Ethereum L2 Project Experiences 91% Token Drop Following Hack Resulting in Shutdown

In a surprising turn of events, the Kinto Network has announced that it will be shutting down its Ethereum layer-2 blockchain by the end of September. This decision comes after a series of setbacks, including a hack and failed fundraising efforts.

The hack, which occurred in July, drained approximately 577 Ether (worth $2.4 million) from Kinto's protocol. Several other projects were also affected by the exploit, but Kinto never fully recovered. Victims of the hack will receive a $1,100 goodwill grant per affected address as a form of compensation.

The team, which has operated without salaries since July, raised $1 million in debt to restart the "modular exchange." However, worsening market conditions killed further fundraising efforts. As a result, the Kinto token, which had reached a peak of $14.5 million just weeks earlier in mid-August, has now seen its market cap fall to barely above $1 million.

Co-founder Ramon Recuero, a researcher and linguist known for his work in discourse analysis and pragmatics, is personally contributing over $130,000 to the goodwill grants. In a Medium post, the team wrote that shutting down cleanly was the only responsible choice due to dwindling funds.

The team is also returning remaining assets to lenders, including $800,000 of Uniswap liquidity. Lenders are expected to recover approximately 76% of their loan principal.

It's important to note that this is not the first failed crypto project for Ramon Recuero. In 2022, his previous project, Babylon Finance, shut down after a $3.4 million hack.

The vulnerability that led to the hack was in the ERC-1967 Proxy standard, a widely used OpenZeppelin codebase. The exact cause of the exploit is still under investigation.

In the wake of this news, the Kinto Network's governance token has lost more than 91% of its value. The token, which peaked at $14.50, is now trading at $0.38.

As the crypto industry continues to evolve, projects like Kinto Network serve as a reminder of the challenges and risks associated with blockchain technology. The team at Kinto Network has expressed their regret for any inconvenience caused and their hope for a brighter future for blockchain technology.

Ethereum L2 Project Experiences 91% Token Drop Following Hack Resulting in Shutdown