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|VIR’s talk show on burning cybersecurity issues with NFT games, photo Chi Cuong|
Hot on the heels of one of the greatest hacks ever in blockchain game history in March, cybersecurity has become one of – if not the – most crucial elements of any project that utilises a blockchain and non-fungible tokens (NFTs).
During the hack that targeted Axie Infinity’s Ronin Network, an Ethereum-linked sidechain developed by Sky Mavis, the company creating Axie Infinity, hackers compromised the network and cashed in by around $620 million.
Theo Tsihitas, technical writer at comparitech explained, “This was made up of 173,600 in ETH (worth just less than $595 million) and $25.5 million, making it the biggest crypto heist to date. Ronin Network, which supports Axie, said its Ronin and Axie DAO validator nodes had been compromised with the funds being drained in two transactions.”
While the aftermath of this hack remains uncertain, the case has shown how important security is in the blockchain and NFT scene, particularly when it comes to complex interactions with thousands, if not millions of users, on just one platform like with many games.
During the talk show, Hoang Viet Tien, head of Strategic Advisory at Insider, summarised information related to cyberattacks on cryptocurrency networks.
“We have seen that for the top 10 biggest attacks on blockchain projects, the cryptocurrency market as of December lost $2.8 billion. There were six attacks taking place in 2021, accounting for 60 per cent of the attacks,” Tien explained.
The damage accounted for 5 per cent of the total loss of about $1.2 billion, he added. “In the latest development, we can see that the protocols of general decentralised finance and inverse finance were both attacked and appropriated cryptocurrencies worth $15.6 million.”
Vietnam, as one of the nations with several successful and up-and-coming projects in this sector, will likely play a pioneering role in providing sufficient security for both, the end-users’ capital contributions to play-to-earn games as well as companies’ long-term stability and vision.
Laying the right foundation
One of the issues brought up by the participants of the talk show was the lack of understanding and preparedness of young startups in the blockchain and NFT markets. Jennie Hoang Phuong, CEO of D.lion Media & Solutions, noted that while it is easy for many startups to copy ideas and paste them into their own concepts, many lack the right foundation to progress any further.
“The ideas of a new startup sometimes won’t come from within themselves, but they think it’s ok to copy and paste certain concepts so that they can immediately ride that wave of success. However, that will lead to the possible risk of lacking a technical background,” Phuong explained.
“In the startup industry, especially related to blockchain and information security, you can copy an idea but you cannot fully understand the nature of the underlying technical structure. So, this makes your project very risky.”
Phuong also remarked that fear of missing out can lead to a domino effect causing multiple issues. “Because you’re not simply doing a startup but are also an investor. This leads to many projects calling for capital dying in infancy,” she said.
In the same vein as that warning about acting too quickly, William Do, CEO of HOBBIT Investment remarked that it would be important to clarify what goals each startup has when starting to work with an investor, especially in the blockchain and NFT game industry.
“As the legal corridor for blockchain and NFT projects is not complete, founders have to convince investors and others with the right strategies,” he said.
Additionally, Do emphasised the need for startup founders to cooperate closely with the investors and lead funds. “When entering the capital raising journey and when faced with questions from investors, many startup founders will be shy and might even feel inferior. And these founders will wonder, ‘Am I on the right track?’,” he said.
“I will ask them: ‘In case you are not skilled enough nor knowledgeable enough nor professional enough to secure or protect your product as well as your project, can you speak up or ask an expert for help? Or will you choose to shut up and hide?’ If they hide, they are not suitable to go the long way with us,” he explained.
- VIR’s talk show: Vietnamese NFT game startups attract foreign investors
- Livestream available at vir.com.vn, tinnhanhchungkhoan.vn, and baodautu.vn as well as on VIR’s Facebook and YouTube platforms at 9am on Thursday, June 3.
Long way ahead
From a legal perspective, with cases and attacks that cause damage to game makers and players, Le Van Duong, partner at Indochine Counsel shared, “The legal corridor for the operation of blockchain games is not yet available in Vietnam. So, when damage occurs, it will be directed to the investors and the users who play games and invest in them.”
Duong also emphasised the vital role of paperwork for any such project. “When ordinary investors fund a game, they will have an investment contract or a shareholder agreement. So, determining the damage and compensation must be based on the specific investment contract or shareholder agreement,” Duong said.
However, as much of what makes up the blockchain industry remains new, new game companies appear with completely new business models, Duong remarked.
“In order to limit the risk, game developers and investors have to focus on the security of the game. If they don’t know how to secure the game, then a third party could provide a solution for them or offer to rent a platform that provides these services. The same goes for special blockchain audit units, such as CertiK, which can advise,” Duong said.
While the legal systems in countries that allow the establishment of businesses using blockchain payment intermediaries such as Singapore, Canada, and Estonia, make it so the parties can establish a juridical person there and develop a game on that legal entity, Vietnam still lacks the legal framework for this.
Trinh Ngoc Duc, CEO of blockchain game FOTA shared, “The issue of the legal corridor is quite a painful one. Most of the companies developed in 2017-2018 were trying to find their way but didn’t know where to start on the legal issues.”
He added that in recent years, some countries have already supported legal issues and Vietnam can learn from them. “There have also been successful projects from Vietnam that have proven themselves elsewhere. So, why don’t we sit down with them and listen to how they did it to balance the interests of businesses with people and the interests of the country.”