Gaming constitutes a new, incredibly exciting venture in the world of blockchain technology and decentralised applications, and it is furthermore proving to be a highly sought-after, increasingly growing ecosystem within the digital asset space.
In a recent report, Accenture estimated that the full value of the gaming industry now exceeds $300 billion, which is undoubtedly an astounding amount. The consulting firm additionally noted that the gaming demographic has increased by half a billion players over the course of the past three years, with approximately 2.7 billion active gamers worldwide.
Thus, sooner or later, it was perhaps only natural to witness the development of a symbiotic relationship between the majorly profitable, booming gaming industry and the disruptive infrastructure of blockchain. In essence, this is because gaming applications developed on the decentralised frameworks offered by blockchain allow players to leverage some of the most leading-edge DeFi utilities and benefits, and open up a completely alternative spectrum of financial opportunities.
In fact, throughout 2020 and 2021, blockchain-based gaming has turned into a real powerhouse in the space, not just for its gamified implementations of DeFi, but because it has progressively started merging with the economic, artistic and somewhat unique propositions of NFTs. Non-fungible tokens have indeed been on an absolute moon mission as of late and, with their introduction into the gaming sphere, NFTs are consistently finding new ways to deliver innovative value propositions and use cases.
The first blockchain, gaming and NFT ensemble dates back to late 2017, when a blockchain-powered cat-centric collectibles game called CryptoKitties almost brought the entire Ethereum network to a standstill due to its sudden and rather unprecedented success.
CryptoKitties was one of the earliest examples of NFTs used in the context of blockchain gaming and, ever since, several other products have emerged that go even farther. From high-end fashion brands to augmented reality (AR) and from virtual worlds to supply chains, there is almost no genre that isn’t being explored for the integration with digital assets and NFTs.
Thus, while NFT-based video gaming is nothing new, the recent rise of a gaming project called Axie Infinity has truly captivated the imagination of many blockchain enthusiasts and has taken the crypto markets by storm over the past year. This is because Axie Infinity arguably differs from any other blockchain gaming application that has preceded it, with a current market capitalisation of $4.2 billion and projected revenues of more than $1 billion in 2021.
So, without further ado, let’s dive into the exciting project that is Axie.
About Axie Infinity
The non-fungible token crypto collectibles market has absolutely exploded throughout late 2020 and 2021, with multiple NFT artworks and NBA TopShot videos selling for considerable sums of cash. But, despite NFT gaming being the most recent talk of the town, several blockchain-based video games had already started building way before anyone even took notice.
When non-fungible tokens began experiencing the first signs of mainstream adoption, blockchain-based NFT game Axie Infinity unexpectedly skyrocketed into the crypto stratosphere, and it has since then been on the radar of many crypto gamers, digital asset enthusiasts and keen investors.
Developed by indie studio Sky Mavis and inspired by Nintendo’s globally recognised Pokémon series, Axie Infinity has ultimately become the most popular blockchain game in the space.
Axie Infinity has players purchase NFTs representing intricately designed monsters, called Axies, and then battle them against one another to earn rewards. In addition, players can earn Smooth Love Potion (SLP) tokens during gameplay and trade them for money at an exchange. Axie Infinity’s ecosystem leverages two native ERC-20 assets for its DeFi applications and financial utilities, with these tokens being Axie Infinity Shards (AXS) and Smooth Love Potion (SLP).
This completely novel blockchain-enabled process of earning and trading assets through gameplay has ignited a whole new ecosystem in the digital asset space and is fueling what is defined as a ‘play-to-earn’ movement in the gaming sphere.
The Axie Infinity game runs on the Ethereum blockchain with the help of Ronin, a sidechain that helps minimise fees, transaction delays and network latency. The game is primarily focused on turn-based battles between players and their Axie monsters either against computer-controlled Axie teams or live opponents from all over the globe.
One of the most exciting features of the Axie Infinity game is that all in-game items are represented on-chain as non-fungible tokens, which inherently allows players to monetise their gameplay and capitalise on various NFT trades with other players. These cryptographically unique tokens can be linked with blockchain-built digital content which, in Axie Infinity’s case, comprises of Axie monsters and the complex of land plots populating the game.
