Ronin: The engine powering Axie Infinity’s growth [2023]

Last updated 2 Feb 2023

Introduction

Ethereum’s Layer-1 was not built for gaming. Games require fast and cheap transactions in order to scale and facilitate the thousands if not millions of micro-transactions that happen daily. The user experience has to be seamless and enjoyable. With transactions costing a few dollars and transaction speeds that are measured in minutes instead of seconds, Ethereum’s Layer-1 blockchain is simply too expensive and too slow. Imagine having to pay a couple of dollars just to make an in game transaction and the transactions not processing instantly.

The downsides of Ethereum were limiting Axie Infinity’s ability to attract new players and retain existing ones in 2021. Spikes in gas fees and network congestion would slow the game’s economy to a halt and undo any traction that the game was getting. Things had to change if Axie Infinity was going to grow and cater to millions of players. The team decided to take matters into their own hands and Ronin’s mainnet was launched in February of 2021 to meet that need.

What is Ronin?

Ronin is an Ethereum sidechain that was created with Axie Infinity’s community in mind. Sky Mavis, the team behind Axie Infinity, needed a reliable, fast and cheap network that could cater to the demands of the game. They needed a scaling solution that put gaming first, was built to withstand the test of time and the ever increasing demands of a fast growing game. Ronin was their answer. The

What are sidechains?

Sidechains are Ethereum compatible, independent blockchains which have their own consensus model, block parameters and run in parallel to the Ethereum mainnet. They are one of the main Layer-2 scaling solutions on Ethereum that allow for more efficient processing of transactions - Polygon network is another example of a sidechain. Other popular Layer-2 scaling solutions include Optimistic Rollups such as Arbitrum. 

Ronin currently adopts a Proof-of-Authority (PoA) consensus model which is a reputation-based system that allows for fast transactions due to its limited number of validators and relatively centralized nature. Validators are handpicked by the team based on their credibility and unlike Proof-of-Stake blockchains, validators are “staking” their reputation instead of tokens. Validators risk losing their reputation if they become bad actors or negatively affect the network. Some examples of validators for the Ronin network include Nansen, Google Cloud and Animoca Brands. The team is working on migrating the consensus model towards a Proof-of-Staked-Authority (PoSA) model which is a combination of PoA and Delegated-Proof-of-Stake (DPoS). This will allow RON token holders, which is the native token of the network, to be validators, increasing the networks decentralization once the migration is complete.

Why create their own chain?

Before Ronin was built, the team partnered with Loom network, an alternative Layer-2 scaling solution. After about a year, the Loom team decided to optimize their network for enterprise solutions instead of user-facing applications. This created a misalignment of goals between the two teams and Sky Mavis decided to end the partnership. Building their own blockchain would prevent a similar situation from occurring in the future.

Most Layer-2 solutions at that time were built with DeFi and payments in mind, not gaming. By creating their own blockchain, Sky Mavis is able to design and decide on the characteristics of the chain. The chain can be fully optimized for the needs of the Axie community, reducing potential future scaling issues that might arise by using existing blockchains. Other potential solutions, such as zkSync which uses a ZK-rollup consensus model, were too new and did not have the proper infrastructure to cater for the needs of Axie Infinity. As of February 2023, most ZK-rollup chains are still in their testing phases and have yet to fully roll out.

Ronin Wallet

A good crypto wallet is vital in creating a seamless user experience when interacting with a blockchain. Instead of leveraging existing wallets, Sky Mavis created their own Ronin wallet. The team partnered with Ramp to allow users to purchase Axie ecosystem tokens directly using fiat. The wallet allows users to have custody over their Axie related assets and is available on both desktop as a chrome extension and on mobile devices as an app. The wallet enables ~20K daily active addresses to interact with the network, peaking at 1.1m in November 2021. 

Daily Active Addresses on Ronin

Transactions

Ronin was built to be an industry leading blockchain for gaming. It optimizes for near instant transactions and negligible fees that allows for millions of in-game micro-transactions to occur seamlessly. The network is the backbone of Axie Infinity, powers all its transactions and holds its assets - Axies, Land, SLP, AXS, Wrapped ETH (WETH). 

At its peak in November 2021, Ronin processed over 560% of the total number of transactions on Ethereum. Currently, the network is able to process ~200 transactions per second andit has a block time of ~3s (ETH averages ~13s). Executing trades on the Axie marketplace and sending assets over the network are completed within seconds. Transactions has since come down a ton as the game's popularity has decline from it's peak and hovers at ~100K transactions daily in 2023.

