If you are a regular reader of this blog, you know that I am not a fan of cryptocurrencies. No business model, no value, no responsibility, and no recourse are all hallmarks of the typical crypto-based business. Take the recent hack of the mobile crypto-based game Axie Infinity.
Axie Infinity is hosted on the Ronin network where users compete against other Axie users to earn reward tokens and NFTs. Playing a mobile game all day in hopes of a big win has become commonplace for many people around the world, especially in poorer countries. The problem is that most crypto-based businesses are so focused on generating perceived value for their tokens, they pay little attention to the security problems of centralized, reward-based platforms.
This ain’t no game
As reported recently by BBC News, the Ronin network has been hacked to the tune of $600 million worth of cryptocurrencies, leaving many Axie Infinity users with nothing to show for the hundreds of hours playing the game. The Ronin network hack is not only the biggest single theft of digital cryptocurrencies to date, it may have been North Korean hackers who accomplished the theft enabling the rogue nation to evade sanctions and finance their nuclear ambitions.
Ever wonder why all these supposedly decentralized cryptocurrency-based companies continue to get hacked? The goal of true Decentralization, a fundamental tenet of blockchain and crypto, is to remove the single ‘honey-pot’ central server so there’s no obvious attack target. So why do they continue to happen?
It turns out that blockchain and cryptocurrencies are not as decentralized as everyone thinks. The Ronin network and Axie Infinity are centralized network applications just like everything else on the Internet. Users must download the mobile app and register their Axie account before battling for token rewards and NFTs that can be exchanged for Bitcoin and Ethereum.
Token rewards are worthless if they cannot be guaranteed by the issuer and therein lies the problem. The primary interest of cryptocurrency entrepreneurs is convincing users that their tokens have value even if that value is time spent playing Axie while commuting. Unfortunately, data security and privacy are secondary to the pumping and dumping worthless tokens.
The Ronin network was hacked in November 2021, yet wasn’t revealed until March 2022 because nobody at Ronin seemed to be interested in protecting their tokens. Hacks like this should be a warning to anyone hoping to get rich for doing something as simple as playing a game.
Cryptocurrencies offer a panacea of wealth generating activities, with many making no sense to any rational person and maybe that is the point. Cryptocurrency is not about monetizing inane activities, it is about rewarding people for providing a valuable service like the computing power necessary to write a block of data to the Blockchain.