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'A Billion-Dollar Crypto Gaming Startup Promised Riches and Delivered Disaster' (bloomberg.com) 67

Posted by EditorDavid from the gaming-tokens dept.
"Even many Axie regulars say it's not much fun, but that hasn't stopped people from dedicating hours to researching strategies, haunting Axie-themed Discord channels and Reddit forums, and paying for specialized software that helps them build stronger teams..."

Bloomberg pays a visit to the NFT-based game Axie Infinity with a 39-year-old player who's spent $40,000 there since last August — back when you could actually triple your money in a week. ("I was actually hoping that it could become my full-time job," he says.) The reason this is possible — or at least it seemed possible for a few weird months last year — is that Axie is tied to crypto markets. Players get a few Smooth Love Potion (SLP) tokens for each game they win and can earn another cryptocurrency, Axie Infinity Shards (AXS), in larger tournaments. The characters, themselves known as Axies, are nonfungible tokens, or NFTs, whose ownership is tracked on a blockchain, allowing them to be traded like a cryptocurrency as well....

Axie's creator, a startup called Sky Mavis Inc., heralded all this as a new kind of economic phenomenon: the "play-to-earn" video game. "We believe in a world future where work and play become one," it said in a mission statement on its website. "We believe in empowering our players and giving them economic opportunities. Welcome to our revolution." By last October the company, founded in Ho Chi Minh City, Vietnam, four years ago by a group of Asian, European, and American entrepreneurs, had raised more than $160 million from investors including the venture capital firm Andreessen Horowitz and the crypto-focused firm Paradigm, at a peak valuation of about $3 billion. That same month, Axie Infinity crossed 2 million daily users, according to Sky Mavis.

If you think the entire internet should be rebuilt around the blockchain — the vision now referred to as web3 — Axie provided a useful example of what this looked like in practice. Alexis Ohanian, co-founder of Reddit and an Axie investor, predicted that 90% of the gaming market would be play-to-earn within five years. Gabby Dizon, head of crypto gaming startup Yield Guild Games, describes Axie as a way to create an "investor mindset" among new populations, who would go on to participate in the crypto economy in other ways. In a livestreamed discussion about play-to-earn gaming and crypto on March 2, former Democratic presidential contender Andrew Yang called web3 "an extraordinary opportunity to improve the human condition" and "the biggest weapon against poverty that we have."

By the time Yang made his proclamations the Axie economy was deep in crisis. It had lost about 40% of its daily users, and SLP, which had traded as high as 40 cents, was at 1.8 cents, while AXS, which had once been worth $165, was at $56. To make matters worse, on March 23 hackers robbed Sky Mavis of what at the time was roughly $620 million in cryptocurrencies. Then in May the bottom fell out of the entire crypto market. AXS dropped below $20, and SLP settled in at just over half a penny. Instead of illustrating web3's utopian potential, Axie looked like validation for crypto skeptics who believe web3 is a vision that investors and early adopters sell people to get them to pour money into sketchy financial instruments while hackers prey on everyone involved.
The article does credit the company for building its own blockchain (Ronin) to provide cheaper and faster NFT transactions. "Purists might have taken issue with the decision to abandon the core blockchain precept of decentralization, but on the other hand, the game actually worked."

But the article also chronicles a fast succession of highs and lows:
  • "In Axie's biggest market, the Philippines, the average daily earnings from May to October 2021 for all but the lowest-ranked players were above minimum wage, according to the gaming research and consulting firm Naavik."
  • Axie raised $150 million to reimburse victims of the breach and repair its infrastructure. "But nearly two months later the systems compromised during the hack still weren't up and running, and the executives were vague about when everything would be repaired. (A company spokesperson said on June 3 that this could happen by midmonth, pending the results of an external audit....):
  • Days after the breach it launched Axie: Origin, a new alternate version with better graphics/gameplay — and without a cryptocurrency element.
  • About 75% of the 39-year-old gamer's co-players have "largely" stopped playing the game. "But at least one was sufficiently seduced by Axie's potential to take a significant loan to buy AXS tokens, which he saw as a way to hedge against inflation of the Argentine peso. The local currency has indeed lost value since he took out the loan, but not nearly as much as AXS."

Thanks to long-time Slashdot reader Parker Lewis for sharing the article


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'A Billion-Dollar Crypto Gaming Startup Promised Riches and Delivered Disaster' More

'A Billion-Dollar Crypto Gaming Startup Promised Riches and Delivered Disaster'

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  • Ah! The promise of riches... (Score:5, Insightful)

    by SciCom Luke ( 2739317 ) on Saturday June 11, 2022 @05:35PM (#62612340)
    has led (wo)men to their doom since the dawn of time.