But, unlike conventional in-game items, Axie’s NFTs confer ownership on the buyer, meaning that firstly all NFT holders are provided with on-chain proof of ownership, originality and authenticity for their assets, and secondly it allows NFT owners to sell or trade their in-game assets with other players.
Players can also ‘breed’ Axies, which enables them to generate and build potentially more powerful teams of monsters and yield additional NFTs to sell on the marketplace. Some of these Axie NFTs have sold for as much as 300 ETH a piece, equating to approximately $960K at the time of writing!
As of August 2021, Axie Infinity currently represents the number one Ethereum-based decentralised gaming application (dApp) by weekly on-chain volume. Axie is also one of the top three most popular gaming dApps by user count, with over 100,000 unique weekly users.
On August 8th 2021, BSC News reported that the Pokémon-like, NFT-based game Axie Infinity had breached the $1 billion mark in NFT trading volume, an all-time-high metric firmly placing it atop the DeFi and NFT throne.
At present, the closest competitors to Axie Infinity’s trading volume and sheer network effect are NBA TopShot NFTs on the Flow blockchain and the Ethereum-based CryptoPunk NFT ecosystem. However, given its unprecedented growth spurt and recent upward momentum, Axie Infinity will most likely carry on dominating the NFT gaming space for the foreseeable future.
Before analysing the Axie Infinity platform, its DeFi-NFT use cases and discussing how its various gaming applications work, it is constructive to briefly shed light on the growing demand for in-game NFT assets not just in the crypto space but in the gaming industry as a whole.
NFTs And Gaming: A Heavenly Match
Ultimately, there are many reasons why the marriage of NFTs and gaming is increasingly proving to be a match made in heaven. Firstly, in almost all previous models of online gaming, those in-game items that could be purchased were rather limited in scope and they could be primarily utilised in that game via a single account. Therefore, if a gamer’s account was stolen, lost or even disabled, all the money they had spent on in-game items would disappear. To this day, this model is actually still the most widely accepted among the gaming community, and it represents a reality that most gamers have come to live with. Then, NFTs came along.
By tokenising in-game items as NFTs, gamers can literally own and control what they buy, earn and create. With NFTs, in fact, it is more than just being able to prove that a character’s new accessories are rare and unique, as non-fungible tokens indeed allow players to leverage an extraordinary spectrum of additional use cases and functionalities, which include the ability to buy and sell in-game NFT items on secondary markets, move them between multiple games and retain the underlying value of their in-game assets as a whole.
While NFTs can be a rather scary venture for most uninitiated gamers, given that they require some form of primary knowledge development in order to properly engage with DEXes, wallets and decentralised applications (dApps), NFTs do also offer gamers new avenues of financial opportunity and economic incentive. Thus, it is of utmost importance that NFT gaming find a balanced equilibrium between engaging, interactive gameplay and money-making. In essence, it isn’t sustainable to have a game in which every player is solely focused on extracting as much value as possible without actually contributing to the game itself, in one way or the other.
An NFT game should stand up on its own merit, appealing to gamers through a well-designed, enriching gameplay experience, while also empowering players with diverse income streams and revenue generating mechanisms.
All of these aforementioned principles are what have ignited the recent ‘play-to-earn’ movement in the blockchain gaming sphere, sparking the interest of many players worldwide in search for alternative formats of wealth creation, as well as the curiosity of all those avid NFT lovers and investors looking for new, exciting investment opportunities in the NFT ecosystem.
Axie Infinity’s Two-Token Model
The Axie Infinity ecosystem employs a two-token model which consists of Axie Infinity Shards (AXS) and Smooth Love Potion (SLP), formerly called Small Love Potion. AXS constitutes the platform’s native governance token and, as such, all active AXS holders form part of Axie’s decentralised organisation and can help shape the development of the platform through governance proposals.
For instance, a few ways through which AXS holders govern the Axie platform is by deciding on how treasury funds should be spent or how the ecosystem fund should be managed. Thus, AXS holders are the true decision-makers when it comes to Axie Infinity’s governance, and they themselves symbolise the ultimate expression of the platform’s decentralised nature and aspirations.
Smooth Love Potion (SLP), on the other hand, is Axie’s own utility token that can be earned by playing the game and can also be redeployed to breed new Axie monsters. It is furthermore important to note that AXS and SLP both represent ERC-20 tokens running on the Ethereum blockchain, and all AXS and SLP transactions can be viewed and verified on-chain on Etherscan.
