• Fri. Dec 9th, 2022

mccoy.ventures

All content has been processed with publicly available content spinners. Not for human consumption.

‘Is my money gone?’ A thriving crypto community deals with a $600 million theft

When Logan Evans found out that Axie Infinity — a popular online game in which players can earn cryptocurrency — fell victim to one of the largest digital heists of all time, he worried he had lost everything.

“My first reaction was ‘holy s—, is my money gone? Did I just buy all these cute little Pokemon for nothing?’” Evans, 24, told NBC News.

Evans has spent the past eight months building up his squad of Axies, animated monsters that many (including Evans) compare to the popular Nintendo Pokémon franchise, wherein players pit their candy-colored monsters against one another. But what might sound like a relatively simple game has emerged as one of the most popular and lucrative of what are called play-to-earn games. Axie Infinity’s website boasts that its marketplace has out through $3.6 billion in transactions, and the game has drawn in around 2 million users per day.

But that economy was rocked in late March when unidentified hackers managed to steal assets worth around $625 million from a subsidiary of Vietnamese gaming studio Sky Mavis, the company that runs Axie Infinity. The company vowed to reimburse lost funds, and Sky Mavis said Wednesday that it had raised $150 million from investors to help pay back its players.

While Evans hasn’t directly lost any money as a result of the hack (he still holds the same amount of in-game currency as he did before the breach), he and other players cannot withdraw cryptocurrency from the game while Axie Infinity and law enforcement investigate the hack and determine that its network is stable. 

Evans said he was frustrated with what he saw as a slow reaction from the company, which first acknowledged the breach six days after the theft.

“I think that’s the worst part,” said Evans, who lives in Missouri. “The negligence of not hearing about it for six whole days.”

April 7, 202205:11

Axie Infinity is one of a growing number of play-to-earn games that use blockchain technology to create a system that can track and reward players. These games have been touted by some crypto advocates as the future of online gaming, giving players a stake in the success of the games they play.

But the complexities of the costs, benefits and risks of decentralized blockchain technologies — and especially the centralized platforms built on top of them — have become apparent in the past year thanks to a series of high-profile hacks

Axie Infinity’s problem started when it created its own blockchain, Ronin Network, to avoid the pricey transaction fees that would have come from using Ethereum, the most popular blockchain for play-to-earn games.

Having its own blockchain allowed the company to create a digital token, which was then backed by ether, the cryptocurrency of the Ethereum blockchain. Those two currencies are connected by what’s known as a cross-chain bridge, which allows users to exchange ether for Axie Infinity’s digital tokens and vice versa. 

The risk of a hack “grows exponentially” the moment crypto assets are traded from a secure blockchain like Ethereum and poured into a cross-chain bridge like Axie Infinity’s Ronin network, said Max Galka, CEO of the blockchain and crypto forensics firm Elementus. In Axie Infinity’s case, hackers were able to break into the company system by compromising Ronin. The hackers could then transfer ether and another digital currency out of the company’s accounts. 

Sky Mavis did not respond to NBC News’ request for comment.

As to Axie Infinity’s future after succumbing to the hack, Galka said it was continually surprising to see “how resilient this ecosystem is to events like this.

“Historically hacks, as large as they may be, have not really scared people off,” he said.

Axie Infinity players who spoke with NBC News confirmed they’re not ready to give up on the game just yet.

Ansel Gravelle is among a group of Axie “managers” who have set up the equivalent of a small business on the platform, complete with a network of players — or “scholars” — who use his digital assets to play Axie Infinity and other play-to-earn games. It’s a win-win situation for those who can’t afford to play Axie Infinity, which requires users to buy three non-fungible token (NFT) creatures known as Axies; they start at about $16, but it’s not uncommon for players to spend upwards of $1,000 to build a team.

News of the hack surprised Gravelle, 24, but he said he can “see the bigger picture” and doesn’t feel a sense of fear or panic.

“I think it’s one of those things that shows we’re new and early in this space,” Gravelle said. “I’m not planning on selling anything. If anything, I’m going to wait and see what kind of dip this fear brings … and try to capitalize on maybe some lower-asset prices.”

Gravelle’s faith may be rewarded, as Axie Infinity has promised to make players whole. He currently helps run a network of about 1,300 players, with most of them playing from the Philippines, Brazil and throughout Africa, with whom he shares profits.

The gamers earn “Smooth Love Potion,” or SLP, tokens as rewards when they play, which can then be sold for cryptocurrency. The value of those tokens in relation to ether has crashed in recent months, meaning players now earn much less than they used to.

“They truly are just like employees. They can play and earn a little bit of cash,” Gravelle said. “You just play the game for a couple of hours a day, and if you make $10 then you keep $6 and I keep $4. That’s how it works.”

It’s become a lucrative business model, Gravelle said, which has allowed him to earn more money than from his six-figure consulting job last year.

Even casual players are still engaged in the game. Akhil Jindal, 29, who started playing Axie Infinity last June, said the game and its community were still big draws but that the hack did offer a warning.

“The community is very strong and with their continued support Axie will continue to remain successful,” said Jindal. “But nonetheless, there’s really important lessons to be learned in decentralization and security.”

Both Jindal and Evans said they hadn’t lost faith in Axie Infinity or its creators, and weren’t planning on giving up on the game any time soon.

“I still trust Axie Infinity,” Evans said. “I still love everything about this space.”