Axie Infinity is a “Play to Earn” game where you must buy NFT tokens, characters called “Axies,” to play. You get Smooth Love Potion (SLP) tokens if you win battles in the game. You can buy more Axies with these SLP and Axie Infinity Shards (AXS) tokens.
All of this isn’t that important, except that you should know the game’s creator. Sky Mavis turned something fun (gaming) into a business.
Once you have enough tokens, you can trade them for good old cash. One poll found that only 15% of players play it for the game itself. All of them had to say that they pay it because it gives them money.
Sky Mavis, Binance, and Accel are all funded by Andreessen Horowitz, which makes sense. In Andreessen Horowitz’s Metaverse, it’s all for the little guy, taking care of their tokens and axes.
Could the Metaverse be about instant money and a new kind of capitalism that isn’t regulated and is based on bad technology? We’ll see.
What’s the problem?
There were problems before the $600,000,000 hack (keep reading).
The way the game works financially is like a modern Ponzi scheme. To keep the value of tokens going up, new players must always put in (real) money.
If that didn’t happen, tokens would lose value as more tokens were added to the game. Because of this, there needs to be a steady flow of new users or capital. Even people who like crypto agree with this.
Playing Axie Infinity was more profitable during the crypto-boom than the average daily wage in some low-income countries, like the Philippines.
But it would help if you bought Axies, which was out of reach for most people. So, a class of Bros called “rentiers” grew up. These Bros would buy Axies and rent them to low-income players for a cut of their winnings.
These employees have no rights, safety, benefits, or say in how the game’s rules change. Workers are called “scholars,” and the companies that rent Axies are called “guilds.” And this is not a joke.
The CEO of the Play It Forward guild, Alfonso Maputol, said, “We have 3,000 players who play more than one game for us.” Whose scholars are almost all from the Philippines and usually play six or seven days a week.
Maputol came from Singapore for the Axie Infinity event and said, “He has fired some of them for not playing enough hours.”
Maputol said, “If you don’t play, we might take away your scholarship.” He told CNN that he doesn’t play the game himself.
— A CNN show about Axie Infinity
Sometimes, the wages of a typical Axie worker would be less than the minimum wage. But that wasn’t a big deal until…
The Axie hack is still one of the biggest and stupidest in history. Why was a gaming company holding $600m in cash and acting like a bank? Why were they making these funds available to take over the internet? Because web3.
Molly White explained the hack in detail to normal people. The gist is that a bridge is needed to turn the tokens in the game into ETH, which can then be turned into real money to pay the bills through an exchange.
Most of the 9 “trusted” validators must vote to confirm that transactions were coming out of the game.
Someone was able to take control of five of the nine validators and empty the entire account. The account had 173,600 ETH and about $25 million in USD stablecoins, which added up to more than $600,000,000.
Remember that this is real people’s money and earnings.
It took Sky Mavis 6 days to realize they’d lost the money, or at least tell the truth about the attack.
Yes, web3 is even more bonkers than it looks.
North Korea’s Lazarus group was the hacker, which was the cherry on top. The money they get from crypto-heists is a big part of how they pay for their nuclear and ballistic missile program.
One developer’s computer had a key logger put on it through a fake PDF job offer, which gave them all the keys they needed to drain the network.
One of the strangest things about Axie is that they could build the same thing without a “blockchain” or crypto. And still, be in charge of half a trillion dollars’ worth of assets.
We think it’s important for people outside of web3 to know how cynical, stupid, and sad the new economy is.