Source: Adobe/photo_gonzo

Daniel C. Park is the data journalist at Covalent, a blockchain data specialist. 
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  • The post-hack measures Sky Mavis took fostered calm in Axie Infinity (AXS)’s community and helped to sustain the play-to-earn (P2E) game’s powerful reputation as a unicorn product.
  • The cascade of smooth love potion (SLP) and AXS withdrawals never manifested.
  • Social engineering and human error compromised Axie’s Ronin bridge. The finding adds credence among Axie players that the hack was a mishap, invoking little reason to reevaluate Axie’s value.
  • The launch of Axie Infinity: Origin doubled daily transactions to 646K, recovering to pre-hack figures in three days. 
  • Ronin retained a daily rate of ~450K for weeks after the announcement of the USD 150m funding.
  • Daily earnings rebounded with the launch of Origin as well, climbing from USD 1.7m on launch day to USD 2.5m the next day, returning to a pre-hack rate of ~USD 1m daily earnings.
     

The theft of USD 625m from Ronin unfazed Axie Infinity players’ bullish feelings, a remarkable tale and test of brand loyalty that validates Sky Mavis’ USD 3bn valuation.

The cascade of SLP and AXS withdrawals never manifested. Not after Binance resumed withdrawals or before Sky Mavis announced it had raised USD 150m to reimburse victims.

Using Covalent’s unified API, we can trace Axie’s engagement metrics, such as daily transactions and USD earnings, the number of new and total Axie players, and their changes as the ordeal unfolded in the public. The post-hack numbers, ironically, signal stubborn optimism from Axie players, thawing SLP investors’ anxieties and buffering the dismal growth Axie had since November last year.

Ronin’s on-chain security remains solid

Ronin’s on-chain security had not been breached. Social engineering and human error, combined with an excessively centralized network of validator nodes, instead, have compromised the bridge, according to forensics.

The finding adds credence among Axie players that the hack was an extraordinary mishap, invoking very little reason to reevaluate their perception of Axie’s value.

Forensics refer to a moment in November 2021 when Sky Mavis requested help from Axie DAO, a governing body of AXS holders. The company had asked the DAO to distribute free transactions as a means to spare the intense user load Sky Mavis’ validators were experiencing.

The weekly total of Axie players. Source: Covalent

Ronin data drawn from Covalent’s API corroborates this account. Weekly total Axie players swelled to a peak of 1.8m in November last year.

Ever since that peak, however, the weekly total of Axie players dipped successively, and Axie DAO’s service was no longer necessary.

The DAO’s validator IP address, as a result, should have been immediately revoked, but it had continued to remain on the allowlist. Because of this, when the Ronin bridge exploiter discovered a backdoor through Sky Mavis’ gas-free RPC node, the hacker also had access to the signature of Axie DAO’s validator.

Sky Mavis had arranged that, out of the nine nodes governing Ronin, five were needed to recognize a deposit or withdrawal event. The exploiter had exactly met the prerequisites. The hack ultimately had been successful not by challenging Ronin’s on-chain security and technology, but by spotting the company’s administrative shortcomings.

Decisive leadership begets loyalty

The rapid and subsequent actions Sky Mavis took to foster calm in Axie’s community helped to sustain the P2E game’s powerful reputation as a unicorn product.

What could have been a total value implosion of Axie had been reduced to a minor hiccup.
 

Date Post-hack measures taken by Sky Mavis
29 March 2022 Announcement of the hack and a guarantee that victims will be fully reimbursed; and starting a forensic investigation with Chainalysis and Crowdstrike
30 March 2022 Forensics indicate that the hack had been socially engineered, rather than a taking advantage of a technical flaw
31 March 2022 All former Sky Mavis validators replaced
1 April 2022 Focus on the launch of Axie Infinity: Origin
2 April 2022 Binance resumes withdrawals for AXS and SLP
3 April 2022 Focus on the launch of Axie Infinity: Origin
4 April 2022 Focus on the launch of Axie Infinity: Origin
5 April 2022 Sky Mavis declares to add five new additional Ronin validators
6 April 2022 Public disclosure of a successful US$150M funding led by Binance to reimburse victims of the hack

On day one, Sky Mavis swiftly appealed to victims by guaranteeing a full reimbursement. Temporarily suspending the Ronin Bridge and currency withdrawals on Binance also afforded an opportunity for Axie players to observe whether Sky Mavis could compensate for the trust deficit the company had created. 

