4 - 7 minute read
In a recent article by Analytics Insight, it was noted that the crypto project Metacade (MCADE) is skyrocketing in its presale phase while Monero (XMR) has struggled in 2022. Metacade is a virtual arcade platform that hosts a variety of games, powered by its native MCADE token which can be used for voting in the project’s governance and to earn income through playing games and participating in the community. The article cites three main reasons for Metacade’s success and potential for continued growth, compared to Monero’s limited use case, Metacade’s diverse offering and appeal to a wide audience, and its early stage of development with room for growth.
However, it is worth considering the potential risks and reasons for skepticism surrounding this and other crypto game services. Loot box articles have shed light on the negative impact of these virtual items on players, with some financially ruined by their pursuit of in-game items. Similar concerns are now being raised about non-fungible tokens (NFTs) in the crypto gaming industry, particularly in relation to the game Axie Infinity.
Axie Infinity, which combines elements of games like Pokemon with NFT monsters, gained popularity and made a lot of money through NFT sales in 2021. However, as the crypto market trended downward, the game began to lose players and revenue. In April 2022, the game faced the second largest crypto hack in history, with $600 million worth of ether stolen. To compensate players, Axie Infinity’s parent company, Sky Mavis, raised $150 million in funding, led by Binance and other investors.
The hack and subsequent fundraising efforts highlight the vulnerabilities of NFTs and the potential for shady activity in the industry. Additionally, it was later revealed that the hack was carried out by North Korean hackers known as the Lazarus Group. An investigation by the FBI and Treasury Department traced the theft back to the group, who tricked an engineer at Axie Infinity into opening an offer letter containing spyware.
This incident, along with the disproportionate impact on players in the Philippines (53% of the player base), raises questions about the reliability and safety of these crypto game services. An investigative report by Time detailed the experiences of Filipino resident Sammerson Aureus, who lost over $1,000 in the Axie Infinity hack.
The negative consequences of these types of games on individuals and the potential for unethical behavior in the industry calls into question the promotion and marketing of NFTs and crypto games as the “next revolution” in gaming and web interaction. As Time’s headline reads, “A crypto game promised to lift Filipinos out of poverty. Here’s what happened instead.”
Furthermore, it is important to consider the potential for sponsored content and misleading information in crypto news sources. Many outlets use sponsored links to lure people to invest and speak highly of certain projects, such as Metacade. It is crucial to do thorough research and due diligence before making any investment decisions in the crypto market.
Ponzi Scheme Design in Crypto Game Services
The issues with Axie Infinity and the use of NFTs bring to mind previous Ponzi scheme design in crypto game services. In 2019, the US Securities and Exchange Commission (SEC) charged the creators of a game called Hashpets with running a Ponzi scheme that defrauded investors of over $2.5 million.
The SEC’s complaint stated that the creators of Hashpets “falsely promised guaranteed returns on investments and misled investors by claiming their investments were backed by real estate and cryptocurrency assets.” In reality, the company was using new investor funds to pay returns to earlier investors, a hallmark of a Ponzi scheme.
The similarities between the fraudulent activities in Hashpets and the vulnerabilities and lack of transparency in some crypto game services raise concerns about the potential for similar schemes in the industry.
It is important for potential investors to be aware of the risks and to thoroughly research and verify any information before making any investment decisions. This includes looking beyond sponsored content and carefully evaluating the credibility and track record of the project and its team.
Final Thoughts
The experiences of Axie Infinity and the discovery of Ponzi scheme design in other crypto game services calls into question the reliability and safety of these types of games and services. The negative impact on individuals and the potential for unethical behavior in the industry raises skepticism about the promotion and marketing of NFTs and crypto games as the “next revolution” in gaming and web interaction.
While new projects like Metacade may offer promising features and opportunities, it is crucial to carefully consider the potential risks and to do thorough research before making any investment decisions. This includes being aware of sponsored content (like the link at the bottom of Analytics Insight’s article) and misleading information in crypto news sources and evaluating the credibility and track record of the project and its team.
