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The Kinto Network, an Ethereum layer-2 blockchain, is set to wind down operations by the end of September, leading to an 81% collapse in its native token's value. The decision comes months after a significant hack and an inability to secure further funding.
Key Takeaways
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Kinto Network announced its shutdown due to financial difficulties following a hack and failed fundraising efforts.
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The Kinto token (K) has seen an 81% price drop.
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The project experienced a $1.6 million hack in July due to a vulnerability in the ERC-1967 Proxy standard.
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Founder Ramon Recuero is contributing personal funds to aid victims and lenders.
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This is the second crypto project founded by Recuero to cease operations after a security incident.
The Downfall of Kinto Network
Kinto, which launched its token in April, announced its impending closure on its Medium page, citing worsening market conditions that hindered further fundraising efforts. The team stated that daily operational costs were depleting their remaining funds, forcing a difficult but necessary decision to shut down cleanly and protect users and lenders.
"Every day that we go on, the funds dwindle further. We’ve operated without salaries since July, and after the last financing path fell through, we have one responsible choice left: shut down cleanly and protect users/lenders as best as possible," the announcement read.
Impact of the July Hack
The network had previously raised $1 million in debt to restore trading after a July hack drained approximately 577 Ether (ETH), valued at around $1.6 million, from the protocol. The hack was attributed to a security vulnerability within the widely used ERC-1967 Proxy standard, which affected several other projects as well.
Despite these efforts, the project could not overcome the financial strain. Some observers also pointed to Kinto's exceptionally high annual percentage yield (APY) offerings on stablecoins, even after the hack, as a potential contributing factor to its financial instability.
Recovery Plan and Founder's Contribution
Kinto has outlined a plan to distribute its remaining assets, including $800,000 in Uniswap liquidity, to lenders who supported the network's relaunch. These lenders are expected to recover 76% of their principal investment. Additionally, founder Ramon Recuero is establishing a "goodwill grant" for hack victims, offering $1,100 per affected address and contributing over $130,000 of his personal funds for relief.
The Kinto team has urged users to withdraw their assets by September 30. After this date, users will need to claim any remaining assets through a perpetual claim contract that the project plans to establish.
A Pattern of Setbacks
Kinto marks the second crypto venture for Ramon Recuero to face closure. His previous project, Babylon Finance, also shut down in November 2022 following a $3.4 million hack earlier that year. Recuero had similarly cited an inability to reverse negative momentum after the hack, leading to Babylon's closure just six months after its launch.
The Kinto token (K) has seen a dramatic decline, trading at $0.46, an 81.4% drop from its recent all-time high of $14.5 million on August 14. The token had only launched four months prior, in April.
Sources
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Kinto Tanks 81% After Announcing Its Blockchain Will Shut Down, Cointelegraph.
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