This week, the business behind Axie Infinity, a popular crypto play-to-earn game, secured $150 million in cash to compensate gamers who lost $625 million in a hack last week. According to the corporation, Axie Infinity’s creator, Vietnamese gaming studio Sky Mavis, had received widespread accolades for creating the most-played NFT game of all time, with 2.2 million monthly active players. The fact that this investment round was sponsored by Binance, the world’s largest crypto exchange, is noteworthy, given that Binance had not previously participated in Sky Mavis’ previous rounds. More on it later, but first, some background information.
Existing Sky Mavis investors, including Andreessen Horowitz, Paradigm, and Accel, joined Binance in this round to assist Axie, although their involvement was all but anticipated after word of the attack surfaced. Those investors, notably a16z, who led the company’s $152 million Series B investment last October, already had a financial stake in the game’s success. Sky Mavis was valued at about $3 billion at that round, which was a lot of money for a firm that had just received $7.5 million five months before. The heist was carried out on Axie’s Ethereum-based sidechain, Ronin, and is the largest known crypto heist to date.
It was a poor look not just for Sky Mavis, but also for investors like a16z, who had touted Axie as the cryptocurrency’s future. When you examine the demographics of Axie players as a whole, over 25% are unbanked, according to the firm, and many are low-income employees in developing nations who rely on Axie for a large percentage of their income. Sky Mavis or any of its investors didn’t find out about the attack for six days, which enraged many people, and once they did, the firm hurried to find answers.
While Sky Mavis said that it was cooperating with law police to investigate the matter, it is extremely unusual for cash to be recovered, let alone reimbursed to users, following a crypto breach. Given that there is no information about the hacker other than the wallet address they used to move assets out of Axie, the search procedure is just too complicated.
The majority of the funds are still in the hacker’s wallet, though the hacker did appear to move 2,000 ETH from the wallet to Tornado Cash, a privacy tool that allows users to hide their wallet address while withdrawing funds. So, if Sky Mavis couldn’t track out the hacker and recover the payments that way, it had to come up with alternative methods to make up the difference or risk losing its consumers’ trust by allowing them to suffer a massive financial loss due to the company’s own security flaws.
