$600M+ ‘Axie Infinity’ hack spotlights weakness in one of VC’s hottest sectors
Hackers stole more than $600 million worth of cryptocurrencies after compromising the Ronin Network, which powers the blockchain-based game “Axie Infinity.” Vietnam-based Sky Mavis, which owns Axie, raised a $152 million Series B led by Andreessen Horowitz last year, reportedly at a $3 billion valuation.
On March 23, hackers made off with 173,600 in ethereum and 25.5 million USDC, a stablecoin pegged to the US dollar. After gaining access to private keys, the hackers took control of a majority of the “validator nodes” that are needed to approve transactions between Ronin and the ethereum network.
“Axie Infinity” has become popular with gamers who earn digital money by playing, selling virtual characters and other means. Blockchain gaming companies have raised $1.6 billion in VC funding to date, making it one of the most well-funded segments within the blockchain ecosystem, according to PitchBook data.
Despite their professed decentralization, blockchain games have struggled to build the kind of interoperability that proponents of the metaverse envision. Bridges like the one used by Ronin are one way to allow interoperability between different blockchain networks, thus letting users move digital assets between different ecosystems.
But as the Ronin hack shows, these so-called cross-chain applications are vulnerable to attack. Earlier this year, Ethereum co-founder Vitalik Buterin argued in a Reddit post that cross-chain bridges have inherent security vulnerabilities.
Following the news Tuesday, Ronin’s digital token fell 20%, and “Axie Infinity” tokens were down more than 7%. Sky Mavis has frozen the ability to move money in and out of its game.
The startup is working with law enforcement, cryptographers and investors to recover or replace stolen funds for its users. The company will also increase the number of validators needed to approve transactions—from five to eight, out of nine total—to improve security.
Featured image courtesy of Sky Mavis
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