Bitget Token will become the native token of Morph, despite an audit showing that the L2 has numerous critical security vulnerabilities and other red flags.
Top-10 global cryptocurrency exchange Bitget is winding down long-term development of its platform token, Bitget Token (BGB), and transferring all tokens it controls to Morph, an Ethereum Layer 2 network designed to power the “next generation of onchain consumer finance,” per the project’s description on its official website.
In a press release shared with The Defiant, Bitget said that it will transfer 440 million BGB tokens in total to the Morph Foundation, with 50% of that sum to be “burned immediately” by the foundation, and the remaining 220 million released at 2% per month to “fund liquidity incentives, use case expansion, and education.”
Bitget Token was originally launched on Ethereum in 2020. Now, according to Bitget, Morph will become the “native onchain home of BGB and serve as the core settlement layer,” with BGB established as the network’s gas and governance token.
In comments to The Defiant, Gracy Chen, CEO at Bitget, said that the exchange has always positioned BGB as “more than just an exchange token.”
“Moving the tokens into the Morph Foundation makes sure BGB’s development is guided by the community and ecosystem builders rather than a single company. Morph was the natural choice because it’s purpose-built for payments and onchain consumer finance, which aligns directly with BGB’s roadmap,” Chen explained.
Bitget’s CEO added that the exchange doesn’t see the transfer as a “race to replicate someone else’s model,” adding that partnering with Morph “allows us to build directly on top of an existing payment-focused Layer 2 that’s already innovating in the consumer finance space.”
The centralized exchange also made it clear that it’s distancing itself from the asset’s further development roadmap, as the Morph Foundation will be “solely responsible for BGB’s long-term development roadmap, co-building the ecosystem with the community.”
Chen explained to The Defiant:
“Rather than splitting resources between running an exchange, wallet, and now a separate chain, we think it’s more efficient and better for users to strengthen BGB’s role within a chain that shares our vision. For us this is more about scaling real-world payment use cases for 120 million Bitget users and beyond.”
Bitget said in the release that the Morph Foundation “will also update BGB’s burn mechanism to link directly to the Morph network activity until the total supply is reduced to 100 million.”
Following the announcement, the price of BGB jumped 10% to $5.20, before retracing to below $5 by press time. Bitget Token currently has a market capitalization of $5.78 billion, making it the 38th-largest crypto asset.
Bitget, meanwhile, ranks 7th by 24-hour trading volumes among centralized exchanges, according to CoinGecko data, and third overall, taking CoinGecko’s Trust Score into account.
Morph has a total value locked (TVL) in DeFi of $41.4 million, making it the 70th-largest chain in DeFi.
Centralization Concerns
Data from L2BEAT shows that Morph appears to be riddled with security issues, ranging from critical exploits to serious centralization risks.
A key vulnerability involves the potential for a malicious code upgrade. L2BEAT found that there is no delay on these upgrades, meaning a bad actor could push out a harmful update and compromise user funds before the community has time to react.
The platform’s fraud-proof mechanism also appears to be nonfunctional. While the system relies on a whitelisted challenger to flag incorrect transaction states, this challenger doesn’t post a challenge of an incorrect state root.
Furthermore, Morph has several other risks as the network operator has the power to override finalized batches to steal funds or censor a user’s withdrawal transaction, L2BEAT warns. The operator can also censor any user’s transactions, preventing them from using the network.
On top of that, due to the operator’s central position, they can extract MEV by front-running user transactions.
However, it’s worth noting that Morph is far from the only network rife with these red flags. L2BEAT’s data shows that more than two dozen networks have similar technical limitations or even worse centralization issues.
Commenting on vulnerabilities, Bitget’s CEO said that the team is “is well aware of the risks flagged by L2BEAT.” Chen added:
“Many of the points they raise are challenges common across most new Layer 2s. Morph has already implemented solutions or mitigations to address these areas, although L2BEAT may not classify them under its own definitions. We remain confident in Morph’s security roadmap, and Bitget will continue to support the ecosystem with user protection as our top priority.”
In March of last year, Morph raised $20 million from prominent venture capital firms in a round led by Dragonfly Capital, with participation from Pantera Capital, The Spartan Group, and others.
Last month, another top crypto exchange, OKX, announced a massive token burn of its platform token, OKB, sending the token on an extended rally. As part of the move, the OKB token, also originally launched on Ethereum Layer 1, became the native gas token of OKX’s Layer 2 X Layer, which it launched last August.
Disclaimer: This article has been updated to add commentary from Bitget’s CEO, Gracy Chen.
