Here’s how insiders dump blockchain game tokens using Sybil attacks
The blockchain gaming industry had an impressive 2021. Play-to-earn, move-to-earn, NFT games, and prices for all sorts of blockchain entertainment were surging.
Newspapers ran glowing stories about blockchain games like Axie Infinity employing 60,000 Filipinos. Of course, it was all just a flash in the pan. Within a few months, the bottom fell out of the market and both active users and market capitalizations cratered.
The topsy-turvy arrangement of game operators paying for players only worked as long as the operators could sell their crypto tokens based on inflated metrics like daily active users.
Unfortunately, they soon found out that there’s no sustainable business in paying populations to play video games. Once insiders finished dumping their bags, the blockchain gaming industry left many of those Filipinos indebted.
Now that much of the dust has settled, a new report by Delphi Digital examines the extent to which so-called Sybil attacks inflated growth metrics for blockchain gaming.
What is a Sybil attack?
A Sybil attack occurs when someone tricks a reputation system by creating multiple identities. The most simple example of a Sybil attack is creating fake identities to downvote a competitor and make it appear as though they have terrible service.
The name of the attack comes from the psychological book, Sybil, which is about dissociative identity disorder.
Various blockchains employ defenses against Sybil attacks.
Bitcoin’s tried-and-true method prevents Sybil attacks by imposing a cost on spam transactions. Not only is it computationally expensive and energy-intensive to hash valid blocks of transactions, but users must also pay a fee for every transaction.
Moreover, all of Bitcoin’s mining pool and node operators can lose their reputation within 10 minutes if they don’t stay in consensus when broadcasting and validating blocks. With reputation expensive to build and easy to lose, Bitcoin is an example of a Sybil-resistant network.
In contrast, Sybil attacks are a fantastic way to goose traction metrics in blockchain games.
Sybil attacks temporarily improve morale
For many Metamask-based games, it’s free to create new wallets and costless to perform many in-game actions. The backer of a blockchain game can easily create the illusion of growing user engagement.
Although there are few reasons to create artificial activity in conventional video games, non-conventional blockchain games almost always have a token or NFT which trades on sentiments like fear and greed.
- Sybil attackers can raise the number of unique wallets interacting with a game.
- These attackers can also qualify for engagement thresholds, snapping up NFTs, airdrops, and other rewards.
- Sybil attackers can also warp blockchain data like throughput, transaction popularity, node distribution, validation norms, and even Layer 2 engagement. Per the axiom “garbage in, garbage out,” misleading on-chain data then provides misleading intelligence, reports, and investor decision-making.
- Besides discouraging legitimate use, these Sybil attacks can artificially pump GameFi tokens.
Throughout GameFi’s short history, Sybil attackers have significantly inflated the number of unique active wallets using the biggest blockchain games. This is always evident during NFT drops where unique active wallets don’t equal the number of human users.
Of course, even legitimate users could have two or three wallets. After all, many people have multiple Instagram or Twitter accounts. Nevertheless, the vast majority of on-chain blockchain gaming activity is bots and Sybil attacks.
Read more: The play-to-earn crypto bubble has popped — Axie Infinity leads, down 99% from ATH
Bot activity discourages legitimate users of blockchain games who believe the marketing materials of game promoters. It also warps the metrics on which most people make investment decisions: Daily active users, traction, growth rates, and other on-chain data.
Most blockchain games have free and ultra-low-cost actions, such as registering with a new blockchain wallet, which provides Sybil attackers with an unfair advantage. This marginalizes legitimate users who often opt for other, more enjoyable games with real humans.
GameFi protocols with lower costs see more bot activity. Many actions are totally free. Often, repetitive actions like gold grinding within blockchain games are easily programmable. Developers can create simple software and complete actions over and over again.
Sybil attacks distort GameFi. Almost all blockchain games — especially games associated with high-value NFTs or tokens — have poor Sybil-resistance. Unfortunately, Sybil attacks have been a feature, not a bug, of the blockchain gaming industry.
The point, after all, has usually been to make money selling crypto assets. Once the money is made, the game is a lot less fun.