Number of transactions on Ronin vs Ethereum

What is Katana? (The Ronin Dex)

Every blockchain has its own flagship decentralized exchange (DEX), a place where users are able to swap tokens freely within the ecosystem. Ethereum has Uniswap, Matic has Quickswap and Ronin has Katana. Better known as “Ronin DEX”, Katana allows users to easily swap between tokens within the Axie Infinity ecosystem without leaving the Ronin blockchain. This reduces the need to bridge assets out of the ecosystem and reduces friction when swapping between Axie’s tokens.

The DEX has 3 liquidity pools (SLP/WETH, AXS/WETH, RON/WETH) where users can opt to become liquidity providers (LPs) by staking the relevant pairing. Liquidity providers receive 0.25% of each trade that taps into the pool, proportionate to their pool share.

AXS staking

Beside the liquidity pools on Katana, there is a separate AXS staking pool, where users can stake their AXS to generate yield. This pool differs from the LP pool on Katana and does not require the user to stake an equivalent amount of WETH alongside their AXS.

The estimated yield for staking is at 43% APR, which does not account for compounding. Rewards get paid out daily and users have the option to claim the rewards, taking it out of the pool or restaking which stakes the rewarded AXS into the pool, increasing their expected APY.

AXS staking dashboard

Currently, there’s over 42.6M AXS being staked, ~43% of the circulating supply. The USD amount has been increasing steadily since the pool was launched in October despite the price of AXS generally trending downwards and sideways during the period. The number of unique wallets holding AXS has been steadily increasing since May, with 90% of the tokens being held for at least 90 days. 

Transferring assets on to Ronin

There are two main ways to get Axie Infinity ecosystem tokens onto the Ronin network: bridging ERC-20 ETH, AXS and SLP from an Ethereum wallet or transferring Ronin AXS and SLP from Binance.

Ronin bridge

As Ronin is a sidechain, bridging is required to get ERC-20 tokens onto the network. Users will need to have an Ethereum wallet such as MetaMask set up in order to interface with the Ronin bridge. The Ronin bridge is currently the third largest bridge by total volume transferred, right behind Polygon and Avalanche. The bridge facilitates two way transfers, is easy to use and transactions typically take no longer than 10-15 minutes to complete. Video guide made by the Sky Mavis team can be viewed here.

Top ETH bridges

However, bridging will incur Ethereum network fees on top of the fees to send the tokens over to an Ethereum wallet. This makes smaller transactions uneconomical and is a huge hurdle for most users. If possible, it is recommended to use Binance to send Ronin AXS and SLP directly to and from the Ronin wallet.

Binance

Users who have a Binance account are able to send Ronin AXS and SLP directly to and from their Ronin wallets. As transactions go through the Ronin network instead of Ethereum, fees are much lower, typically costing less than $1. In the case of SLP, sending it over to a Ronin wallet costs 1 SLP of the price when compared to using the Ethereum network. The withdrawal process is similar to that of other tokens, users key in their Ronin address, select the amount and send the tokens over. Binance has a written guide on exactly how to do it here.

Current criticisms and future plans

The PoA consensus model means that the network is relatively centralized due to its limited number of validators and the inability of the common man to run a node. This allows the team to push out upgrades quickly and to fix any issues that might arise but goes against the ethos of a player owned game that Axie Infinity is striving towards. To alleviate that concern, Sky Mavis plans to progressively decentralize the network once Ronin is more developed and stable. The eventual change in consensus mechanism is one such step that the team is taking to increase decentralization. In March 2022, the Ronin Bridge was hacked and exploited for ~$650M. Since then additional steps of security has been taken to prevent a similar occurrence in the future.

On top of that, the team is actively looking at developments in the blockchain space and are open to changing the consensus model to a more decentralized model once such solutions mature. One example would be zkSync which uses a ZK-rollup consensus model.

Once Ronin is more mature and stable, other games developers can start to build their games on Ronin.  This will allow the network to expand beyond Axie Infinity and potentially become the go-to blockchain for future blockchain games.

Conclusion

The Ronin network has proven itself to be a capable scaling solution for gaming, being able to handle massive amount of transactions. The birth of Ronin ushered in the rise of Axie Infinity and the GameFi/Play-to-earn wave. New users were more willing to try the game due to the improved user experience. The speed and non-existent gas fees enables a vibrant in-game economy that clocked in more transactions than Ethereum per day.

Although the network has its flaws and is more centralized than the community would like it to be, Sky Mavis has made consistent steps to decentralize it. Adding in community validators and distributing RON tokens to LPs on the Katana DEX are just the first steps towards decentralization. It’s still early days for Ronin and it will be interesting to see how the blockchain develops and grows over time. Will Ronin become the go-to blockchain for gaming? Only time will tell.