Sky Mavis co-founder Leonard Larsen is determined to prove Axie Infinity’s critics wrong

Aleksander Leonard Larsen feels hard done by. Based on the events of 2022 thus far, that’s understandable.  

The Sky Mavis co-founder and chief operating officer is just six months removed from seeing more than half a billion dollars’ worth of crypto drained from Ronin, the blockchain his company built for gaming developers. The incident was, to some extent, out of his control.

So too, he feels, are the criticisms that have dogged Vietnamese studio Sky Mavis and its marquee title Axie Infinity, perhaps the world’s most popular crypto-based game. Detractors argue Axie’s “play-to-earn” model has led to the exploitation of workers — many of whom had lost day jobs during the pandemic — in Southeast Asia.  

“It’s mind-boggling to me,” he said in an interview at Token 2049, a crypto conference in Singapore on Sept. 29. “It’s unfair, but I guess that’s just the way it is when you’re getting the attention of the world.” 

Now armed with a shored-up Ronin and a brand-new game, Leonard Larsen feels like an underdog again. He’s dead-set on showing the world that Axie “is more than just that the play-to-earn that everybody is getting to know us for.” 

A whirlwind year 

Even by the standards of turbulent crypto markets, Sky Mavis has had a whirlwind 12 months.   

At its heart, Axie is a turn-based game that pits teams of Pokémon-like creatures (known as Axies) against each other. These critters take the form of NFTs, and through Axie’s gameplay loop, players can earn two types of tokens — AXS and SLP. They can also burn SLP to breed new Axies, or cash their tokens out.  

While riding high last October, Sky Mavis bagged $152 million in a fundraise led by Andreessen Horowitz, which valued the firm at around $3 billion. At that time, Axie boasted 2.7 million daily active users. It became so expensive to begin playing the game at one point that so-called “guilds” began forming to lend out Axies and offer guidance to new players.  

“We didn’t anticipate that it would become so big, so fast, and what happens there is if you’re not careful you lose control of your own narrative,” Leonard Larsen said. “So, you would have middlemen in Axie that are going out and selling this to their friends as a get-rich-quick scheme… It’s a common problem I feel within crypto.”  

Sky Mavis had considered shutting down the guilds, which sprung up independently, but ultimately avoided doing so. 

Then the frenzy subsided. By May this year, the number of daily active users had dropped to less than 1 million. The game’s tokens have also declined sharply in value, according to CoinGecko data. In June, Sky Mavis announced that it would be shuttering the classic version of Axie to focus on the launch of a new game, dubbed Axie Origins. 

“The Axie Classic game that we released early in 2020 had kind of run its course. The quality of that game could only go so far,” Leonard Larsen said. The way he tells it, Axie Classic was merely an experiment — and its popularity caught even Sky Mavis off guard. The team was not, for example, running any “live operations” — meaning the game was not being regularly updated with new features or in-game events. Indeed, it was while Sky Mavis was busy developing Origins that Classic blew up, Leonard Larsen said.  

“There was also all this pent-up demand from the last two years when we had been building community,” he added. “The game wasn’t necessarily what people were there for — it was everything that was surrounding it.” 

Ronin under siege 

In March, roughly $540 million in funds belonging to Axie Infinity players was drained from Ronin, the Ethereum-linked sidechain developed by Sky Mavis. The U.S. government tied the exploit to North Korean cyber-crime group Lazarus, and The Block later revealed that the hackers gained control of Ronin’s validators using a fake job ad. 

This highly sophisticated “spear-phishing” attack gave the hackers access to four out of Ronin’s nine validators, which fulfil various functions in blockchains, including creating transaction blocks and signing transactions. The hackers then took control of the crucial fifth node using the Axie DAO, a group set up to support the gaming ecosystem. Sky Mavis had asked the DAO for help dealing with a heavy transaction load in November 2021. 

One obvious question occurred, after those details had come to light in July: Why did Sky Mavis concentrate power in the hands of so few validators? 

“It’s related to trade-offs. Everything we do is trade-offs,” Leonard Larsen said, adding that at one point Ronin had more than $1 billion of ether in total value locked (TVL). “These are very big numbers compared to a chain that’s so young.” 

He added, “Obviously, looking back at it, I wished we would have focused more on security. It was a hard lesson to learn.” 

In April, Sky Mavis announced it had raised $150 million in a round led by Binance. The proceeds, it said at the time, would be used alongside the company’s own funds to reimburse users affected by the exploit. After coming to a sudden halt at the time of the hack, Ronin’s Ethereum bridge relaunched in late June — by which point all user funds had been restored.   

Later, in July, The Block revealed that Binance had scaled back its investment in Sky Mavis. Because Sky Mavis had been able to stabilize and recover funds from the hack, it could make users whole without the exchange operator’s assistance, a Binance spokesperson told The Block at the time.  

Asked about this puzzling sequence of events, Leonard Larsen said, “The raise is still happening, but it’s a different type of… vehicle than was initially intended, so there’s a little bit of back and forth there. But overall, the commitments that were made at the time was critical for Sky Mavis to even be able to get some time.” 

He confirmed, however, that the round, as announced in April, “did not close.” He declined to go into further detail on exactly why Binance scaled back its investment, simply adding, “When the commitments were made, it was very critical. Having those conversations, getting support from Binance was very, very important at the time.” 

Sky Mavis currently has a financial runway of around 10 years, according to Leonard Larsen, an eye-catching length of time for a business still so young. This, he explains, factors in all the tokens on its balance sheet, which represents a sizable cache. Axie Infinity generated $1.3 billion revenue in 2021, Leonard Larsen said.  

Does he feel at ease, with so much dry powder behind him?  

“It’s obviously different from what it was, because we had literally the freedom to do almost anything that we wanted at one point,” Leonard Larsen said, seemingly alluding to the suppressed state of token prices.  

“Now we need to be more I think careful, generally speaking, about how we are looking at the space,” he continued. “But I don’t feel relaxed. I feel like I want to win more.” 

What’s next for Axie? 

How then will Axie — which has amassed one million downloads for Origins in pre-release mode — reinvent itself?  

A new runes and charms system has been introduced to encourage players to spend money inside the game during each of Axie’s “seasons,” which last six to eight weeks. In Origins, SLP can be burned to get runes and charms — which can be equipped to make Axies more powerful — whereas before it could only be burned to breed Axies. The runes and charms can be normal, rare or mystic. But after each season, they vanish, meaning players will have to burn more SLP if they want to continue decking out their Axies.  

“We have designed it in a way so that the economy is more sustainable and able to handle these users, especially when we look at the SLP ratio being burned,” Leonard Larsen said. “There are things inside the game that are circulating out of production on a, let’s say, six to eight weekly basis. So that really means that for people to compete they need to commit more capital by that season, and then spend money to be able to earn something.” 

Sky Mavis also plans to launch a virtual land-based game — one similar to 4X games but with NFTs infused — later this year.  

What’s more, the restored Ronin chain is once again open for business. Sky Mavis had increased the number of Ronin validators to 17 by mid-August, and added an 18th in the form of Google Cloud in September. Besides its own Axie games, Sky Mavis also wants to bring third-party gaming studios onto the chain. Specifically, those focused on mobile games that haven’t yet issued a token.  

The first batch of external studios to begin building on Ronin will be announced before Christmas, and Leonard Larsen said he wants to position the chain “as a Layer 1 for gaming projects specifically.”   

More importantly, though, he hopes that in the coming months he can once again seize control of the Axie narrative.  

"I feel like a little bit of an underdog story, again, which has historically been very good for us,” he said.