The news caused its governance token to plunge over 80%. The project pointed to failed fundraising, unsustainable operations, and mounting losses as reasons for the closure. Built on Arbitrum, Kinto wanted to combine decentralized security with centralized exchange efficiency and even supported tokenized stock trading. The team pledged to return remaining assets to lenders and provide grants to hack victims, but the shutdown is co-founder Ramon Recuero’s second failed venture.
Kinto Network Shuts Down
The governance token of the Kinto Network collapsed by more than 80% after the project announced it will shut down its Ethereum layer-2 blockchain at the end of September. The team pointed to worsening market conditions, failed fundraising efforts, and the fallout from a July hack that drained 577 ETH, worth about $1.6 million, from its protocol.
In a Medium post, Kinto said that it was operating without salaries since July and that continuing would only erode remaining funds. This left closure as the only responsible option to protect users and lenders.
The hack exploited a vulnerability in the ERC-1967 Proxy standard, which is a widely used OpenZeppelin codebase, and impacted several projects beyond Kinto. While the team pointed to the hack and financial pressures as the primary reasons for shutting down, some people criticized Kinto’s unsustainable yield offerings. Earlier this year, co-founder Ramon Recuero said that staking K tokens generated returns of up to 130% APY in USDC, among the highest in the DeFi sector, even as the project struggled to generate revenue.
Kinto was built on Arbitrum with Ethereum as its settlement layer, and its modular exchange attempted to merge the efficiency of centralized platforms with the security of decentralized ones. It also facilitated trading of tokenized stocks like Apple, Microsoft, and Nvidia.
After the shutdown announcement, the team outlined a recovery plan that will see $800,000 in Uniswap liquidity distributed to “Phoenix” lenders who previously helped the project relaunch, allowing them to recoup around 76% of their principal. Victims of the hack will receive a $1,100 goodwill grant per affected address, partially funded by Recuero, who pledged more than $130,000 of his own money. The team also said that if future asset recoveries exceed victim claims, the excess would be returned to the community through Snapshot governance.
Kinto token’s price action over the past 24 hours (Source: CoinMarketCap)
Users have been urged to withdraw assets by Sept/ 30, after which remaining claims will need to be settled through a perpetual claim contract. The closure is Recuero’s second failed project, after Babylon Finance, which shut down in late 2022 after a $3.4 million exploit. Since the announcement, Kinto’s token has plunged to $0.38.
Source: https://coinpaper.com/10919/kinto-token-crashes-as-network-confirms-shutdown
