Prominent Venture Capitalists a16z And Others Invested $311M In Alleged Ponzi Scheme Axie Infinity
Even before the popular “play-to-earn” blockchain game Axie Infinity was hacked in March to the tune of $625 million, market observers described the game, which rewards its players with crypto tokens, as a Ponzi scheme, and predicted it would hurt thousands of players, especially in the Philippines.
A Ponzi scheme is an investment fraud that uses money from new investors to pay earlier investors and may steal some of the money. Ponzi scheme organizers often promise high returns with little or no risk. With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it gets hard to recruit new investors or when existing investors cash out en masse, that’s when Ponzi schemes collapse.
A video game fueled by cryptocurrency and NFTs, Axie Infinity was created by Vietnam-based startup Sky Mavis Inc. as part of the rising play-to-earn gamer movement. Axie’s biggest fans evangelized that “play-to-earn” blockchain games like Axie could provide more opportunity and equality for people traditionally excluded from the global economy. Players could earn in-game currency called Smooth Love Potion (SLP) and exchange the tokens for other cryptocurrencies.
Sky Mavis takes a cut of in-game transactions and sits on a large stash of tokens.
The game was a huge hit in the Philippines, where about a quarter of the 110 million population lives below the poverty line, Time reported. Filipino players represented 40…