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Axie Infinity

From Invertopedia, the encyclopedia of how things fail

Entry 012. An analysis built from the public record, not an insider account. Spot an error? Tell us.

Axie Infinity is a blockchain game where players breed and battle NFT creatures called Axies and earn a token, SLP, that they can sell for cash[2][4]. At its peak in November 2021 it had about 2.5 to 2.7 million daily players, half of them in the Philippines[2][4]. In March 2022 hackers took 173,600 ETH and 25.5 million USDC from its Ronin bridge, which the FBI put at $620 million and blamed on North Korea[1][3]. SLP now trades about 99.9 percent below its high[6].

Contents
  1. 1The bet
  2. 2What happened
  3. 3The kill shot
  4. 4Red flags ignored
  5. 5The cost
  6. 6The inversion
  7. 7What survived
  8. 8References

The bet

Sky Mavis bet that a game could be a job. Players bought Axies, earned SLP by playing, and sold it; people who could not afford a team borrowed one as "scholars" and split the earnings with the owner[4][7]. The new tokens would be spent breeding more Axies, so earning and spending would balance[2].

When rising prices pushed the cost of a starting team from about $5 to $1,000[7], the scholarship model and new players kept the economy growing, and investors valued Axie at $4 billion[1].

What happened

Apr 2021Axie moves from Ethereum to its own Ronin chain. Lower fees bring a rush of new players.[2]
Aug 2021Axie NFT sales for the month peak above $848 million.[2]
Nov 2021Daily active players peak at about 2.5 to 2.7 million.[2][4]
Late 2021SLP is minted faster than it is burned, and its price slides.[2][4]
Mar 23, 2022An attacker uses keys for five of Ronin's nine validators, four run by Sky Mavis and one by the Axie DAO, to drain 173,600 ETH and 25.5 million USDC.[1][5]
Mar 29, 2022Sky Mavis discloses the hack, nearly a week later.[1][3]
Apr 6, 2022Sky Mavis raises $150 million in a round led by Binance to reimburse users.[1][9]
Apr 14, 2022The FBI says Lazarus Group and APT38 did it. The Treasury's OFAC adds the attacker's address to its sanctions list.[3]
Apr 2022Daily players are down to about 1.2 million, 52 percent off the peak. The average Axie sells for about $37, down from $494.[2]
Jun 28, 2022The Ronin bridge reopens after audits, with user funds repaid.[8]

The kill shot

Player earnings were paid, in effect, by new players buying in, so the game only worked while growth went on. The hack hit an economy that was already shrinking.

SLP had real uses, but issuance outran burning[2]. Cash came out when players sold SLP, and fresh money came in mostly when new players bought Axies to start. Critics called it a Ponzi scheme that depended on recruiting new players to keep up demand for its tokens[7]. Once new arrivals slowed, the price of SLP fell, which cut what players earned, which pushed more of them out[2][4].

Sky Mavis tried to tighten supply by cutting daily quest rewards and adding staking incentives, and the decline continued[2]. Daily players had been falling since November 2021, months before the hack[2]. The bridge hack then turned an economic problem into a security disaster, made worse because access the Axie DAO had granted Sky Mavis in November 2021 was never revoked[1][5].

Red flags ignored

  • Pay came from the next player. Earnings were sold for cash that new players brought in to buy their first team.[4][7]
  • A $1,000 entry fee for a game. Starting teams went from about $5 to $1,000, which only made sense as an investment.[7]
  • Five keys guarded the vault. Five of nine validator signatures could move bridge funds, and Sky Mavis controlled four of them.[1]
  • No alarm on the vault. Ronin had weak monitoring of large outflows, so a theft worth over $600 million went unnoticed for nearly a week.[1][5]
  • The players were the thin end. One manager took a 60 percent cut while his scholars earned about 450 pesos a day, just under the 470-peso minimum wage outside Manila.[4]

The cost

The hack took 173,600 ETH and 25.5 million USDC[1][5], put at about $620 million by the FBI[3]. Sky Mavis repaid 117,600 ETH and 25.5 million USDC to users, while 56,000 ETH from the Axie DAO treasury was left uncollateralized[8]. Law enforcement had recovered about $40 million by early 2023, including about $30 million seized with Chainalysis's help and a seizure in Norway[10].

