Bigger problem with Axie Infinity

Summary: The $620 million Ronin theft is only a small part of the problem; play-to-earn mode isn’t free.

On March 23, the blockchain wallet of the chain game “Axie Infinity” was stolen $620 million. The bug is related to the structure of the game itself, which uses not the standard game currency, but real money — non-fungible tokens (NFTs). This is the so-called “play-to-earn” model: if you can play, playing games can really make you money.

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Instead of running directly on the tried-and-true Ethereum network, Axie Infinity uses a proprietary sidechain, Ronin, designed to reduce congestion on the public chain. In order to interact with applications on the Ronin network, users move cryptocurrencies onto the network using specialized “bridges”.

This is where the vulnerability happens. The internals of the blockchain network itself are difficult to breach, mainly when cracks start to appear when funds are transferred between networks. Last year, a hacker stole about $610 million by attacking Poly Network’s bridges. Just two months ago, the bridge of DeFi platform Wormhole was also hacked, involving an amount of 325 million US dollars.

In Ronin’s case, its parent company didn’t even notice the hacker’s presence for about a week, or did so and decided to make an official announcement later. All told, the company blogged about the theft on March 29, a full six days after the hackers took the funds.

Axie co-founder Jeff Zirlin tweeted: “This is a time to show what we are, and chaos is a ladder.”

This flippant ostrich behavior more or less reflects the mindset of the Axie Infinity team. The Ronin bridge is still closed, meaning that Axie players cannot withdraw their own cryptocurrency from the network, but company executives have apparently decided to continue operations. Axie Infinity’s parent company, Sky Mavis, said it plans to reimburse players for monetary losses. It’s also delaying the release of the game’s next big upgrade, Axie Infinity: Origin, by a week.

But given Axie’s desire to maintain its position as the largest single play-to-earn ecosystem on any blockchain, security may not be its biggest concern.

Back in December, Zirlin described Axie Infinity’s play-to-earn mechanics as a kind of liberation for the world of online gaming. “What we’ve done is put an asset system into the game,” he said, referring to the idea that players can actually “own” Axie NFTs on their blockchain. “So, we’ve liberated people in some ways. We’ve given them something they should have always had.”

However, Axie is actually a lesson that reveals the dangers of play-to-earn.

This game can make money, and it can also generate debt. Three Axie NFTs are required to start playing the game, and these NFTs are only available on the secondary market. If players can’t afford NFTs at the beginning (usually a few hundred dollars), they can participate in Axie’s “scholarship” program, which is sponsored by the wealthy to purchase expenses in exchange for subsequent profit sharing.

This is called a grey market system. This system is not officially endorsed by Sky Mavis, but it has become a common mode of game interaction in countries like Venezuela and the Philippines. According to CoinGecko, some popular lenders took nearly two-thirds of the total profits.

That’s part of the reason why most Filipino Axie players earn less than the country’s average minimum wage, according to research firm Naavik. Prominent crypto critic Stephen Diehl likened it to “digital serfdom.” This statement is slightly exaggerated, and it is more like an exploitative employment contract, a full-time job with a low return.

“Through this system, the sponsors work every day, and then everyone shares the profits,” a “scholarship” manager told Motherboard. “Everyone is a winner!”

Such an attitude is easily reminiscent of “serfdom”. Last fall, Sky Mavis was valued at $3 billion and backed by venture capital giant Andreessen Horowitz. Like any other crypto unicorn, part of the money is made through speculation. Its related tokens, AXS and SLP, can be traded on decentralized exchanges outside the game and have a high market cap.

At the same time, the platform’s business model has been criticized for being similar to a Ponzi scheme, which relies heavily on low-paid workers. They create value at the very bottom of the system (the game itself) and then most of the value is taken from them, reflecting a clear hierarchy of power: the richest at the beginning always end up earning the most money.

A socialist might say the same is true for a lot of work, the difference is just rhetoric. Zirlin’s claim that this “liberates” players is essentially recreating an existing exploitative system on the blockchain.

It’s also similar to Uber’s promise: Anyone can become a driver, with more flexible working hours. You can plan your working hours yourself and do not need permission from the Taxi and Limousine Commission. But former drivers knew they were workers, but Uber drivers didn’t think so. Uber used a massive publicity campaign to persuade California voters to vote for a proposal that would exclude casual work from some labor laws.

Currently Axie Infinity is working hard to recover from the Ronin bridge hack, and other fundamental issues are on hold for now. In essence, blockchain offers no liberation.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/bigger-problem-with-axie-infinity/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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