Applications and Use Cases

Ronin Network $625 Million Hack Highlights Blockchain Security Weaknesses

April 07, 2022

The recent $625 million hack of the gaming-focused Ronin Network highlights some of blockchain's glaring security issues. Ronin acts as a cross-chain bridge that enables users to make payments on one blockchain using cryptocurrency from another. Hackers were able to breach five passwords and steal millions of dollars worth of Ethereum and USDC in one of the largest crypto hacks to date.

Ronin was developed by Sky Mavis, publisher of the popular video game Axie Infinity. According to Flora Li, head of the Huobi cryptocurrency exchange's Research Institute, Axie Infinity has exploded in popularity, resulting in an influx of more than eight million players on the Ronin blockchain. The game is currently the most popular blockchain-based massively multiplayer online (MMO) game.

“This hack reflects the continuing challenges that blockchains and operators face in balancing user experience and security,”said Li. As Axie brought in a rapid influx of users to the Ronin blockchain, developers “took shortcuts to relieve network bottlenecks, cutting down the number of nodes that needed to be validated for transactions [to be added to the blockchain] to just five of nine nodes, making it easier for hackers to exploit.”

"We realized the Ronin Network has been exploited for 173,000 [Ethereum] and around $25 million in USDC," said Jeff Zirlin, co-founder of Axie Infinity, during a keynote address at the recent NFT LA conference. "It is one of the bigger hacks in history," he said, while committing to continue building and strengthening the company's blockchain network. "We believe in a future of the internet that is open and owned by the users."

A shocking $14 billion worth of cryptocurrency was stolen, hacked or scammed last year. In the case of Ronin Network and similar blockchains, the proof of stake (PoS) consensus and validation mechanism has come under fire as a security weak point. An alternative to the energy-intensive proof of work consensus used by Bitcoin and other blockchains, PoS blockchains select random validators on the network who have staked their cryptocurrency. Fewer validators mean the blockchain can operate faster, but is also more open to hackers.

Vitalik Buterin, creator of the Ethereum blockchain, has called the phenomenon the "Blockchain Trilemma." He posits that the three most important aspects of blockchain -- decentralization, security and speed -- require a delicate balancing act. For instance, improvements to decentralization require adding more nodes, which sacrifices the speed of consensus. Improvements to speed can be made at a cost to decentralization, and therefore security.

When Ethereum officially switches to proof of stake with its much delayed and anticipated Ethereum 2.0 upgrade, the company claims it will be able to handle 100,000 transactions per second without sacrificing security or decentralization. If it is successful, the company will set a benchmark for smaller blockchains like Ronin, who ramp up too quickly while sacrificing security.

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