    • Re:Ah! The promise of riches... (Score:5, Interesting)

      by ctilsie242 ( 4841247 ) on Saturday June 11, 2022 @05:57PM (#62612370)

      Yep, so many scams are done, just by luring people with easy money... even back to the days of USENET and "make.money.fast" posts.

      It is amazing that cryptocurrencies lasted this long. Even in 2013-2014, people were wondering how many people would keep running into the bottom of the pyramid, even though it was obvious with the halving of output and the original people owning so much of the currency, that they wouldn't get much.

      Same with NFTs, although the tax law changes killed those after a few years.

      Makes me wonder how far this will fall. Cryptocurrencies in general seem "too big to fail" with all the money thrown into them. Wonder how all this will settle out?

      • Re:Ah! The promise of riches... (Score:5, Insightful)

        by rudy_wayne ( 414635 ) on Saturday June 11, 2022 @06:16PM (#62612392)

        Yep, so many scams are done, just by luring people with easy money... even back to the days of USENET and "make.money.fast" posts.

        It is amazing that cryptocurrencies lasted this long. Even in 2013-2014, people were wondering how many people would keep running into the bottom of the pyramid, even though it was obvious with the halving of output and the original people owning so much of the currency, that they wouldn't get much.

        There is an unlimited supply of stupid people. No matter how many people lose money, no matter how obvious these scams are, stupid people just keep jumping in and getting fucked.

        All we can do is sit back and laugh.

        • It's not the stupidity that I don't understand, but the greed. I can still understand somebody throwing away their salary for the promise of an X return in investment. But it simply boggles the mind that somebody would get scammed out of literally their life savings.

          • Re: (Score:2)

            by hey! ( 33014 )

            It's "motivated reasoning". It's not *intelligence* that's wanting, it's *vigilance*.

            Logic isn't in the driver's seat. Emotion is. Once you have bought into a fabulous gains scenario emotionally, logic is going to get locked in the trunk and only let out to rationalize bad decisions.

            • Ha ha, you assume most people can actually think logically. Majority of people believe they can think logically, but their "logic" is along the lines of "Sun is very hot, so if we want to send humans to the sun, we should send them there at night" or "Surveys show graduates with bachelor degrees earn more, let's give everyone a bachelor degree because everyone deserves to make more money". Such pseudo-logic, filled with flawed assumptions, flawed reasoning along the lines of "if A then B must mean if B then
        • Not just stupid people. You can also keep the pyramid scheme going by making it into an easy to use money laundering scheme. Dirty money goes in, less clean money comes out, the difference is an implicit money laundering fee which feeds the pyramid scheme for longer.

        • Re: (Score:1)

          by vivian ( 156520 )

          There's not an unlimited supply of stupid people.
          The reason pyramid schemes collapse is the stupid people supply line dries up.

          • But we make more every day.

          • Yea, but those same people who lost money will jump onto the next pyramid scheme, be it crypto, to-the-moon stock social media campaigns, or whatever else they are told will get them rich quick - something from nothing. Most scammers know, the best target for a scam is someone who has been scammed before.
          • You only need a certain number of stupid people in order to disguise your money laundering scheme. Depending on how much of a haircut you are willing to take, even the bottom layers of the pyramid can launder significant money. Obviously you pay less for the privilege if you are higher in the scheme.

          • There's not an unlimited supply of stupid people.

            Good lord, have you ever actually met people?

            They are, by and large, awful, and a huge percentage of them are dumber than a bag of hammers.

            Trust me, there IS an unlimited supply of stupid people. Always has been, always will be.

            • Re: (Score:1)

              by vivian ( 156520 )

              Even if 99% of people are stupid, the population itself is finite.
              Therefore any pyramid scheme or ponzi which requires an actual infinite supply of stupid people will collapse.

              • Even if 99% of people are stupid, the population itself is finite.
                Therefore any pyramid scheme or ponzi which requires an actual infinite supply of stupid people will collapse.

                Yes, but by then you'll be rich. Who cares about the suckers, you got yours. That's the end game- you have their money and they don't.

                Trust me, there are more than enough dolts and goobers out there to fund the most lavish lifestyle you can imagine.