AXS Use Cases
At the time of writing, the AXS token is primarily utilised for platform governance and, in part, for breeding new Axies. However, there are plans to add further functionality to the token, including:
- Staking, which will allow AXS holders to stake their tokens to earn a proportionate amount of the AXS inflation. The Axie Infinity staking rewards program is set to go live in 2021.
- Further Governance Functionalities. Axie Infinity is designed to transition to a decentralised governance system, which will allow AXS holders to take over some of the decisions surrounding the development of the NFT gaming platform. In fact, it is expected that Sky Mavis will no longer have the majority vote by October 2023. Axie Infinity’s governance features are set to launch in 2021, but the platform is expected to transition to a fully decentralised organisation by 2023.
- Purchasing Power. It is very likely that, at some point in the future, network participants will be able to purchase plots of land, Axies and engage with the platform’s financial utilities solely through the AXS token. Thus, AXS could ultimately become the platform’s currency of choice and only exchange asset.
How The Axie Infinity Game Works
As previously mentioned, Axie Infinity is a battle game that allows players to battle their Axie monsters in real-time. Each Axie monster is represented on-chain as an ERC-721 NFT asset, the most common Ethereum NFT token standard after ERC-1155. Each Axie possesses 4 main qualities, with these being:
These qualities play a fundamental role in Axie’s battling mechanics since they determine the amount of damage an Axie can incur, which Axie attacks first and how much damage they can cause to other Axies.
Axies can belong to either one of the following categories, including Aquatic, Beast, Bird, Bug, Plant or Reptile, or to one of three classes, known as Dawn, Dusk or Mech. Different classes have their strengths and weaknesses that make them more or less effective against certain other classes. For instance, Aquatics are strong against Beast, Bug, and Mech Axies, but are weak against Reptile, Plant, and Dusk Axies.
An Axie is comprised of six body parts: Back, Ears, Eyes, Horns, Mouth, and Tail and, depending on which classes they belong to, Axies will display different statistics accordingly.
Because Axie Infinity is a play-to-earn gaming platform, Axies can be either used to earn SLP tokens by participating in specific battles and quests, such as PVP Arena and Adventure Mode, or they can be used to create potentially rare, unique and powerful interbred Axies, which players can then trade for other Axies on the platform.
Axie Infinity has limited Axie breeding to 7 cycles per Axie, in total, in order to control the Axie population. Breeding costs are exponential, meaning that for the first breeding cycle players will pay 4 AXS plus 150 SLPs, whereas this increases to around 3,150 SLPs on the seventh and last cycle.
Each body part of an Axie has three main genes associated with it:
- 1 Dominant (D) Gene.
- 1 Recessive (R1) Gene.
- 1 Minor Recessive (R2) Gene.
Dominant genes have a 37.5% chance of being passed down to any offspring, whereas this drops to 9.375% for recessive genes, and 3.125% for minor recessive genes.
In addition, Axie Infinity supplies players with a calculator to help determine the odds that an offspring of any two Axies will have specific traits.
Some of the rarest types of Axies are those with Mystic Parts, which are only found in some of the original batches of Axies sold during the pre-sale. 25% of the original batch of 4,088 Axies, known as Origins, have Mystic Parts, out of these a total of 19 Triple Mystics and 3 Quad Mystics were created. Thus far, all three of the most expensive Axies ever sold were Triple Mystics, including #2761, #3224 and #1046, which sold for 200 and 300 ETH respectively.
Apart from Axies, a variety of in-game resources can be tokenised and traded on Axie Infinity’s P2P marketplace, such as plots of land that Axie players can customise with various items.
In total, the Axie Infinity world of Lunacia consists of 90,601 plots of land spread across 7 different types:
- Lunas Landing
In early February 2021, CoinDesk reported a record-breaking sale of a piece of virtual land on Axie Infinity, which had Axie community member ‘Flying Falcon’ purchase a plot of land for 888.25 ETH, worth a staggering $2,792,960 today!
Axie Infinity is also developing a Lunacia Software Development Kit (SDK) which players and developers will be able to implement into their customised land infrastructures and leverage to create additional gaming experiences using Axie Infinity NFT art assets.
