Axie Infinity fell victim to the biggest DeFi hack
The world witnessed it’s so called the largest DeFi exploit ever, approx. $625 million was robbed from the Ronin Network, a blockchain “bridge” was built by the creator of the famous crypto game Axie Infinity to allow players to move crypto between the game’s Ronin blockchain and the Ethereum network. The robbery was one of the most recent hacks targeting bridges, these are the tools that allow users to move crypto from one blockchain to another. The vicious hacks sent the prices of both the RON, the Ronin blockchain token and AXS, the main tonic Axie Infinity on a downstream, let’s know more about it.
The hack was exposed on March 29, after a week after it happened, when a user could not withdraw 5,000 ETH from the Ronin Network. The developer of Axie, Sky Mavis initiated an investigation and it came to light that 173,600 ETH (approx. $566939408) and 25.5 million USDC (approx. $25500000) was drained out of the Ronin Network on March 23 in two transactions. The hackers used the same technique from February, when approx. $320 million was stolen from the Wormhole Bridge.
What enabled the Ronin hack? The one key factor has a very centralized nature of the network, it only requires the approval from five of nine “validators” to move funds. It is a vulnerability the hackers took advantage of by getting their hands on the private keys of five validators. Who are these Validators? They are simple computers that help route transactions made on a blockchain. One of the biggest investors of Sky Mavis commented sometime before the hack that designing badly or having a vulnerability in the bridge can put the whole ecosystem at a huge risk.
After the knowledge of the hack, RON fell down 19% approx. and AXS is still down by 10%. The COO of Sky Mavis, Aleksander Leonard Larsen commented that they are taking all the initiatives to reimburse the players as soon as possible. The stolen funds had the deposits of various players. Most of the players live in developing countries such as the Philippines, Venezuela, and Brazil. The Axie Infinity treasury contained 56,000 ETH.
The biggest question still remains, how will the players get their refund? It is different from the Wormhole hack, because the funds were almost immediately restocked by investing for Jump Crypto; there aren’t well-heeled investors ready to serve as a reserve for Axie’s lost funds. Sky Mavis can hold fundraising opportunities and sell some tokens related to Axie, including RON and AXS, the most important at discounted prices. The company has another option of selling the Sky Mavis equity to raise cash, or recommend a vote to its community that will allow it to liquidate some of its $1.6 billion community treasury to repay the people.
Why does it matter?
As the crypto universe is evolving every day, bridges have become a very important component. And as the code has to be compatible with numerous blockchains, they get harder and harder to build. Ronin has swiftly increased its security by replacing the damage validators and increasing the number of validators required to approve transactions. But what is the future of the users? The users need to do their own research and be sure that the smart contracts that they interact with are audited accordingly.