Morphex: Fantom Operations Update
The past few days have been difficult for everyone impacted by the Multichain exploit, including Morphex. We are privileged to have a supportive, understanding, and patient community during these difficult times — thank you.
Currently, trading limits on Fantom have been reduced from open interest to $1, essentially enabling close-only mode for trades. Swaps have been disabled. MLP esMPX incentives will be turned off within 24-hours. Single-staking esMPX incentives will continue. Withdrawals remain open as they always have been for MLP liquidity providers to withdraw their assets. Morphex’s treasury will withdraw its MLP position on Fantom after OI falls below the value of treasury’s position or in one week, whichever happens first, indicating it will prioritize other LPs to withdraw first.
As a reminder, this applies only to Fantom operations. BNB Chain operations remain unaffected with trading open for your convenience.
What happens next?
Morphex has worked diligently to assess and determine the next steps for operations on Fantom. We have been in communication with the Fantom Foundation, LayerZero, and Axelar, as we learn more about each issuer’s assets, bridge operability, and security. Our community is familiar with Axelar, as Morphex uses Axelar to bridge MPX between Fantom and BNB Chain. We have enjoyed working with the LayerZero team to better understand their product. Fantom Foundation has stated that they will support LayerZero and Axelar equally. As Fantom looks ahead to a multi-issuer asset future, there are benefits and drawbacks to consider.
The primary benefit of two issuers vs. one is the diversification of risk for issuer compromise, which is what we have witnessed with Multichain. The primary drawback is the fractioning of liquidity for core and stable assets. In an environment where liquidity is split between LayerZero and Axelar assets, liquidity for wBTC, wETH, and stablecoins will be divided. Liquidity pools may be smaller due to this division, price impact may be higher, slippage may be greater, and all of these conditions including some which may yet to be realized or written here, may create a less efficient, but likely safer, experience on Fantom.
For Morphex, the primary concern is the composition of the MLP. With two issuers’ assets included, core and stablecoin assets from both LayerZero and Axelar would be listed, as well as FTM. Liquidity providers would be exposed to both issuer’s assets, even if they deposited LayerZero or Axelar assets only. This risk is not new, as MLP providers were already exposed to all assets within the MLP prior to the Multichain exploit and this is applicable to GLP providers on GMX itself. However, it is worth noting. For traders, there is a more impactful consideration with two issuers’ assets included in the makeup of MLP, which is the fractioning of liquidity as it applies to available liquidity for trading. A trader who wants to long wETH will have to choose whether they want to long Axelar’s wETH or LayerZero’s wETH.
As an example to better understand this impact, let’s assume with one issuer’s assets, the wETH pool had $300k worth of available liquidity. With two issuer’s assets, Axelar’s wETH may have $150k and LayerZero’s wETH may have $150k. The trader will be limited in their position by total available liquidity for the specific asset pool chosen, in this example, $150k as opposed to $300k.
Is this a major issue? No.
Have liquidity providers and traders always had to take into account the risks present in the assets they hold, provide as LP, trade, and interact with? Yes.
Have traders always had to take into account the available liquidity in the asset pool they are trading? Yes.
A multi-issuer asset future for Fantom is here. Welcome to the new age.
We will adapt. We will adopt.
Therefore, having taken all of this into consideration, Morphex is excited to announce that it will support both LayerZero and Axelar assets. A new MLP token is required and will be launched along with new correlated contracts. This process will take some time, we estimate 1–2 weeks. We do not believe there will be an impact on earned multiplier points or esMPX.
As a reminder, this applies only to Fantom operations. BNB Chain operations remain unaffected with trading open for your convenience.
