A brand new idea came out of the DeFi market in 2021: Play to Earn (P2E). P2E is a concept in which games pay players to play, rather than the other way around. One of the frontrunners behind play to earn was Axie Infinity – a game where you collect cute pets and battle other players to earn cryptocurrency.
Today’s article tackles the most important aspect of Axie Infinity: tokenomics. The project’s tokenomics play the most important part of how the game rewards players and how its collectibles are valued. But before diving straight into tokenomics, let’s have a quick reminder of how the project works in the first place.
What Is Axie Infinity?
Axie Infinity is a turn-based online video game where players battle each other with cute pets called Axies – digital NFT collectibles. The game is developed by Sky Mavis, a blockchain game studio from Vietnam created by Trung Nguyen and Aleksander Larsen. The main idea behind Axie Infinity is that players own all the resources, land, and items found in the game.
The game’s decentralized ownership is powered by non-fungible tokens (NFTs). NFTs act as a proof of ownership for various in-game collectibles, including Axies. Each Axie is a unique NFT that players can own, use, transfer, and sell. And if that wasn't enough, the game uses even more crypto mechanisms to reward players.
SLP (Small Love Potion) is a utility-based cryptocurrency that players earn as a reward after defeating enemies in Axie Infinity. Think of it as an alternative to earning experience points (EXP). SLP is a real cryptocurrency that you can use in the game or sell on the market – but I’ll talk more about that later when you reach the tokenomics section.
You can sum up Axie Infinity’s gameplay in the following way:
Battle other players with Axies
Breed your Axies
Sell Axies on the NFT marketplace
Basic Axies go as low as a few dollars on the marketplace. Anyone can afford a new Axie when starting their journey. Premium Axies are sold for thousands of dollars. You have the potential to earn a lot of money if you play the game long enough.
You need at least 3 Axies to enter a match. The moment the game starts, you’ll realize that Axie Infinity fits into the standard turn-based game trope. And if you play Pokemon, Yu-Gi-Oh or Final Fantasy, you’ll feel right at home.
There’s a lot to learn about Axie Infinity due to the game’s complexity. You have the gameplay, the Axies themselves, and a bunch of other small mechanisms that make the game special. But perhaps even more important are the game’s two cryptocurrencies: AXS and SLP.
I already gave you surface-level information about SLP. What else does the token do and what’s AXS supposed to be? Let’s dive right into the tokenomics by starting with the use cases.
Axie Infinity’s primary cryptocurrency is Axie Infinity Shards (AXS). The token is what enables you to participate in Axie’s ecosystem and own the project together with the rest of the community. AXS facilitates participation in governance and voting rights.
Axie Infinity is a game that’s continuously being developed. But since the game is technically decentralized and owned by the community, the team itself cannot singlehandedly guide the game’s direction. That’s why you, the player, have to participate in governance and vote on various game proposals together with the community.
Besides governance, you can also use AXS to stake and earn passive income. A portion of the game’s fund is dedicated towards token rewards – which you earn for securing Axie Infinity’s network by locking up tokens.
Last but not least, you can spend AXS tokens by breeding Axies. Breeding is a process in which two Axies are combined to create an even better Axie. You retain the original two Axies and can breed them again, but keep in mind that they become ‘sterile’ at a certain point.
Breeding ultimately allows you to combine the genetics of each Axie. Axis have six individual traits that increase their value. It also makes them stronger and allows you to win fights more easily.
Moreover, AXS also has speculative value as it represents the game itself. You can freely trade and sell AXS on exchanges. The more people play Axie Infinity, the higher the value AXS has.
Small Love Potions (SLP) is Axie Infinity's other token. SLP stands at the core of the game’s play-to-earn model. It’s a reward token earned from playing the game, but it's simultaneously an in-game currency used to pay various expenses.
You need to spend SLP tokens every time you want to breed your Axies. The number of tokens you need to spend depends on the level of your Axies and their traits. But if you don’t want to spend your tokens, you can sell them directly on the market to earn income. Whatever you do, it’s a win win.
Sky Mavis has distributed the game’s AXS governance token in the following fashion:
Public Sale: 11%
Private Sale: 4%
Staking Rewards: 29%
Play to Earn: 20%
Sky Mavis: 21%
Ecosystem Fund: 8%
The max supply of AXS is capped at 270 million tokens. The supply is expected to be fully vested in April 2026. The initial token launch for AXS took place on November 4th 2020.
The team raised $1.5 million during a seed round in November 2019, selling the token at an average price of $0.005. Another $864,000 were raised during a private sale in May 2020 at a price of $0.08.
The AXS initial coin offering (ICO) took place in November 2020. The project raised $2.97 million in funds from public crypto investors. The token was sold at a price of $0.1, and each investor had a personal investing cap of $200.
SLP is a token that spawned with the game’s launch. It has no hard cap to its token supply. Moreover, the circulating supply is incredibly volatile because players constantly earn and burn SLP from playing and breeding respectively.
As of November 2022, SLP has a circulating supply of 39.9 billion tokens and a market cap of $129 million. AXS has a circulating supply of 109 million tokens and a market cap of $957 million.
Axie Infinity is an enjoyable play-to-earn (P2E) game in which players collect cute pets called Axies to fight other players and earn money. You can earn cryptocurrency by receiving SLP from battles or by selling your newly bred Axies on Axie Infinity’s NFT marketplace.
The project’s tokenomics allows players to fully control and own the game’s ecosystem through the AXS token. You can vote on existing governance proposals and propose new governance decisions. But you can also monetize your stake in the project’s governance system by staking AXS through the staking portal.
Axie Infinity offers various ways of incentivizing players to participate in the game’s ecosystem. You have NFTs, SLP, and AXS. But for either of the aforementioned tokens to hold onto their value, people have to actually play the game. No network adoption means no value. So for the team to reinvigorate the game, it has to make the game feel alive again.
If you want to learn more about Axie Infinity, I suggest visiting the following links:
Marko is a crypto enthusiast who has been involved in the blockchain industry since 2018. When not charting, tweeting on CT, or researching Solana NFTs, he likes to read about psychology, InfoSec, and geopolitics.