“CeFi comes to the DeFi rescue,” said Changpeng Zhao (CZ), as his company, Binance, leads the $150 million funding round for Sky Mavis, the Vietnam-based gaming company that runs one of the biggest Play-to-Earn (P2E) gaming platforms, Axie Infinity.
This funding round serves as a bailout to victims of the $625 million hack on Sky Mavis’ dedicated sidechain, the Ronin Network. Other participants of the funding round include Animoca Brands, a16z, Dialectic, and Paradigm.
According to the press release by Sky Mavis, “the round combined with Sky Mavis balance sheet funds, will be used to ensure that all users affected by the Ronin Validator hack will be reimbursed.”
Back story
- Late last month, Nairametrics reported on the hack, which revealed that Axie Infinity’s sidechain, the Ronin Network, was hacked and it resulted to 173,600 Ether and 25.5 million USDC stolen from the network.
- According to the statement, “The attack was socially engineered, and a thorough investigation is ongoing. We take full responsibility for the breach. The root cause of the breach was the small validator set which made it much easier to compromise the network.
- “While racing for mainstream adoption, we made some trade-offs that ended up leaving us vulnerable to this sort of attack. It’s a lesson that we’ve learned the hard way. A lesson that will guide how we build Ronin out moving forward. We’re confident that we will come out stronger and wiser from this.”
- The attacker moved the entirety of the funds into a wallet and so far, about 8,251 Ether, worth $26.4 million as of the time of this writing, has been moved to different addresses so far. In fact, 1,400 Ether of the 8,251 Ether was passed through the privacy tool, Tornado Cash, so as to render the funds untraceable.
What you should know
- Sky Mavis revealed that they plan to increase the validator group to 21 validators from 9, within the next three months, which will be a split between various stakeholders including partners, community members, and long-term allies.
- They also stated that the Ronin Network bridge will begin operations once it has undergone a security upgrade and several audits, which can take several weeks. However, in the meantime, Binance will be supporting the Ronin Network by providing ETH withdrawals and deposits for Axie Infinity users, allowing most of them to operate freely.
- The statement mentioned that “the 56,000 ETH compromised from the Axie DAO treasury will remain undercollateralized as Sky Mavis works with law enforcement to recover the funds. If the funds are not fully recovered within two years, the Axie DAO will vote on next steps for the treasury.”
- CZ also stated, “In order for the global ecosystem to continue thriving and maturing, it is imperative that we work together, especially when it comes to security, which is our strong suit. We have seen the tremendous work and growth of the Sky Mavis team since working together on the Axie Infinity project on Binance Launchpad. We strongly believe Sky Mavis will bring a lot of value and growth for the larger industry and we believe it’s necessary to support them as they work hard to resolve the recent incident.”
- The hack on the Ronin bridge is bigger than the total value of the hacks seen in 2021. In 2021, according to data from The Block research, the Decentralized Finance (DeFi) space lost a little over $610 million to exploits. $355 million, representing 58.20%, was lost using flash loan attacks while the rest ($255 million, representing 41.80%) was lost using other forms of methods, like exploiting a bug in a given protocol.
- To add, this attack makes it the largest in the entire cryptocurrency space. It surpassed the amount lost in the Poly Network hack, which totalled $611 million.
Despite the hack, Axie and Ronin maintain a dominant position in the NFT gaming space on the Ethereum Network. They tout to have processed 10 times more all-time volume than the 2nd largest NFT game.
The network has also processed 3 times more NFT trading volume than all other chains, barring Ethereum. Right now, there are 2.6 million unique addresses that own Axies. This is 4 times more than the next largest NFT project (NBA Top Shot) by holders.
The Ronin wallet has been downloaded 3 million times, serving as a boarding pass and on-boarding portal into Web3 for millions of people. Also, with 2.2 million monthly active players, Axie is the most played NFT game of all time, with majority of its players hailing from the Philippines.
