The COVID-19 pandemic devastated the world, prohibiting people from going out to prevent the spread of the virus. Some were bored, but most were looking for ways to earn money while waiting for the global crisis to end.
Enters Axie Infinity—an online game universe wherein the player battles, breeds, collects, and raises virtual pets. This was the most popular Play-to-Earn (P2E) gaming platform, allowing people to earn money while being restrained within the corners of their homes.
However, this P2E gaming platform shut down following the USD 600 million hacking attack on the Ronin Network. In this TRU Insight, we’ll walk through the development of the Ronin Network hack that resulted in the stolen USD 600 million worth of Ether and USDC.
The Ronin Network Hack in a Glance
What Happened
In 2022, the financial markets suffered the second-largest cryptocurrency hack in history. The main power provider of Axie Infinity, Ronin Network, suffered a cyberattack that resulted in a loss of around USD 600 million worth of Ethereum (ETH) and USD coin (USDC).
This ultimately led to the loss of investment for thousands, if not millions, of Axie players as the gaming platform shut down following the hacking.
What Do We Know
Jeff Zirlin, the founder of Axie Infinity, confirmed that the hacker had stolen 173,000 Ethereum units and USDC worth around 25 million dollars. He said the administrative team took almost a week to confirm the platform’s exploitation.
Lazarus group, a North Korean state-sponsored hacker, is the primary suspect in the cyberattack. The United States Department of Treasury’s Office and the Office of Foreign Assets Control (OFAC) found an Ethereum wallet address associated with the major cyberattacks conducted by the Lazarus group.
The Growth of Play-to-Earn (P2E) Gaming
From connecting with our loved ones to investing and earning, rapid and continuous technological advancements have revolutionized how we do things.
One aspiration is the successful inception of Web3—an idea of a blockchain-powered internet to facilitate decentralized interaction and transactions. This innovation bridges the geographic and bureaucratic processes that make online transactions and interactions layered and costly.
One interesting application of Web3 is through Play-to-Earn (P2E) games. As its name suggests, this gaming process allows you (user/player) to earn rewards by simply playing the game and accomplishing particular tasks.
These rewards have a real-world or monetary value—changing the landscape of the traditional gold-farming or company-facilitated gaming marketplaces.
By developing through blockchain technology, the gaming assets were turned into non-fungible tokens (NFTs). These tokens allow the users to take ownership of the in-game assets, which they can trade or hold to speculate on their future valuation.
What Is a Non-Fungible Token or NFT?
Non-fungible tokens revolutionized traditional in-game assets. It’s ultimately used to address the underlying ownership and transferability of such assets.
The valuation and ownership of traditional in-game assets heavily depend on the system of the companies that created them. This means that if you put them outside the gaming platform, these assets lose their entire value.
This is the entry point of blockchain technologies in the gaming ecosystem and economy. When a gaming platform uses blockchain to create or mine in-game assets like tokens, they ultimately create transferable and speculable tokens known as non-fungible tokens (NFTs).
What Is Ronin Network?
Ronin Network is one of the leading blockchain networks that powers the once-largest E2P gaming platform—Axie infinity.
This is an Ethereum Virtual Machine (EVM) developed to decentralize the in-game assets to make them transferable and ownable.
The process goes like this:
- The company or gaming platform uses blockchain technology (Ronin Network) to mine or create decentralized in-game assets.
- The in-game assets were distributed on a public ledger to prevent dual spending and increase transparency.
The users/players purchase or earn the in-game asset through the gaming platform. However, they carry the full liberty to transfer their assets to other cryptocurrency exchanges, use them for EFT payments, or convert them to fiat currency to withdraw their funds.
The Stolen USD 600 Million Worth of Ether and USDC
Skeptics and critics share the same sentiment towards Web3—its lawlessness nature makes the environment a breeding ground for scalable cyber theft attacks.
Despite its promising benefits and features, Ronin Network remained unsafe to such attacks. In fact, two years after its launch, Ronin Network suffered the second-largest crypto heist in history.
In 2022, the blockchain network was breached by a suspected North Korean (group of) hackers.
Ronin Network comprised nine (9) validator nodes to initiate a transaction. Additionally, signatures from five (5) of them are needed to kickstart a deposit or withdrawal.
These five signatures were exploited through social engineering attacks—ultimately resulting in stolen USD 600 million worth of ETH and USDC.
According to Jeff Zirlin, a total of 173,000 ETH and USD 25 million worth of USDC were stolen from the network.
The Impact of Ronin Network Breach on Axie Infinity
As its primary power provider, Axie Infinity was forced to shut down following the USD 600-million Ronin hack.
Axie Infinity was a platform deemed the future of the Play-to-Earn (P2E) gaming scene. It incorporated blockchain technology into in-game assets to create non-fungible tokens (NFTs). In the Axie Infinity ecosystem, the native NTF is called Axies.
These NTFs (Axies) are either purchased or earned, which are then collected, bred, and battled to level up and increase your financial gains.
With this promise of financial gains by playing and the current global quarantine, Axie Infinity has gained significant traction, especially in Southeast Asia.
However, everything changed in 2022 after the Ronin Network was exploited and suffered a loss of USD 600 million worth of Ether (ETH) and USD Coin (USDC).
Prior to the discovery of network exploitation, the Axie Infinity gaming platform experienced difficulties in making transactions. The investigation behind this ultimately led to the halting of network activity. This means that users/players who hold their funds on the Ronin network won’t be able to make withdrawal transactions.
Ronin Network Was Hacked Again – But the Ending Was Different
In 2024, the bridge between Ronin Network and Ethereum was once again compromised.
The first week of August 2024 witnessed another hacking in the improved Ronin Network. However, unlike the 2022 hacking, the exploited platform was promptly discovered. This ultimately resulted in a loss of approximately USD 12 million worth of Ether (ETH).
But thankfully, the prompt discovery of the exploited platform led to the return of USD 10 million worth of ETH. Unfortunately, the remaining USD 2 million worth USDC remained unrecovered.
