The rise of crypto bailouts
Sky Mavis, the company behind NFT game Axie Infinity, raised $150 million in funding to help reimburse users impacted by the $600 million hack of its Ronin sidechain.
Why it matters: A new pattern for dealing with crypto hacks is emerging. This is the second major breach this year in which investors stepped in to mitigate the damage.
Details: Crypto giant Binance is leading the round in Sky Mavis, with participation from existing investors Animoca Brands, a16z, Dialectic, Paradigm, and Accel.
- A portion of the $600 million will also be reimbursed via Sky Mavis' and Axie Infinity's balance sheets.
- "We needed to take responsibility for this and be transparent because we failed to live up to the expectations of our users. It didn't really matter if anyone's ever done this before," Sky Mavis co-founder and COO Aleksander Larsen told Axios' Dan Primack.
Context: In late February, hackers made away with some $320 million worth of crypto from Wormhole, a popular bridge between different blockchains.
- An investor in the project, Jump Crypto, decided to acquire crypto and make participants of Wormhole whole.
- "That was really motivated by a belief that not doing so would’ve been an enormous setback to a cross-chain world in crypto and DeFi in general," Jump president and chief investment officer Dave Olsen, told Bloomberg last month. "Quite logically, it may have been the end of Wormhole entirely."
Bottom line: If you're an investor who believes the cost of these hacks are setbacks compared to the potential business opportunity, leaning in even further during the crisis makes sense.
- Not only could the breach drain confidence in the protocol or company at the center— it could also have a ripple effect on that sector in crypto.