The Grim Dystopia of Axie Infinity
Few things sum up the late capitalist dystopia of web3 than Axie Infinity
What is it?
It’s a “Play To Earn” game… you must buy NFT tokens to play, which represent characters called Axies. If you win the battles in the game, you win Smooth Love Potion (SLP) tokens, which can be combined with Axie Infinity Shards (AXS) tokens to buy more Axies.
None of this is really that important except to understand that the maker of the game, Sky Mavis, took something fun (gaming) and financialised it.
Basically all these tokens you accumulate can one day be swapped back to good ol’ fiat currency. In one poll, only 15% of players say they play it for the game itself — the majority play it for the income.
Naturally, Andreessen Horowitz are involved in the funding of Sky Mavis, as well as Binance and Accel. It’s all for the little guy you see, looking after their tokens and his axies in Andreessen Horowitz’s Metaverse. Could the Metaverse really be about instant liquidity and a new unregulated form of capitalism, resting on bad tech? We’ll see.
What’s the problem?
Before the $600,000,000 hack (read on), there were problems.
The economics underlying the game equate to a modern Ponzi, since new players are always needed to put in (real) money to keep the value of tokens going up. Tokens would otherwise deflate as more are created within the game. That’s why a continual new stream of users (i.e. capital) is required. Even pro-crypto folks are saying this.
During the pandemic crypto-boom, playing Axie Infinity exceeded the average daily income in some low-income countries, notably the Philippines,
But to play the game, you need to buy 3 Axies, which was beyond the reach of most. So a rentier-class of Bros appeared, who would buy Axies and rent them out to low-income players, in return for a share of the winnings. These workers have no rights, no security, no benefits and no influence on rule changes within the game. With no irony, the workers are called ‘scholars’ and the companies that rent Axies are called guilds.
“We have 3,000 players playing multiple games for us,” said Alfonso Maputol, the CEO of the Play It Forward guild, whose scholars are almost entirely based in the Philippines and usually play six to seven days a week. Maputol, who flew in from Singapore for the Axie Infinity event, said he’s fired some of them for not playing enough hours. “If you don’t play, we might take away your scholarship,” said Maputol, who told CNN he doesn’t personally play the game.
— CNN feature on Axie Infinity
Sometimes a typical Axie-worker’s earnings would would fall below the minimum wage, but that wasn’t such a problem until…
The Hack
The Axie hack is still one of the biggest and dumbest in history. Why was a gaming company holding $600m of cash and acting like a bank? Why were they making these funds available to extract over the internet? Because web3.
Molly White explained the hack in detail for sane people. The gist of it is that a bridge is needed to convert the tokens in to the game in to ETH, which can then be converted into real money to pay the bills through an exchange.
To verify transactions coming out of the game, a majority of the 9 ‘trusted’ validators must vote. Someone was able to gain control of 5 of the 9 validators and empty the entire account, containing 173,600 ETH and about 25 million in USD stablecoins, adding up to in excess of $600,000,000.
Remember — this is real people’s money and earnings.
It took Sky Mavis 6 days to realise they’d lost the money, or at least, come clean about the attack.
Yes web3 is even more bonkers that it looks
To cap it all off, the hacker was discovered to be North Korea’s Lazarus group. Crypto-heists are an important source of funding for their nuclear and ballistic missile program.
It turned out that a scam job offer PDF was used to install a key logger on one developer’s machine which provided access to all the keys to drain the network.
One of the craziest thing about Axie is they could build the same thing without a ‘blockchain’ or crypto and still be sitting on half a trillion dollars of assets under management.
Whilst I cannot believe I’ve spent 30 minutes of my life writing this article, I think it’s important for those of you outside web3 to understand just how cynical, stupid and depressing this new economy is.
Namaste,
web2 boomer