In the short nine days between breaking the news of the hack (29 March) and raising USD 150m (6 April), the company’s leadership and transparency rewarded the Axie community’s steadfast support.

Ronin’s metrics as the ordeal unfolded

Data from Covalent’s unified API is used to demonstrate how Sky Mavis steered the Axie economy through the hack to a pre-hack level of normalcy.”

The daily number of transactions on Ronin. Source: Covalent

Daily transactions on Ronin have displayed a slow decline since the beginning of 2022, dipping from ~800K transactions in February to ~500K in March. Departing from this trend, the sharper dip that occurred when the hack had become public knowledge (29 March) rebounded shortly thereafter.

On 29 March, Ronin registered 577K transactions. The figure fell successively for three days from 321K (30 March) to 376K (31 March), and finally 344K (1 April). Daily transactions, however, soared with the launch of Origin, a highly anticipated patch for Axie.

The launch, in fact, doubled daily transactions to 646K, and Ronin retained a daily rate of ~450K for weeks after the announcement of the USD 150m funding (6 April).

The daily amount of USD earnings on Ronin. Source: Covalent

Likewise, daily USD earnings (SLP/USD) exhibit a similar pattern to that of daily transactions. On 29 March when the hack was reported, the earnings dipped from USD 2.74m to USD 1.48m the next day.

The figure, however, quickly rebounded with the launch of Origin, climbing from USD 1.67m on launch day to USD 2.48m (2 April), USD 3.06m (3 April), and finally USD 5.36m (4 April).

The earnings, followingly, returned to their pre-hack rate of ~USD 1m. 

Sky Mavis’ measures have been instrumental in containing the sharper dips in transactions and earnings the hack had manifested. The recovery, however, would not have been achievable if there had not been some pre-established bullishness within Axie’s community.

The weekly number of new Axie players on Ronin. Source: Covalent

Beyond the value of a loyal community, the P2E game’s cozy rapport with Axie’s community is a significant asset, the P2E game’s growth is staggering. 

The weekly total of new Axie players (new wallets) skyrocketed to 330K in the week the hack was announced, a tenfold jump from 29,398 new wallets the previous week. The radical change can be attributed to media buzz that entailed the compromise of Ronin.

New registries, however, dramatically fell to 36K (week of 28 March), 31K (week of 4 April), and finally 17K (week of 11 April).

Axie’s engagement metrics, in retrospect, illustrate a very complex challenge for Sky Mavis. The recoveries made in transactions and earnings are meaningful references to the optimism that permeates among Axie players.

Their support, however, is not unconditional, and Sky Mavis needs to rejuvenate Axie’s growth within the boundaries of their patience.

Axie’s optimistic journey ahead

The nine-day saga ushered in radical, but refreshing changes to Axie’s long-term security, onboarding five new validators, such as Delphi, Animoca Brands, Dielectric, Nansen, and Stable Node. Most of Sky Mavis’ Twitter real estate also recalibrated its attention on the launch of Origin during this time.

The hack, by some chance, cast a distraction to the months of reduced growth Axie had since November last year; and manifested as an opportunity for Sky Mavis to test and market the bullishness of Axie players.
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Learn more: 
Redesigned Axie Infinity’s Ronin Bridge Delayed till Late May
North Korea’s Lazarus Group Behind Axie Infinity’s Ronin Hack, Say US Treasury, FBI

Play-to-Earn Bitcoin Games: How Lightning Network Enables Gamers to Earn Sats

Blockchain Gaming Skyrockets 2,000% in One Year, Axie Infinity in Downtrend – Report
Crypto Security in 2022: Prepare for More DeFi Hacks, Exchange Outages, and Noob Mistakes 

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