The story broke on 29 March 2022, when $600-million was stolen from a specialised blockchain, the aforementioned Ronin “bridge”, which is actually a connection between two blockchains. 

Before we get into what Ronin was (and is, now that it has been “re-opened”) and what its connections to video games are, pause a moment to consider this figure. Nearly R1-trillion. Stories of hacks and grift suffuse the crypto space, but the scale of this theft was astonishing.

Okay, let’s rewind and start the narrative again. 

In 2018 a Vietnamese video game studio called Sky Mavis released a game called Axie Infinity. This game was loosely modelled on Pokemon, which started as a card game in 1996 and became wildly popular in various formats over a long period, ranging from cards to anime to videogames to films to merch.  

But Axie Infinity included startlingly innovative new tricks. It incorporated some of the first NFTs. These blockchain-borne certificates of ownership allowed players to “mint” their own pets — cute little oval creatures which could then be put into battle or bred with other cute pets to make new cute pets. 

This immediately created an in-game economy — these NFTs were instantly tradeable via the magic of the blockchain, allowing players to buy and sell their pets using cryptocurrency. 

Previous videogames had various mechanisms to buy and sell treasures or weapons, but this was the first successful blockchain-tethered game — gameplay and cryptocurrencies and NFTs and blockchains all rolled into one ecosystem. It became a huge success.

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And this spawned a weird, real-world economy, mainly in the Philippines (for reasons that are a little unclear, but not really central to the story). At one point, nearly three million people were playing daily.

Once people realised that they could win battles, facilitate cute pet breeding and then mint the NFT of the new baby and sell it on an NFT market in return for cryptocurrency, all hell broke loose. I would ask you to reread the last sentence, but I’ll just say it differently.

Bayano, an unemployed twentysomething Filipino, logs on to Axie Infinity.

He acquires an Axie pet (never mind the details glossed over here).

He manages, via skilful gameplay, to get his Axie pet to breed…

… giving him another pet, his second. With its own NFT.

He sells the NFT for his second Axie pet on this Axie NFT marketplace which operates on… you guessed it… the Ronin blockchain.

He sells his cryptocurrency for real dollars on his local cryptocurrency exchange.

He feeds his real family with his real dollars, which purchase real food at his local supermarket. 

This is what is called “play-to-earn”.  

Are you getting this? Bayano, unemployed, can now feed his family by playing a video game. And now it gets weirder.

It costs money to start playing Axie Infinity (an entrance fee of sorts), after which you can start battling and breeding NFTs/pets. So a bunch of smart operators (including the giant venture capital company, Andreesen Horowitz) said — wait a minute!!! If we stake a bunch of unemployed people to enter Axie Infinity and breed NFTs all day and then sell them on the Axie NFT marketplace and we share revenue with them then… we get rich and they feed their families. (The stakers grandly called themselves “guilds”; staked players are called “scholars”).

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Win-win, right? Well, yes, as long as the market for Axie NFTs is robust, going up, liquid, etc.

Lots of players with time on their hands — almost exclusively in developing countries — staked to play a game, sharing their NFT sales. Hundreds of thousands of players making a modest living by playing a video game, sometimes up to 16 hours or more a day.

What could possibly go wrong?

This is what went wrong — a bunch of North Korean hackers (yes, North Korean hackers; the cyber detectives have determined this) hacked into the Ronin “bridge” (so called because it is a blockchain bridge that connects the video game with the world of cryptocurrencies) and stole R1-trillion, and the whole Axie ecosystem collapsed.

Revenue for the month of June was $11,000 — compared to $17-million last September. Axie players suddenly found themselves with few buyers for their NFTs, even at fire sale prices. So no food for their families and VCs suddenly losing interest and looking elsewhere for returns. 

The entire house of cards disappeared instantaneously. 

And so Sky Mavis, the video game company — bloodied, bruised and beaten — set out to secure the Ronin blockchain and start all over again. Hence the announcement: “The Ronin bridge is now repaired.”

But the public blowback has been brutal, as one might expect.

It’s not sure how many people will return to Axie Infinity; I assume that confidence is unlikely to reappear and that it will go the way of Farmville and Angry Birds.

Which is not to say that “play-to-earn” is gone. 

There are many games now starting to compete in this space,  notwithstanding that one may ask the obvious question — what economic activity is really being created here?

To which I suppose the answer can only be, if there are willing buyers and sellers, then who am I to judge? DM

Steven Boykey Sidley is Professor of Practice at the University of Johannnesburg.