Optimism Creates Panic After $450m Fund Transfer

08/18/2022

2 minutes read

2022.08.18 17:30

Optimism, a layer two protocol and smart contract platform that aims to enable low-cost and near-instantaneous Ethereum transactions, has created panic amongst users through an unannounced movement of funds amounting to $450m.

As the unannounced transfer of funds led to rumors of Optimism’s multi-signature wallet being hacked, Optimism released a clarification on Twitter (NYSE:TWTR) and said, “We’re seeing some confusion about recent transfers of OP out of a multi-sig. This is expected—today, we executed a series of planned standard transfers to the Coinbase (NASDAQ:COIN) Custody wallets of various investors in OP Labs PBC.”

We’re seeing some confusion about recent transfers of OP out of a multisig. This is expected—today we executed a series of planned standard transfers to the Coinbase Custody wallets of various investors in OP Labs PBC.

— Optimism (_) (@optimismFND) August 17, 2022

Furthermore, Optimism apologized for creating a hack or scam stir due to the announced transfer of funds and said, “To clarify further: this was not a token unlock or a change in the circulating supply–just the first L2 supported by Coinbase custody.” The company said, “Apologies for not communicating about this transfer beforehand.”

The company vowed to make announcements before transferring funds and said, “We will announce large planned transfers ahead of time to avoid further confusion going forward.”

OP Token Takes A Dive

However, Optimism’s native token, or the OP token, took a 10% dive due to the panic and the hacking rumors. Panicked users also reprimanded Optimism on Twitter and said “You are transferring $450m of tokens in a public blockchain without any notice. Guys, please make an announcement well in advance. We were all scrambling to figure out if something was wrong.”

As soon as Optimism clarified that the $450m fund transfer was pre-planned, the OP token rebounded from $1.25 to $1.34.

Optimism describes itself as “a Layer 2 Optimistic Rollup network designed to utilize the strong security guarantees of Ethereum while reducing its cost and latency” on its website. It also calls itself a “low-cost and lightning-fast Ethereum L2 blockchain.”

On the Flipside

In June 2022, Optimism admitted to sending 20M OP tokens meant for liquidity provisioning partner Wintermute to the wrong address.
People have taken to social media and questioned the company. “Who is providing oversight on these massive transfers? How do OP holders know that Optimism multisig isn’t screwing them by misappropriating tokens?” Chris Blec, a podcaster who runs “proof of decentralization,” asked.

Why You Should Care

Other companies such as Polygon have been making regular announcements before moving funds.