For players, the cost was the token. SLP's all-time high was $0.3997; in October 2026 it traded around $0.0005, about 99.9 percent lower[6]. The governance token AXS peaked at $164.90 and trades near $0.95[11]. A Reuters report found daily players down to about 250,000 from 2.7 million, with Filipino players and managers describing losses of up to 1 million pesos[4].

The inversion

If the money you earn comes from the next person joining, you're not earning, you're early. Before you build an economy, find out who pays when growth stops.

What survived

The game still runs, "albeit in a far different form," with user numbers down about 90 percent from the peak and roughly 400,000 regular users, according to Cornell researchers[7]. Users' stolen bridge funds were repaid[8], the bridge came back with daily withdrawal limits starting at $50 million[8], and about $40 million of the stolen money was recovered by law enforcement[10].

References

  1. ^ “The aftermath of Axie Infinity's $650M Ronin Bridge hack”. Cointelegraph, April 12, 2022. Breach on March 23 and disclosure on March 29, 173,600 ETH and 25.5 million USDC, five of nine validators (four Sky Mavis, one Axie DAO), access never revoked, the $150 million Binance-led round, the $4 billion valuation.
  2. ^ “The decline of Axie Infinity”. The Block, May 16, 2022. The April 2021 move to Ronin, daily players 2.5 million to 1.2 million, NFT sales and prices, SLP mint outpacing burn, Sky Mavis's failed fixes.
  3. ^ “FBI links largest crypto hack ever to North Korean hackers”. BleepingComputer, April 14, 2022. The FBI's attribution to Lazarus Group and APT38, the $620 million figure, OFAC's sanction of the attacker's address, Ronin as an Ethereum sidechain, the March 29 disclosure.
  4. ^ “Stung by losses, Filipino players ditch Axie Infinity crypto game”. Reuters via Gulf News, updated April 27, 2023. Peak of 2.7 million daily players and about 250,000 later, half the players in the Philippines, SLP's slide from late 2021, scholar pay and manager losses.
  5. ^ “Ronin sidechain developers reveal further details of $625 million hack”. ForkLog, April 28, 2022. The postmortem: March 23 breach, phishing of a Sky Mavis employee, Axie DAO signing access from November 2021 never revoked, weak outflow monitoring.
  6. ^ “Smooth Love Potion (SLP) price”. CoinGecko, read October 25, 2026. SLP's all-time high of $0.3997 and current price about 99.9 percent lower.
  7. ^ “What the crash of a play-to-earn game reveals about the future of Web3”. Cornell Bowers CIS, September 9, 2025. The scholarship model, the $5 to $1,000 starting cost, the Ponzi criticism, the 90 percent fall and roughly 400,000 regular users today.
  8. ^ “Sky Mavis opens Ronin bridge after $625 million hack”. Nairametrics, June 29, 2022. The June 28 reopening, 117,600 ETH and 25.5 million USDC repaid, 56,000 Axie DAO ETH uncollateralized, the $50 million daily limit.
  9. ^ “Axie Infinity's Ronin bridge to re-open after $552M hack”. Decrypt, June 24, 2022. The $150 million round led by Binance in April 2022 and the planned June 28 reopening.
  10. ^ “Norwegian authorities seize $5.86 million from Lazarus Group”. BankInfoSecurity, February 20, 2023. Norway's seizure, the $30 million recovered with Chainalysis, and nearly $40 million recovered in all.
  11. ^ “Axie Infinity (AXS) price”. CoinGecko, read October 25, 2026. AXS's all-time high of $164.90 and current price.
Categories: Games · Play-to-earn · Collapsed in 2022 · Cause of death: no new players · Hacked in 2022