Geist Finance once managed almost $30 million worth of crypto assets.
The aftermath of a Multichain exploit has forced lending protocol Geist Finance to cease its operations.
On July 14th, the development team behind Geist Finance took to Twitter to reveal the news. It is worth noting that on July 6th, the firm suspended Geist contracts. However, three days later, on July 9th, the platform resumed withdrawals and repayments.
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In the announcement, the team confirmed they intend to discontinue lending and borrowing services on Geist permanently.
Before the Multichain hack, Geist Finance, operating on the Fantom network, managed crypto assets exceeding $29 million.
Users were granted the ability to lend, borrow, or utilize tokens from the Multichain platform as collateral, which included bridged versions of USD Coin (USDC), Tether (USDT), Bitcoin (BTC), and Ether (ETH). The pricing, collateral, and loan value determinations of these tokens were overseen by Chainlink oracles.
However, the hack caused these oracles to stop delivering trustworthy data, as they started reflecting values of the "real" or non-bridged versions of each coin, which are more than quadruple the value of their Multichain versions. The development team elaborated:
Because Chainlink oracles are tracking the value of real USDC, USDT, WBTC or ETH, they are not aware of the real value of Multichain assets. Those assets are currently trading at around 22% of their real value.
This value discrepancy has rendered the possibility of reactivating lending "impossible" since it would lead to severe debt for holders of non-Multichain coins, such as Magic Internet Money (MIM) or Fantom (FTM). This obstacle makes the reopening of Geist impossible.
The Geist team, however, ensured that the blame did not fall on the Chainlink oracles, stating they "worked as they should." Instead, they pointed the finger of blame solely to Multichain.
On July 10th, the blockchain security firm Chainalysis suggested that the "unusually large, unauthorized withdrawals" could be the result of an internal rug pull.
It is worth noting that on the same day as Geist Finance, Multichain also closed its doors.
The Geist Finance closure underlines the inherent risks within the crypto lending sector and the paramount importance of stringent security safeguards to protect against devastating security breaches.