                Most religions are Ponzi schemes and look at how their head grifters live- private jets, a different Lamborghini for every day of the week, multiple mansions, etc etc etc.

                Never underestimate the stupidity and gullibility of people. It's a barely-tapped resource w

        • Look at how many multi-level marketing schemes persist for decades. Compared to them, Crytpo seems only mildly stupid.

          • Some of the crypto stuff can get up there. For example the fact that people trusted exchanges and handed their crypto to another person's wallet, with the promise that they might be able to get their crypto back in the future. That is like handing a bar of gold to someone you don't know at all, tell them they can keep it, as long as they can get it back to you. Unlike gold depositories, there is no insurance or regulation in case something happens... or if what was deposited just walks off.

            The entire cry

            • For example the fact that people trusted exchanges and handed their crypto to another person's wallet, with the promise that they might be able to get their crypto back in the future. That is like handing a bar of gold to someone you don't know at all, tell them they can keep it, as long as they can get it back to you. Unlike gold depositories, there is no insurance or regulation in case something happens... or if what was deposited just walks off.

              Seems ridiculous to those of us who know a bit about how this stuff works. But much of the population is used to living in a highly regulated world to the point where they don't realize just how wild-west some of this stuff is. If I were to move to a new locale, I might open an account at the credit union located closes to my house. I probably wouldn't do a lot of research to make sure that it was a real deposit-taking institution and the like as fake banks aren't really a problem.

              Depositing cryptocur

      • Re:Ah! The promise of riches... (Score:4, Informative)

        by 93 Escort Wagon ( 326346 ) on Saturday June 11, 2022 @07:21PM (#62612452)

        Makes me wonder how far this will fall. Cryptocurrencies in general seem "too big to fail" with all the money thrown into them. Wonder how all this will settle out?

        But it’s not real money, for the most part. It’s a mostly self-contained system with a questionable claimed equivalent value set against fiat currency.

        It’s not as if the huge bitcoin swings over the past couple of years have had any real impact on the actual economy, for example. All the coins could fall to zero and there’d be little-to-no impact on the vast majority of people.

        • Re:Ah! The promise of riches... (Score:5, Interesting)

          by Brain-Fu ( 1274756 ) on Saturday June 11, 2022 @07:59PM (#62612478) Homepage Journal

          I didn't know that Yang said this was "the biggest weapon against poverty we have." I wonder if that statement was made out of utter ignorance, or a malicious attempt at pandering to the misguided motivations of his voter base.

          A new substitute for money will do nothing to combat poverty, as the basic mechanisms by which wealth flows from the poor to the rich will remain in place. If you want to combat poverty, look into microcredit [wikipedia.org], arguably the actual best weapon against poverty we have.

          Investment in infrastructure is also an excellent means of wealth transfer from the rich to the poor, provided the poor are in a position to utilize the infrastructure improvements. Labor automation could be THE thing that brings about the end of poverty as we know it, but it will require an accompanying cultural and economic revolution in order to achieve this.

          Cryptocurrency, on the other hand, is just another greater-fool game.

          • Re: (Score:2)

            by maitas ( 98290 )

            Actually there's a study by Esther Duflo that unfortunately shows that microcredits have no impact whatsoever on poverty.

        • Makes me wonder how far this will fall. Cryptocurrencies in general seem "too big to fail" with all the money thrown into them. Wonder how all this will settle out?

          But it’s not real money, for the most part. It’s a mostly self-contained system with a questionable claimed equivalent value set against fiat currency.

          It’s not as if the huge bitcoin swings over the past couple of years have had any real impact on the actual economy, for example. All the coins could fall to zero and there’d be little-to-no impact on the vast majority of people.

          For example, the peak valuation of this company was $3 billion, but the actual money invested was only $160 million. So even though the major chunk of that $3 billion valuation is gone only that $160 million in cash was actually wasted.

          The crypto market is massive based on valuations, but how much fiat currency has actually been spent on crypto?

          Another aspect of "too big to fail" isn't the amount of money but the role the money is playing. The reason banks were too big to fail is they were right at the cent

        • I hope you are correct. Unfortunately I suspect that there are many leveraged smaller investors out there who might lose their homes as a result of "investing" in crypto. They will be selling many assets at fire-sale prices which may (or may not) have knock-on effects. However, even they don't directly impact the economy, that's a large number of people who will now need to receive public assistance. We already have a huge problem here in the US in that savings rates are close to zero and at some point

        • But it’s not real money, for the most part.

          SHHHH!!

