Is Axie Infinity (AXS) Safe?

Last Updated January 31st 2022

9 Min Read

Is it safe to invest in Axie Infinity? What are the major risks associated with investing in Axie Infinity, and how can each be avoided?

Axie Infinity was all the range throughout 2021, growing its value by more than 165000% in its first 12 months of operation. It became one of the fastest-growing cryptocurrencies and attracted the attention of speculative investors. But its high rising status has also placed it and its investors on the radar of cybercriminals.

This is to say that while Axie Infinity is a fast-rising and highly resilient token with immense potential for upward gains, which makes it a rather safe investment, it is also dogged by a host of risks. We will be highlighting the most common and the most dangerous threats to AXS investment here. We will also tell you how each can be avoided or managed.

Before this, though, we need to mention that most of these risks are inherent to the larger crypto market and not necessarily unique to Axie Infinity investing.

To understand what a menace they are to the industry, a 2021 crypto crime investigative report by Chainalysis reports that digital currency investors lost more than $14 Billion to hackers and other frauds in 2. A similar report by Crypto Head had in 2020 indicated that crypto crime has been rising at an average rate of 316% since 2016.

These statistics are relevant to the question at hand because data by Chainalysis showed that hackers and scammers have recently shifted their attention to smart contract platforms, the Axie Infinity’s niche. In 2021, for instance, the report indicates more than 70%, or in excess of $10 Billion, of the stolen investor funds were looted from DeFi and most contract-based platforms.

But are the specific risks that are relevant to Axie Infinity investing, and how can they be avoided?

We explain them in detail below, but first, we look at what everyone needs to consider before buying AXS tokens.

What To Consider Before Buying Axie Infinity (AXS)?

Start by appreciating the fact that Axie Infinity is a massively unpredictable crypto investment.

Like most other cryptocurrencies in the crypto market, the token’s price is constantly fluctuating, sometimes at rather drastic rates. It is not uncommon for the altcoin to lose or gain double-digit values in a few hours or a few days.

Here is an illustration of just how volatile AXS token prices can be:

Having been around for slightly over a year, Axie Infinity has posted an incredible price action, seeing that its ROI currently exceeds 50000%. A closer look at its price chart, however, reveals that its price action was marred by volatile price fluctuations.

For example, between 20th and 27th July 2021, Axie Infinity grew its value by more than 300% as its price jumped from $15 to $45. It would rise with an almost similar margin between 21st September and 3rd October 2021 when its price jumped from $50 to $140. However, since its hit its all-time high of $165 on 7th November 2021, AXS has been on a downtrend that has already shed more than 70% of this peak value.

Read Also: Axie Infinity Price Predictions

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

What Are The Risks Associated With Axie Infinity (AXS)?

At the moment, the greatest risk to investing in Axie infinity has to be the rising cases of hacking.

We have already mentioned that investors lost crypto worth billions of dollars in 2021 to hackers. Much of this was lost through compromised personal digital wallets or hacked crypto exchange vaults.

In early 2021, for instance, reports emerged that more than 6000 Coinbase user wallets had been compromised and an unknown amount of crypto stolen by hackers. BitMart and Liquid crypto exchanges were also breached, and investor funds worth $200 and $90 Million were stolen from both exchanges in January and September, respectively.

While we haven’t come across any serious case of hacking involving Axie Infinity network or wallets, we still urge you to exercise caution, especially as Axie Infinity rolls out new programs and possibly enters the risky DeFi space.

There is also the less popular risk of Axie Infinity’s sustainability. Here, experts have called to question the sustainability of Axie Infinity’s play to earn model, with some even referring to it as a Ponzi scheme.

Critics started calling it out as soon as it launched. Their fears were then confirmed when the Axie Infinity game slashed SLP (the utility token) rewards for adventure mode players by half in August 2021 before blocking lower-level accounts from earning SLP.

They argue that as its pool of players increases, it will become increasingly difficult for Axie Infinity to reward the gamers. Given the significance that the play-to-earn game has on the Axie Infinity ecosystem, some analysts fear that a massive reduction in rewards of scrapping them altogether might crash the network.

Other Types of Scams to Look out for

Rug pulls

In a rug pull scam, crypto developers create and popularize a seemingly legit crypt platform - primarily an exchange or DeFi investment program. They encourage investors to pull in funds or use their service - primarily through the promise of incredibly low fees for exchanges and brokerages. They, however, pull the rug from beneath the platform by stopping withdrawals and vanishing with investor funds.

