While the world is raving about new crypto tokens and NFTs, it is a game that is the most popular crypto application in the world and that game is called Axie Infinity. This game has rivaled the biggest and best crypto projects in the past three years and given its investors massive returns.
In this blog, we will discuss all things Axie Infinity. We will talk about what this game is all about and if it is a crypto project that you should be keeping an eye on in 2022.
What is Axie Infinity
Axie Infinity is one of the unicorns of the emerging Play-To-Earn business model. In a nutshell, Axie Infinity is a game that allows you to keep and breed pets. In this game, players can battle, collect, raise and build a land-based kingdom for their pets.
Axie Infinity is a blockchain-based game that allows its players to earn money by playing the game. The vision of its founders is to build a blockchain game where work and game become one. The game is developed by a studio called Sky Mavis and its founding team had 5 members which have now grown to 80.
The history of Axie Infinity
The founding team started developing the Axie Infinity game back in 2017, but work started accelerating only after the formation of Sky Mavis Studio in 2018.
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In 2018, when the original game was launched it had zero imagery, and its battle results were calculated through a text-based UI. In 2019, the team raised a couple of seed rounds worth $1.5 million intending to advance development. It is in 2020 though, that things started speeding up for the Axie Infinity and it started grabbing the eyeballs of the crypto universe.
What made the year 2020 crucial for Axie Infinity?
- Sky Mavis released Mavis Hub which is their PC launcher. It also serves as their central hub for Axie Infinity Updates.
- Ronin, an Ethereum linked sidechain saw its test run go live, which helps transactions run faster and with a lower fee compared to the main Ethereum chain.
- Axie Infinity tokens SLP and AXS were launched which are its in-game currency and governance tokens respectively.
Then came the year 2021 which is Axie Infinity’s true breakout year. In 2021 Axie Infinity successfully migrated to Ronin. This made the game economically viable for its players and also rewarding to buy, sell and trade the game’s core NFTs. This gave an exponential rise to the value of AXS and SLP which are the game’s key tokens.
What is the SLP Supply Conundrum?
Smooth Love Potion (SLP) is Axie Infinity’s key in-game digital currency. SLP is an ERC-20 token that can be earned by playing game modes such as PvE adventure and PvP arena. It is spent breeding new Axies. SLP does not have a hard cap on its total supply and it heavily depends on the amount of in-game activity.
SLP can also be traded on cryptocurrency exchanges such as Katana. What this means is that players can earn SLP by playing the game or buying it from other players in exchanges. This accelerates a players’ in-game progress who does not want to spend hours on the game to earn SLP in-game.
Since SLP is only burnt by breeding, there is more SLP being generated by the system than it is being sunk. As the supply of SLP in the Axie Infinity universe continues to rise, it keeps on pushing the market price down. And this imbalance is only getting worse.
This devaluation of the SLP’s price due to an oversupply in the in-game economy is Axie Infinity’s biggest issue and is called the SLP Supply Conundrum. To address this problem, Sky Mavis has devalued the SLP that can be earned in the game across all types of players as of now.
What this means is that now the players have to work harder to earn the same amount of money they earned from the game a year back. What Axie Infinity is suffering from is inflation in its SLP economy and if not solved soon it will hamper long-term player retention.
Who are the Axie Infinity players?
Most of the Axie Infinity players can be found in countries such as Vietnam and Venezuela. These players are mostly scholars who find playing the game more economically rewarding than doing their daily job. Till the time Axie Infinity provides these players with an opportunity to earn more money than their daily job in their respective countries, Axie Infinity will be able to retain its Daily Average User.
But herein lies another issue. Since for most of these players, playing Axie Infinity is like a job, they don’t spend their SLP on breeding and they rather cash it out as their daily wage. This drives the SLP inflation even higher.
The breeding problem in Axie Infinity
Breeding is the only way to burn both AXS and SLP in the game. By breeding, players can create more powerful Axies. This helps the players move up the ladder of PvP arena brackets and this helps the players earn higher SLP and AXS rewards.
It means that if the population of Axies increases over time then the need to breed new Axies drops. And this is exactly what is happening right now. The USD floor price of Axies has dropped more than 75% in the past three months. This is because players are not spending their SLP on breeding and they are transferring their Axies. The overpopulation of the Axies is driving the SLP inflation even higher in the game.
Is Axie Infinity an Infinite Possibility or Infinite Peril?
What Sky Mavis has achieved with Axie Infinity over the past three years is nothing short of impressive. The game has become a pioneer in the Play-To-Earn business model and has created tremendous value for its investors in the process.
That being said, the business model of Axie Infinity currently depends on the continued growth of its user base and continual injection of fresh capital entering the system which can prop up the value of Axies, SLP, and AXS.
Since the SLP inflation is resulting in players getting less money out of the game than they used to before, retaining growth in its user base is going to be tough soon. The SLP conundrum needs to be fixed asap as well as creating new revenue models that will provide a stable source of recurring revenue to all stakeholders.
The meteoric growth of Axie Infinity has brought with it great expectations and the entire blockchain gaming sector is watching how the Sky Mavis tackles its issues and makes its business model more sustainable. Axie Infinity is indeed a world of infinite possibilities.
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