According to the Axie Infinity Whitepaper, the Lunacia SDK will initially be a map editor where players can use Axie Infinity art assets to create games and other experiences. Once a game has been created, it can then be deployed as an NFT and sold on to other gamers. These NFT assets will be placed on land and players will be able to click on them to enter the game inside, a really cool proposition!
Through this process, Axie aims to gradually decentralise the game creation aspect of the Axie Infinity universe. In fact, it will be impossible for one team to built out all the content needed for Lunacia, especially if the platform reaches hundreds of millions of users. User generated content, therefore, constitutes a scaling strategy for new experiences through in-game NFT assets.
Playing-To-Earn With Axie Infinity
Since its inception back in 2018, Axie Infinity has helped design a new genre in the gaming vertical, known as ‘play-to-earn’, and has ever since focused on building the infrastructure necessary to allow gamers to enjoy the benefits of advanced gameplay while also profiting along the way. In fact, Axie Infinity users can earn an income in the form of AXS or SLP tokens, as well as from in-game asset trading.
New players will need to purchase or borrow a minimum of three Axies to start playing and earning, and currently the cheapest Axies available on the market are going for somewhere between $70 and $250 per Axie. Naturally, Axies with particularly desirable body parts, statistics and valuable genes will inherently be more expensive, as we’ve seen with the #1046, 300 ETH-worth Axie.
The Axie Infinity ecosystem is rather unusual when compared with other existing NFT-based gaming solutions, particularly in the fact that it boasts an entirely unique, value-rich, thriving micro-economic structure that fundamentally revolves around its platform and its platform alone.
We hear of thousands of players around the globe grinding on the daily to get those AXS or SLP token rewards, and an equal amount of in-game asset traders constantly on the lookout for opportunities to flip NFT-based plots of land or sell valuable items to other players.
In parallel with players battling, breeding, buying and selling Axies, as well as plots of virtual land, the ‘play-to-earn’ features of the Axie Infinity ecosystem have fuelled the development of an Axie-native, autochthonous economic model based on arbitrage opportunities. Indeed, the ability to earn through gameplay has led to the formation of what is called the Axie Infinity Scholarship economy, which essentially sees well-established players called Managers lend out a team of three Axies to other, smaller players called Scholars.
Scholars then utilise the team of Axies to generate as much SLP as possible, and share the revenue with the Managers who, at times, will also provide Scholars with educational resources and mentorship to help smaller players maximise returns and daily yields.
It is also important to note that multiple accounts on Axie Infinity are not allowed, therefore scholarships represent a viable solution for Managers to leverage the DeFi utilities of more than 3 Axies at any one time without being banned from the platform. This, in turn, also produces additional opportunities for Scholars who can gain knowledge from Managers with regards to Axie revenue maximisation and benefit from the shared loot.
Having said that, in Axie Scholarships, Managers must ensure that their Scholars aren’t breaking any rules and aren’t themselves using multi-accounts to try to take advantage of higher gains, which would ultimately result in the Managers’ Axies being banned and their accounts potentially shut down.
AXS And SLP Tokenomics
Thus far, we have analysed the gaming applications of the Axie Infinity platform, the DeFi-NFT functionalities of its ecosystem and the role played by non-fungible tokens in the gaming sphere. Let us now discuss how these elements have affected and are currently influencing the price action of both Axie’s governance token AXS and its utility token Smooth Love Potion (SLP).
With regards to AXS, Axie’s governance token really started picking up steam in late June 2021, when its price began showing some initial signs of bullishness. In fact, in late June and early July 2021, AXS embarked on an absolute moon mission that sent its price from a low of approximately $4 to an all-time-high of $76.96, all in the space of a month and a half.
Currently, at the time of writing, AXS is trading at approximately $69, only down 10% from its ATH. AXS enjoys a market capitalisation of $4 billion, with a circulating supply of 60,907,500.00 AXS and a maximum supply of 270,000,000 tokens.
However, given its most recent, aggressively bullish spike, investors should be wary and exercise proper risk management before entering at these levels. The asset could very well carry on moving upwards, but a few retracements could potentially be in play for AXS in the short-term outlook. From a multi-year standpoint, however, AXS will most likely preserve its bullish momentum and continue growing alongside the rest of the Axie Infinity NFT gaming ecosystem.
