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What Binance’s Axie Infinity bailout means for the future of crypto – TechCrunch


The company behind Axie Infinity, a popular cryptocurrency game, raised $150 million in funding this week to help repay users who lost funds worth around $625 million in a hack this week. last. The creator of Axie Infinity, Vietnamese game studio Sky Mavis, has been widely praised for creating the most played NFT game of all time, with 2.2 million monthly active players, according to the company.

What’s interesting about this funding round is that it was led by crypto exchange Binance – the world’s largest exchange – although Binance did not participate in Sky’s previous raises Mavis. More on that later, but first, some background.

Existing Sky Mavis investors, including Andreessen Horowitz, Paradigm, and Accel, joined Binance in this round to help bail out Axie, but once news of the hack broke, their involvement was all but expected. These investors already had a financial stake in the game’s success, particularly a16z, who led the company’s $152 million. Series B round last October. Sky Mavis earned a valuation of almost $3 billion this round, which means a bit of fanfare for a company that had raised a total of just $7.5 million five months prior.

The hack, which took place on Axie’s Ethereum-based sidechain Ronin, marks the largest known crypto heist to date. It was a bad look not only for Sky Mavis, but also for investors like a16z who had touted Axie as the future of crypto. It starts to look even worse when you consider the demographics of Axie players as a whole – more than 25% are unbankedthe company said, and many are low-income workers in developing countries who depend on Axie for a significant portion of their income.

It took six days before Sky Mavis or one of her investors found out about the hack, which infuriated a lot of people, and once the company found out, they immediately rushed to find solutions. While Sky Mavis has announced that it is working with law enforcement to investigate the situation, it is very rare for funds to be recovered after a crypto hack, let alone returned to users. The research process is simply too complex, given that there is no information about the hacker readily available aside from the address of the wallet they used to transfer funds out of Axie.

It should be noted that the majority of the funds are still in the hacker’s wallet, although the hacker did appear to be moving some 2,000 ETH from the wallet to the Tornado Cash privacy tool, which allows users to hide their wallet address when withdrawing funds.

So if Sky Mavis couldn’t track down the hacker and recover the funds that way, it had to think of other ways to make up the shortfall or risk the reputation of leaving its users to suffer a huge financial loss that stemmed from company’s own security weaknesses.



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