IntoTheBlock brings us a blockchain analysis of the recent over $600 million Ronin exploit.
Around the end of 2020, crypto started to develop a new sector with growing interest that was attracting many users. This was the “play-to-earn” games sector. One of the pioneers and leaders in the space was Sky Mavis, with their product Axie Infinity. The game runs in the Ronin Network, an Ethereum side chain. This enabled users to have fast and seamless transactions with a significant reduction in gas fees, plus almost instant confirmation empowered the game experience. Sky Mavis had good product market fit and encountered exponential growth. In order for players to reach the Ronin Network, they use the Ronin Bridge.
On March 23, Ronin validators were compromised and the bridge was exploited for 173,600 Ethereum and 25.5 million USDC. In this article, we seek to analyze key on-chain Ethereum metrics surrounding AXS, the Axie Infinity governance token, following one of the largest crypto exploits.
Balance by time held measures the variation over time in the balance of coins that each group of holders has been holding. These groups are divided between Hodlers, Cruisers and Traders, depending on how much time they have been holding their coins.
Source: IntoTheBlock’s AXS indicators
The Hodlers category, which stands as the group holding coins over one year, experienced a decrease in balance. A 25 million AXS decrease equivalent to $1.7 billion was recorded, soon after the exploit was noticed by the community on March 29.
Analyzing AXS smart contracts, a withdrawal is noticeable from the “AXS Token Swap” address which belongs to the Axie Infinity Foundation and is currently the top AXS holder. This transaction matched the decreased amount in the hodlers category. The transaction was made to fund a new multi-sig wallet with daily limit. Sky Mavis, the parent company of Axie infinity, hasn’t made any public comment about funding this new multi-sig wallet, but the same address “AXS Token Swap” seemed to have funded a previous multi sig-wallet on July 6, 2021.
Furthermore, IntoTheBlock registers the on-chain volume transferred in the Transactions Volume indicator. This one can indicate both trading and non-speculative activity. Similar to trading volume seen in exchanges, Transactions Volume can be helpful to spot volatility in the market.
Source: IntoTheBlock’s AXS indicators
In this case, the AXS token experienced significant on-chain volume after the exploit was recognized, but this was due to the transfers made by the foundation to set up the new multisig wallet. Since these tokens are currently not being sold, and being maintained as AXS, substantial selling pressure on the Ethereum on-chain markets is not yet being caused.
Consequently, the AXS token price has not been drastically affected by the recent exploit news, with 92% of the token holders currently making a profit. IntoTheBlock’s Global In/Out of the Money indicator identifies any address with a balance of tokens, the average price (cost) at which those tokens were purchased and compares its current price. If the current price is greater than average cost, address is “In the Money.” If the current price is less than average cost, address is “Out of the Money.”
Source: IntoTheBlock’s AXS indicators
Axie Infinity experienced great adoption by the market during summer 2021. Its governance token, AXS, benefited from this adoption and significantly appreciated in value. Being one of the top performers in 2021, positioned the token holders to bear through the recent decrease in the crypto market without being affected by selling pressures. This left 15.5K out of the 16.9K addresses to be currently “In The Money,” or profiting on their holdings.
In addition, IntoTheBlock measures Total Addresses with a Balance by subtracting those addresses that have no balance ("Total Zero Balance") from the total number of addresses in the network ("Total") to arrive at those addresses that actually have a balance ("Total With Balance").
Source: IntoTheBlock’s AXS indicators
The indicator depicts a clear exponential growth in addresses with balance. Furthermore, there is no sign of addresses selling their tokens due to the recent exploit. This suggests that token holders are willing to accept the risk and decision making of the Axie Infinity Foundation going forward.
In 2022, this is the second significant bridge-related exploit after the wormhole bridge exploit — this represents an increase in risk for DeFi users. Axie Infinity experienced great adoption and success in the DeFi space, it is one of the favorite “play-to-earn” games for users. The next steps forward in relation to how Sky Mavis handles the bridge exploit will be crucial to this continued success.
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