What happened
One of the leading play-to-earn blockchain-based metaverse games, Axie Infinity (AXS) has had a rough few days. As of Tuesday night, the token had dropped 9.8% over a 24-hour period on news that the network's key bridge between Ethereum and Axie Infinity, a side-chain named Ronin, had been hacked. As of 10:15 a.m. ET Wednesday, Axie Infinity tokens had made up some of these losses, but their value was still down 7% over the prior 24 hours.
Image source: Getty Images.
So what
The roughly $600 million hack of Axie Infinity was reportedly one of the largest ever for the crypto sector.
As a play-to-earn game, Axie Infinity utilizes NFTs, which are essentially ERC-20 tokens (Ethereum-based), on its network. Users buy these Axie NFTs, and can use the network's native AXS tokens to make transactions, though these tokens ultimately need to be settled in Ethereum. Accordingly, the network's Ronin bridge, which was recently launched, is an important piece of the Axie Infinity infrastructure.
Hackers were able to gain control of nodes -- the software that allows users to convert tokens into ones able to be used on the Axie network -- and made off with more than 170,000 Ether tokens and $25 million worth of USD Coin (a stablecoin that is pegged 1 to 1 with the U.S. dollar). Worse, this hack took place a week ago, but was not discovered until Tuesday.
Now what
Ultimately, this hack highlights again the security issues around the use of bridges in the cryptocurrency world. In last month's high-profile hack of Solana's Wormhole bridge, $320 million worth of cryptocurrency was stolen. Thus, investors' confidence in bridge-based applications may be reasonably shaken by news of an even larger hack.
Now, the Axie hackers reportedly sent their ill-gotten gains to major exchanges including Binance and FTX, so there is some hope that these tokens could be recovered. That said, the extent to which users will flock back to Axie Infinity in the wake of this hack is unknown. Holders of AXS tokens and believers in the Axie Infinity community can likely expect to see price volatility for some time.
