On March 29th, 2022, it was discovered that there had been a significant security breach on the Ronin network. Ronin runs the Ronin Bridge which connects major P2E title Axie Infinity to the Ethereum mainnet.
This breach resulted in the theft of 173,600 Ether and 25.5 million US Dollar Coin. At the time of the hack, this equated to over $600 million USD in value – making the Ronin Bridge hack the single largest hack in crypto history.
How the Hack Occurred
The Ronin network is secured by validators, a set of nodes that verify the state of the blockchain perpetually. The hacker that exploited the network was able to compromise the node keys for four different validators, giving the hacker control over the network itself.
This is essentially a form of 51% attack. A 51% attack is any network attack that is carried out by taking over 51% of the validating nodes on a network, giving the attacker control over the state of the blockchain.
The Ronin Bridge hacker utilized this concept and was able to verify the removal of over $600 million USD in ETH and USDC.
The funds themselves have largely remained undisturbed in the wallet that was originally used post-hack. A reported $7 million USD was moved through privacy tool Tornado Cash.
Market Effect and Aftermath for Axie Infinity
The cryptocurrency market largely brushed off the hack initially. Axie Infinity’s native token, AXS, did not decline in price substantially on the news. In fact, AXS actually saw a price increase prior to the latest market decline.
Axie Infinity delayed the release of Axie Infinity: Origin after the hack was discovered and has since been working diligently to restore the lost funds to the network to pay back initial users who had their money stolen.
As of April 11th, Axie Infinity appears to have successfully identified or already secured funds to replace the $600 million USD. Axie Infinity was able to raise $150 million USD through Binance and other supporting partners.
Also, Sky Mavis (the company behind the development of Axie Infinity) announced that they would be paying $450 million USD out of pocket to replace funds lost in the hack. It is unclear as to how these funds will be used to restore lost value on the Axie Infinity chain.
Decline of Axie Infinity Player Count
The largest effect that the hack has had on Axie Infinity is related directly to its overall usage. The blockchain’s average daily player count has tanked spectacularly post-hack, declining by an estimated 45%.
Of course, it has been pointed out that the daily user count on Axie Infinity has been decreasing for an extended period of time, tracing back to the December 2021 peak. Since then, millions of users have failed to interact with the chain.
Summary
The Ronin Bridge hack was a big loss for the P2E and blockchain gaming sectors. Axie Infinity is a leading metaverse/gaming project, responsible for a large percentage of the sector’s overall growth.
The hack also depicts another prime example of the vulnerability that certain bridge networks have. Bridges connect blockchains together and facilitate the transfer of data and information between otherwise isolated networks.
Though bridges have a growing importance as infrastructure within the crypto-economy, major security faults have led to two of the biggest hacks ever: the Solana wormhole hack and now the Ronin bridge hack.