Disclaimer: Nansen has produced the following report as part of its existing contract for services provided to Sky Mavis at the time of publication. While Sky Mavis has the right to review and provide feedback to Nansen, Nansen maintains full editorial control over the publication of this report. All views expressed are the independent opinions of Nansen's research analyst(s) who are the author(s) named in this report. This report is intended for informational purposes only and does not serve as investment, financial, professional, or other advice. For more information, please refer to the disclaimer at the end of this report, as well as our Terms of Service.
Ronin is an Ethereum sidechain built specifically for the Axie ecosystem. It was created to fuel the play-to-earn revolution and has become a key player in the crypto gaming space. The network powers the entire Axie Infinity ecosystem, facilitating transactions and holding its assets - Axies, Land, SLP, AXS, Wrapped ETH (wETH).
Axie Infinity launched their highly anticipated Origin on April 7th, which is set to be the main version moving forward. The update introduced new features like free Starter Axies, Arena Mode, Crafting, Runes and Charms. Furthermore, Axie Classic holders are still able to utilize their NFT Axies in Origin.
With the reopening of Ronin Bridge, users whose crypto assets were stolen have been fully refunded. Back in April 2022, Binance led a $150M funding round to help Sky Mavis restore the funds on the Ronin Bridge.
What are sidechains?
A sidechain is a separate blockchain that runs in parallel to the Ethereum network and operates independently. It has its consensus algorithm and is connected to Mainnet by a two-way bridge.
Sidechains support general computation and are EVM compatible, however, sidechains are less decentralized and use a separate consensus mechanism. What this means is that a quorum of sidechain validators can also commit fraud. Since sidechains are independent, if hacked or compromised, the damage will be contained within that chain and will not affect the main chain.
Ronin Ecosystem Overview
Since Ronin was made to be a gaming-specific layer one (L1) focused on onboarding gaming studios and bringing together a collective group of gamers, one of the main advantages of building a dedicated sidechain is its near-instant transactions and nominal fees, allowing millions of in-game microtransactions.
Axie Infinity surged in popularity last year but had seen declining transaction volumes. Moreover, their NFT sales volume also significantly declined since the peak. Although the overall volume had declined since the peak, Axie Infinity has a sizable roadmap ahead, with the launch of Origin, the gameplay features NFT land plots, free “starter Axies” for onboarding purposes, and plenty of other incentives to address the limitations of V2.
Total Value Locked
As shown on the table above, TVL had declined significantly this quarter under the backdrop of a general downtrend in the crypto market. It is also worth noting that the % decrease in TVL was significantly higher for Ronin at 82.7% compared to Ethereum’s decrease of 65.5%. This was caused in part by the decrease in activity and popularity of Ronin and Axie Infinity this quarter, as well as the Ronin Bridge hack last quarter.
Transactions: Ethereum vs Ronin
As seen above, the number of daily transactions on Ronin was approximately half of that on Ethereum. There had been a gradual decrease for both chains, given that the market had been bearish throughout Q2 2022. However, the sudden spike at the start of the quarter was attributed to the release of Axie Infinity: Origin.
Ronin Bridge Stats
On March 23, 2022, the Ronin Bridge was exploited, with the loss of 173,600 ETH (worth around $590m at current prices) and $25.5m worth of USDC. It was reported that around 5 out of 9 validators were attacked and controlled during the incident. Hence, the bridge was closed and there weren't many activities for most of Q2 2022.
In response, Ronin’s mission this quarter was to have 21 independent validator nodes to collectively secure the network. Among the organizations added to the validator node pool were Nansen, Delphi, Animoca Brands, Dialectic and Stable node. However, only 14 validator nodes were found at the end of Q2.
As of Jun 28, the Ronin team had successfully reopened the Ronin bridge with upgraded features. They updated the Bridge Smart Contract software so that the validators can set a daily withdrawal limit from the Ronin Bridge. It stated that all user funds are fully backed 1:1 by the new bridge, with new measures in place to increase the security of the bridge.
Revenues on Ronin
At the start of the quarter, Axie Infinity: Origin was released which caused a spike in daily revenues. Since then, the daily revenues on Ronin (in USD) had seen a gradual decline, whilst initial excitement from the new release started to cool down. This was shown through the decrease in Breeding Fees, which are paid when players breed their Axies, evident that player activity had decreased.
However, there was a sudden spike in Marketplace Fees on May 3 of $105k due to the announcement of Land Staking in Axie Infinity which allowed users to stake their virtual plots of land in return for AXS crypto token rewards.
Katana is a decentralized exchange built on top of Ronin. Currently, the available tokens on Katana are ETH, AXS, SLP, USDC, and RON.
Some benefits of using Katana include:
- Breeders can trade AXS
- Users can trade SLP for wETH to buy additional Axie teams with minimal fees.
SLP is a utility token/ potion in the Axie ecosystem, which is used to breed Axies. When SLP is minted more than burnt, it will reduce the value of SLP due to oversupply on the market. However, as gameplay activity reduced, SLP mints had decreased from the start of Q2 2022 when Origin was released and remained rather constant since the middle of the quarter.
Based on their whitepaper, Axie mentioned a few key milestones that they are aiming to achieve in the next quarter:
- Land gameplay
- Origin hit 800,000 downloads for early access.
- Axiecon - Axie Infinity Convention
- Lunacia SDK Alpha: The Lunacia SDK Alpha is meant for developers and creators to make games using existing Axie Infinity assets and hosting them on land
- $AXS ecosystem begins: Governance, Play-to-earn, Mainstream release of Axie Infinity on IOS/ Android
Overall, despite the general decline in activity, there has been some interesting developments in the Ronin sidechain and Axie ecosystem, with Axie Infinity: Origin taking the spotlight.
The game update helped rejuvenate both Axie Infinity and Ronin, bringing players back to the game along with Land Staking and the reopening of the Ronin Bridge. With the newly upgraded Ronin Bridge up and running since Jun 28, 2022, users are once again able to transfer funds between Ethereum and Ronin blockchain. The bridge had also been upgraded with increased security and funds restored through the funding round led by Binance. Nature is healing.