          FFS, don't tell the noobs, we need them to keep flushing their money down the crypto-toilet into our wallets.

          Errr, I mean, "we need them to keep investing their money into these amazing financial opportunities.

      • Yep, so many scams are done, just by luring people with easy money... even back to the days of USENET and "make.money.fast" posts.

        It was not easy money, for many in the Philippines it was a full time job to play this game.

      • I imagine that there will be surges of interest in cryptocurrencies until either someone figures out how to make them work, the governments of the world generally ban them, or both. (Banning them won't end their use, but it will end their popularity.) Any time there's money to be made, people will be trying to make it.

      • https://en.m.wikipedia.org/wik... [wikipedia.org]

        "The Albanian Civil War in 1997 was sparked by pyramid scheme failures in Albania soon after its transition to a market economy. The government was toppled and more than 2,000 people were killed"

    • Re:Ah! The promise of riches... (Score:4, Insightful)

      by sgage ( 109086 ) on Saturday June 11, 2022 @07:25PM (#62612456)

      Not just the promise of riches. It's the promise of something for nothing. Get in on the ground floor! Get rich quick!

  • Step 2? (Score:4, Insightful)

    by The Evil Atheist ( 2484676 ) on Saturday June 11, 2022 @06:12PM (#62612382)
    We've long gone past underpants-gnomes level of stupidity.

  • Why is this a story? Is there anything unexpected or noteworthy in what happened?

    • Slashdot has become the crypto equivalent of sorryantivaxxer and the HermanCainAward subreddit.

      We get the sit back and enjoy the show of stupid scammers and grifters losing money on a massive scale.

    • Why is this a story? Is there anything unexpected or noteworthy in what happened?

      Exactly. I read the title:

      A Billion-Dollar Crypto Gaming Startup Promised Riches and Delivered Disaster

      And thought two things: (1) And? (2) Seems about right.

      • I like a story that tells you everything you need to know in the title so you don't actually have to read the story. Like this one.

        In fact, you could pare the title down quite a bit and lose nothing: 'Crypto Startup Delivered Disaster' . Maybe even remove the word 'startup'.

    • Re:Ah, yes? So? (Score:4, Insightful)

      by Sarusa ( 104047 ) on Sunday June 12, 2022 @12:42AM (#62612692)

      People are so gullible that they need to be repeatedly smacked in the face with the fact that web3 and NFTs are scams from start to finish. If the story keeps just one more dumbass from sinking their life's savings into it and then finding out that NFTs are extremely fungible, then it will have been worth it.

      The constant reminders also help counter the incessant hype and bullcrap from the gaming companies. If you don't aggressively fight lies then people only see the lies and you get the incredible harm the antivaxxers have done.

      • Re: (Score:2)

        by gweihir ( 88907 )

        I don't think that helps. See, e.g., anti-vaxxers, flat-earthers, and other "believers" of any kind. They just dig their heels in and insist that, of course, _they_ have the truth and you are just trying to take something from them.

        Well, to be fair you are: You are trying to take their false sense of certainty.

  • Unless other players are losing money or it's really a Ponzi scheme?

    Just because there is a cryptocurrency or NFTs involved doesn't create value.

    • unregulated Casino does not need to pay out any thing and has lot's of shills

      • But I suspect purely random with a bias for the house does a better job than any amount of cheating. Those buildings in Las Vegas are good evidence for that.
    • Games can create value in their internal economies. Scarce real estate or rare items have commanded high prices even in the earlier multi-player games. Items that are difficult to obtain are valuable as well; some players are happy to pay real money for those, effectively paying the selling player for their time spent to obtain the item. None of that requires crypto though, this can either be handled through regular currency, or in-game gold. If the game's hosting company does not provide a bridge betwe
      • An value of the in game item is only what someone is willing to pay for it. If all game participants are there to sell items, the most they can do is make themselves feel better by trading said items amongst each other. "This in game weapon is worth 5 of the in-game food items", sure, but if nobody is willing to buy either of them with real goods (or cash which can be exchanged for real goods, like actual food which will keep you body from starving), there is no value outside the game.

        If you want to make

    • Rich people pay, poor people grind.

      Just like gold farmers in WoW, except they're trying to legitimize it.

      • But you do understand why WoW and other MMOs try to discourage gold farming, yes? There's a reason beyond "but we don't get a cut".

