Geist Finance Closure After Multichain Hack: Key Insights
Geist Finance Closure Decision
Geist Finance has opted not to reopen after Multichain confirmed that funds are irretrievable following a significant security breach. The inability to accurately value Multichain assets, compounded by Chainlink oracles tracking only real USDC, USDT, WBTC, or ETH values, has greatly influenced this decision.
Impact on Fantom Network
Geist, operating on the Fantom (FTM) network, previously held over $29 million in cryptocurrency assets. Users utilized bridged tokens like USDC, USDT, BTC, and ETH as collateral for borrowing and lending. Chainlink oracles, essential for price tracking and valuation, have now become unreliable, showing the prices of non-bridged coins which are significantly higher than those of Multichain assets.
Discrepancies in Valuation
The Chainlink oracles are currently unable to determine the actual value of Multichain assets, which are trading at about 22% of their real value. This discrepancy is a direct consequence of the recent Multichain hack, which severely impacted asset valuation and reliability.
Details of the Hack
On July 14, Multichain confirmed that withdrawals on July 7 resulted from a hack. The breach occurred due to unauthorized access to a cloud server account, controlled exclusively by the CEO, who was arrested by Chinese authorities. This security lapse enabled unauthorized draining of funds, contradicting prior protocol assurances that no single server could access all key shards.
Counter-Exploitation Effort
A subsequent fee-based attack on July 11 was identified as a counter-exploit initiated by the CEO's sister, aiming to recover the assets under team instructions. However, her arrest has left the status of the recovered funds uncertain.
Broader Implications
In a related incident, Arcadia Finance, another decentralized finance (DeFi) protocol, suffered a loss of around $455,000 due to a code exploit linked to untrusted input validation. This breach highlights the vulnerabilities present within DeFi protocols.
The closure of Geist Finance underscores the critical need for robust security measures in the rapidly evolving crypto landscape.
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