top 20 applications. Community voting determines treasury allocations, and this program supports the growth of the Fantom blockchain.
-
Michael acknowledged that while these initiatives are beneficial for the future, they do not directly address the Multichain issue. Nonetheless, he emphasized Fantom’s commitment 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, without a community, there is no foundation. He stressed that focusing on the community is crucial for the future of Fantom DeFi.
-
Michael hopes to see Fantom leading in technology by the end of 2023. He acknowledged mistakes made by the Fantom Foundation, particularly placing too much trust and not taking sufficient measures to protect the foundation. He recognized the importance of proactively safeguarding both the foundation and its users. He mentioned Fantom’s plan to issue a new stablecoin called $fUSD within its ecosystem.
-
Michael assured that although they did suffer some losses, a large portion of funds remain intact, and there is sufficient funding for Fantom to continue its projects into the future.
-
Michael highlighted the addition of new team members, including a new marketer and a senior technical expert, who will help drive Fantom forward.
-
Corey asked about the bank project. While Michael couldn't provide a clear timeline, he clarified that due to regulatory reasons, the bank will operate as an entity separate from the foundation.
-
Michael discussed the security of Fantom’s assets. He explained that unlike the Multichain situation, Fantom’s assets are not controlled by a single individual but managed collectively by multiple parties, each operating independently from the foundation. This structure helps protect Fantom from similar tragedies.
-
Michael stated that the Special Fee Contract (SFC), often associated with network control, only handles reward distribution to validators. It does not grant access to validators on the network. Michael said they plan to eliminate the SFC to reduce risks and dependence on Ethereum-based technology.
-
Michael said while they don’t develop IoT or mobile apps themselves, they plan to fund hackathons targeting these areas. He believes the most important use cases for blockchain technology lie in DeFi, mobile devices, and gaming applications.
-
When asked about funds trapped on Multichain and potential recovery or refund plans, Michael said they will address these transactions and prioritize individuals whose funds were stuck after being transferred from Multichain.
-
Corey asked about the recovery status of frozen funds. Michael said they are in discussions with Circle and Tether to achieve the best outcome. Most of the $USDC and $USDT have already been frozen to prevent bad actors from accessing them.
-
When asked about the timeline for deploying Fantom’s stablecoin, Michael said they don’t have a specific date yet but confirmed it will definitely happen this year.
-
Corey asked if they had received responses from Circle or Tether. Michael said they are still waiting for replies and need a court order to freeze any remaining assets.
-
When asked whether the foundation plans to hire a risk management team, Michael said they already have many internal checks and balances, along with rigorous testing processes, to prevent issues.
-
Michael confirmed that three individuals located in different places jointly control the EOA wallet through multi-signature.
-
Corey asked who would be compensated if funds are recovered. Michael said this is difficult to determine and depends on the outcome achieved.
-
Corey raised the cost of potentially using treasury funds to compensate user losses. Michael said it’s hard to estimate, but likely at least tens of millions of dollars.
-
Regarding migration from EOA to multi-sig, Michael said no EOA controls the SFC, and they plan to eliminate the SFC altogether.
-
When asked about regaining TVL on-chain, Michael said they are collaborating with Axelar and LayerZero and plan to launch more stablecoins on Fantom. They aim to ensure partnered projects consider regulatory and geographic risks.
-
Michael said several protocols are already deployed on Fantom, and he believes lending protocols will grow and recover. He also acknowledged that rebuilding trust with the Fantom community is a long-term process.
-
Corey asked about address 0XD68, reportedly capable of reversing anything happening on-chain. Michael stated there is no such address that can reverse transactions or control validators on the Fantom network.
-
Corey asked Michael when the Fantom Foundation first learned about the Multichain incident. Michael recalled it was around the time Multichain publicly announced the news.
-
Michael admitted they made wrong decisions but acknowledged the benefit of hindsight. He said the lesson learned is that if there are signs of trouble, strict actions should be taken immediately.
-
Michael apologized to the Fantom community for the incident. He emphasized his commitment to finding solutions and moving forward.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
深潮TechFlow