From July 2020 To April 2021, the Smooth Love Potion (SLP) token fluctuated relentlessly between approximately $0.10 and $0.01, allowing traders to catch tops and bottoms with relative ease. From April 25th To May 1st 2021, however, the tables turned completely as Axie’s utility token confidently broke resistance and suddenly shot up from a lower low of $0.03 to an all-time-high of $0.4191, putting in a whopping 13x in less than a week.
The SLP token is now trading at approximately $0.18, and it enjoys a market capitalisation of $185 million. At present, SLP has a circulating supply of 1 billion tokens and a total supply of 1,002,129,279 SLPs. The SLP chart displayed above paints a picture perfect example of an asset that has experienced irrational price action and parabolic momentum which, due to its unsustainability, has caused it to crash on two separate occasions.
As of now, the token is down 55% from its ATH, but over the medium to long-term outlook SLP should indeed face no major difficulties in reconquering its previous highs, especially with such large numbers of Axie Infinity players using it on a regular basis for their daily transactions.
In terms of its Initial Coin Offering (ICO), Axie Infinity (AXS) launched through a lottery system on the Binance Launchpad in late October 2020. Binance began recording user BNB balances from October 27th 2020 onwards, with the recording process running for 7 days.
At launch, AXS’s ICO was hard-capped at $2,970,000, with a total of 29,700,000 AXS, or 11% of Total Token Supply, being allocated to the Binance Launchpad. AXS’s ICO price was of $0.10 per token, and the maximum allocation per winning ticket was of $200 in BNB token.
Since its ICO in October 2020, AXS has returned lucky early-stage investors over 700x in gains, but at AXS’s peak of $76.96 those who managed to sell at those levels would have gained over 767x ROI.
Since its very early days of development, Axie Infinity has been on the radar of many heavyweight tech firms, blockchain-based projects, crypto VCs and private investors. Some of the earliest partners of the Axie Infinity NFT game include MakerDAO, Kyber Network, Ubisoft, Samsung, HTC and Binance.
In May 2021, Axie Infinity developer Sky Mavis secured a $7.5 million investment round led by Blocktower Capital, Konvoy Ventures, Libertus, Collab + Currency’s Derek Schloss, Stephen McKeon, as well as Dallas Mavericks owner Mark Cuban. The impressive set of early-stage backers, combined with the most recent components of the latest investment round, indeed all point towards a great future projection for the Axie Infinity NFT gaming platform.
Axie Infinity is being developed by Sky Mavis which is a technology-focused game studio founded in early 2018.
Trung Nguyen founded Axie Infinity in 2018, and he is currently the platform’s CEO. Trung is involved in all key decisions from product to marketing and leads the company in Vietnam. At the age of 19, Trung co-founded and was CTO of Lozi.vn, an early Vietnamese e-commerce startup which raised around $10 million in funding and is still in operations as of now. He left Lozi once it became a stable business and the team’s focus shifted from building to business and operations.
The Axie team consists of 40 full-time employees and has its headquarters in Ho Chi Minh City, Vietnam. The founding team consists of the following individuals:
Trung Thanh Nguyen – CEO
Tu Doan – Art Director and Game Designer
Andy Ho – CTO
Jeffrey Zirlin – Growth Lead
Throughout 2020 and 2021, blockchain-based gaming has turned into a real powerhouse in the space, not just for its gamified implementations of DeFi, but because it has progressively started merging with the economic, artistic and somewhat unique propositions of NFTs.
Axie Infinity is an all-round, ‘play-to-earn’ NFT gaming platform that has taken the crypto markets and the digital asset space by storm, and it quite frankly doesn’t seem to be stopping any time soon. Thus far, the underlying element of its wild success can be linked to the fact that Axie Infinity is merging the mystique of its Pokémon-like Axie NFTs with the power of DeFi and advanced gameplay.
Furthermore, the ‘play-to-earn’ proposition spearheaded by the project has ignited such unprecedented levels of global hype in the crypto space that make Axie one of those projects that are near impossible to ignore.
Axie Infinity is pioneering a new set of infrastructural paradigms in the world of blockchain-based gaming, and it ultimately aims to forge a DeFi-NFT symbiotic ecosystem fundamentally based on in-game art assets.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.