        Since the ingress and egress of gold isn't fixed, as in a real economy where there is some authority that mints coins and only so many coins exist as are minted, every time some monster dies in a MMO, money is generated. Either it drops directly or the monster drops some crap that a vendor turns into coins. Every time a player pays for something, money is destroyed. Because the

        • If you have a game that is desirable to play and you have people putting in real money, you can make the economy work through various means including, if there's enough money in circulation, reducing the value of grinding in order to manage the money supply. And you can even impose taxes on certain transactions. I don't play MMOs with economies but if the game is brining value to the players, it provides a source of enjoyment and a means of economic experiments. I would neither pay my time grinding nor m

          • I think I dimly remember a few games that actually wanted to make their economy run on real money. Few of them still exist.

            Didn't Diablo 3 try something akin to this for a while 'til the players revolted?

        • Well if you ask me, any game that involves grinding is defective. But they didn't ask me.

  • Wow (Score:3)

    by phantomfive ( 622387 ) on Saturday June 11, 2022 @07:46PM (#62612472) Journal

    on March 2, former Democratic presidential contender Andrew Yang called web3 "an extraordinary opportunity to improve the human condition" and "the biggest weapon against poverty that we have."

    TIL Andrew Yang knows nothing about crypto.

    • Re: (Score:3)

      by splutty ( 43475 )

      He meant "The biggest weapon against poor people". He just misspoke.

    • Re: (Score:2)

      by noodler ( 724788 )

      Alexis Ohanian, co-founder of Reddit and an Axie investor, predicted that 90% of the gaming market would be play-to-earn within five years.

      In the same vein, Alexis Ohanian knows nothing about the gaming market.

  • I'd like to say that anyone who "invests" in a crypto / NFT based game or thinks they'll profit from an investment of time deserves everything they get. But the reality is these "games" are scams and even if people buying into them are idiots they are still victims and the perps are still committing a crime.

    And this game isn't the only one by any means. There are a constant stream of MMOs relying on NFTs or crypto which are obvious scams where the game will never materialise. e.g games selling virtual plo

  • Imagine an amusement park filled with nothing but amusement park workers who are paid in amusement park currency (real, crypto, it doesn't matter), how long do you think that would last? I recon however long the real money raised to start/run that park will last. With no outside customers, the park will eventually run out of real money to pay property tax, bring in food ingredients, but parts for repairs, etc. As food in the park dries out because the park has no real cash to buy ingredients, the workers wi

    • Re: (Score:2)

      by ceoyoyo ( 59147 )

      In a big enough amusement park, potentially a long time.

      Now imagine an amusement park where everyone is a worker and they all have the same job: to ride the rides.

  • lol (Score:3)

    by jargonburn ( 1950578 ) on Saturday June 11, 2022 @08:34PM (#62612530)

    the entire internet should be rebuilt around the blockchain

    No.
    Wait, what? No.

  • 'what web3 looks like in practice' (Score:4, Insightful)

    by Sarusa ( 104047 ) on Sunday June 12, 2022 @12:43AM (#62612694)

    From the article: 'Axie provided a useful example of what [web3] looked like in practice'.

    Indeed. It's all lies and scams, and only the guys at the top get rich. Over and over and over again.

    • Not necessarily all lies, as some people truly believe so they are not lying when omitting the parts they truly don't know. It is still a pyramid scheme, but to most people pyramid schemes sound believable as sources of wealth for everyone. Like communism, or UBI, or MMT theory - it sounds so great on the surface as long as you don't look into those pesky details and try to do the math. Like any such scheme however, there are in fact people who do get rich off of them. There is real money to be made on pyra

    • If you spell "web3" sideways it forms the word 'scam'.

      Also, how do WE become the guys at the top?

  • "Purists might have taken issue with the decision to abandon the core blockchain precept of decentralization, but on the other hand, the game actually worked."

    If it is centralized, what's the advantage of a blockchain over a database except for marketing speech?

  • Honestly the amount of data collected from these gamers is worth more than the cryptocurrencies. If it's free or profitable then you are probably either the product or the labour.
  • Promise Paris -- Deliver Detroit
  • For those who bet their future or their children's future on crypto, this is the link you need right now: https://www.gamblersanonymous.... [gamblersanonymous.org]

    But, you gotta take the first step and admit you have a problem.
  • Thanks for this article! To be honest, I don't really trust all these cryptocurrencies, and it seems to me that it's quite risky to use them nowadays, that's why I prefer playing in ordinary online games, and betonline poker [poker-place.com] is one of them for sure. It's really easy to register and start playing on their website and as for me, I spend all my free time on it.

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