The most popular rug pull scam yet has to be the One Coin scams carried out by Ruja Ignatova, where investors lost an estimated $4 Billion in 2014. In 2021, the Turkish exchange, Thodex, founder carried out One Coin-style scam when he stopped withdrawals and ran away with more than $2 Billion worth of crypto investments.

Ponzi schemes

Ponzi schemes are almost similar to rug pulls. They, too, involve the creation of a fraudulent crypto investing platform that is then fronted as a legit program by its developers. They then lure naïve and gullible investors in with the promise of above-average returns on investments while encouraging them to popularize the platform and draft new members.

They, too, end up ceasing communication, stopping withdrawals, and running away with invested crypto.

The most devastating Ponzi scheme in 2021 has to be the Finiko scam in Russia. In this case, three individuals started the Finiko investing platform and used it to steal close to $100 Million from their investors. The sad part is that the Ponzi scheme had been called out by Russian banks way before it burst. However, naïve and gullible crypto investors driven by a get-rich-quick mentality continued pouring funds into it.

Don't Miss: Will Axie Infinity (AXS) Make Me Rich?

How To Keep Your Axie Infinity (AXS) Safe

Cybercrime has been on an uptrend for the last couple of years. Criminals are constantly devising more innovative ways of defrauding crypto investors, and the amount of loot has increased steadily for the last few years.

Steve Morgan, the Editor in chief of Cybercrime Magazine, believes the level and cost of cybercrime are only going to rise as we move forward. He estimates by 2025, the cost of cybercrime, i.e. both direct and indirect losses to crypto crime, may exceed $10 Trillion. In simple terms, you cannot escape these risks, the best you can do is put measures in place to safeguard your AXS investment.

These measures start with proper vetting of all exchanges, digital wallets, and brokerages before registering with them. Check independent audit reports and reviews of their source code and their developer’s reputation. Only register with audited platforms created by industry-leading experts on crypto matters.

You then need to learn how to store your tokens safely. Get your coins off the exchange or brokerage and store them in a non-custodial offline wallet. For this, you may want to acquire reliable hardware or a paper wallet.

Lastly, learn how to secure your wallet and exchange accounts. A recent security report by Verizon stated that 80% of hacks to digital systems are a result of human error, especially weak passwords, and are, therefore, preventable.

For your crypto exchange and digital wallet password, use different and highly unique but memorable passwords. You could also consider keeping a backup alongside the recovery seed backup in a secure place.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Axie Infinity (AXS) Security Vs Privacy

You may have noticed that some blogs and publications have used the terms Axie Infinity security and privacy interchangeably. But as an AXS investor, you need to understand that these are two distinct subjects with totally different meanings:

Axie infinity security

Axie Infinity security relates to how the ecosystem is designed and the safety of your AXS tokens. It involves vetting the Axie Infinity platform to ensure that it doesn’t have any loopholes in its code that criminals may exploit.

It also involves the platform's founders, i.e. vetting their reputation and studying their intentions. In this case, you will want to only register with exchanges and wallets or invest in programs associated with reputable crypto experts like Axie Infinity’s developers, Trung Nguyen and Aleksander Larsen.

More importantly, security involves the study of third-party risks associated with investing, trading, and interacting with AXS tokens in any other manner. Here, you want to learn all the risks associated with AXS and master ways on how each risk can be managed or avoided altogether.

Axie infinity privacy

Axie Infinity privacy, on the other hand, relates to how your personal data is held by both the network and third-party platforms. Like the majority of platforms built on Ethereum, Axie Infinity is a pseudo-anonymous platform. This implies that it records your transaction data, and though it doesn’t make it readily available for public viewing, competent and highly resourceful individuals can still trace a transaction back to you.

Axie Infinity privacy also involves checking the amount of private data collected by exchanges, brokerages, and wallet service providers. It then extends to monitoring how this data is stored, entities with access to this sensitive data, and confirming if it is shared with or sold to other third parties.

Bottom Line: Is Axie Infinity (AXS) Safe?

Having looked at the token’s stellar performance throughout 2021, we are inclined to believe that it is a safe long-term investment. The majority of crypto analysts and investors agree because they, too, have witnessed its resilience. They have also analyzed AXS tokens technically and fundamentally and are convinced the token will continue posting incredible gains for the next few years.

Having said that, we must acknowledge that - like the 17000+ digital currencies available today - AXS is not immune to investment risks. These include hacking, Ponzi and rug pull scams, and even the sustainability challenge. Nevertheless, we conclude by reminding you that if you vet investing/trading platforms thoroughly, arm yourself with a reliable hardware wallet, and use unique passwords, you can avoid most of these risks.