Where Does Sky Mavis Go From Here?

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Roundtable: A Garena Free Fire Deconstruction

In this Metacast episode, Aaron Bush and Thomas Baker, join your host Maria Gillies to discuss:

Naavik Pro’s first F2P Deconstruction on Garena Free Fire
Mobile Game Earnings in Q1 2022
The recent announcement of Bloodborne Kart, a fan-made game from Lilith Walther

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Check Out The Episode

#1: Axie Infinity’s $600M Exploit

For the Web3 and gaming community at large, the March 29th hack attack on Axie Infinity was a watershed moment. Axie Inifinity is widely considered to be the market leader in the blockchain gaming space, and the question on everyone’s mind was what impact this would have on a burgeoning ecosystem / whether these funds could be reclaimed, in one form or another. According to Rekt.news, this is considered the largest theft in history.

In a recent podcast with my colleagues at Naavik, we discussed what would happen next, how the different scenarios might play out, and the ramifications of this attack and the draining of funds. In terms of next steps, I suggested three main options:

The hacker will return the funds (partial or full) of their own volition
- Publisher will provide a “bug bounty” wherein the hacker gets treated like a “white hat”, gets remunerated for discovering the exploit, returns the funds with no legal charges being pressed
Sky Mavis will access the funds in their Treasury to make the users who have been affected whole
Sky Mavis will seek out additional funds from their investors to “bail” them out.

As reported by Venture Beat on April 6th, option #3 happened, with Sky Mavis raising an additional $150 million in new rescue funds. The round was led by Binance, with participation from other top VCs in the space and current investors, including Animoca Brands, a16z, Dialectic, Paradigm and Accel.

One could argue this was necessary, as most, if not all these investors have their goals and agendas tied to ensure the Web3 ecosystem flourishes. They need to ensure the momentum continues unfettered by this attack, while providing the community and players with a way to reimburse affected funds. Binance, for example, not only provided rescue funding, but also actively supports the Ronin Network by providing Ethereum withdrawals and deposits for Axie’s users. This includes various tokens of Axie Infinity Shards (AXS) and Smooth Love Potion (SLP), monitoring any unusual transaction activity and potential for brokering future land sales.

That said, what’s interesting to note is the balance in Axie’s treasury account. From the following snapshot, you can see that this account holds 21M AXS tokens (valued at around $1.2B) and a WETH (wrapped ETH) balance of 56K (valued at around $182M USD).

*A view of Axie’s treasury account | Source:* *Ronin Block Explorer*

I’m still curious as to why Sky Mavis decided to raise another round from investors vs. going with the second option I outlined above. It’s a given they have enough funds to reimburse players who may have been affected. To be fair, there are a variety of answers to this question: how they want funds allocated on their balance sheets, the potential need to swap tokens to ensure the right allocations are available for reimbursement, and more. What’s clear to me is the speed in which actions were taken to safeguard this product, and by extension, the greater ecosystem.

After this attack, I’ve noticed that there remains a profound sense of trust and protection to a nascent industry. By and large, the community surrounding Axie Infinity has come together, with players feeling positive and hopeful for a positive outcome and investors doubling down on their partners and investments to ensure continued service. While I can’t speak for other developers, this occurrence has helped me to reinforce aspects from Web2 that are absolutely pertinent in Web3.

For example, having a mature process for build rollouts, frameworks to validate updates, security audits, quality verification, setting up dashboards for key metrics and building in triggers when unexpected deltas occur, audits for smart contracts, etc. are necessary in order to ensure the safety of our players, their assets, and most importantly their trust. What will be interesting to see in the coming months, possibly years, is what happens to the funds that are currently sitting in the hackers wallet, which can be found here. Will they remain there, taunting Sky Mavis, knowing they can’t access it? Will they return it as a sign of good will (or to relieve the pressure?), given the attention and scrutiny they will continue to be under for the foreseeable future? Will they burn it (possible?) and essentially remove it from the ecosystem altogether?

Regardless of the hypotheses outlined above, I’m confident security will get better, product teams will learn, and innovation will continue. Like many of my Web3 colleagues, I remain as bullish as ever, because in the end, the technology worked exactly as it was intended. (Written by CA, VP of Americas at Mythical Games)

🎮 In Other News…

💸 Funding & Acquisitions:

Following the $600M hack, Sky Mavis closed a $150M rescue round led by Binance. Link
24x7, an India-based game studio, raised $75M at a $2.5B valuation. Link
Gaming agency Loaded raised $20M. Link
Community Gaming closed a $16M Series A led by Softbank. Link
Dorian announced a $14M Series A led by Raine Group. Link
Ready Player DAO raised a $10M Series A led by TCG. Link
Niantic continues its acquisition spree with its latest in NZXR, former Magic Leap developers. Link
In-game ad platform Gadsme raised $8M. Link
Indian hypersocial publisher Bombay Play announced a $7M Series A. Link
Legendary Play raised $4M for its esports-themed mobile titles. Link
SuperBloom raised $3M to launch a mobile game for women. Link

📊 Business:

The State of Switch in 2022 (a survey study). Link
Tencent shut down its streaming service, Tencent esports. Link
Roblox teased layered clothing (and the process behind creating it). Link

🕹️ Culture & Games:

A Kirby song cover won a grammy. Link
A fun feature on r/place and its recent activity. Link
Axie Origin is in live beta. Link
Minecraft launched Rivercraft and Epic announced a partnership with Lego. Minecraft | Lego