Axie Infinity blockchain game

The video game industry is one of the fastest-growing industries in the world: experts expect it to grow to $312 billion by 2025. One of the most prominent examples of blockchain games is Axie Infinity.

What is Axie Infinity?

It is a popular blockchain game based on the famous Pokémon series of games. In Axie Infinity, players breed, train and battle virtual pets called Axies, represented as ERC-721 non-mutually exchangeable tokens (NFTs). The game is based on a real economy or tokenomics: players spend and earn native tokens as they play.

Axie Infinity became the progenitor of the Play-to-Earn (P2E) genre, and the success of this game has spawned hundreds of games of this genre and even new trends such as Free-to-Play (F2P) and Move-to-Earn (M2E). Currently, there are already more than 2,000 P2E games on the blockchain.

In 2021, the game caused a sensation, so much so that its token capitalization exceeded $2 billion, and the number of active users passed 700,000. Axie Infinity ranked first among all blockchain games.

The development of the Axie Infinity game started back in 2017. The Vietnamese video game development studio Sky Mavis is responsible for its creation. The game is based on CryptoKitties and combines the gameplay of another popular game — Pokemon. The alpha version of Axie Infinity was launched in December 2019.

The game became particularly popular among Filipinos, with over 40 percent of players being from the Philippines. Due to low wages, the game became a significant source of income for many Filipinos.

The game was initially released on the Ethereum blockchain. Still, the Sky Mavis team decided to create a sidechain specifically for blockchain games due to the low bandwidth and high network fees. In 2021, the studio launched the Ronin sidechain, which increased the speed of transactions and reduced their cost.

In March 2022, hackers from the notorious North Korean group Lazarus hacked into the Ronin sidechain and withdrew about $620 million in ETH and USDC cryptocurrencies. This attack was one of the largest in the history of cryptocurrencies. Despite the impressive scale of the incident, the Axie Infinity team compensated all affected players. However, all this hurt the game's development, as a general decline in cryptocurrencies accompanied the hack.

Axie Infinity game problems

The innovative approach to video games involving blockchain technology has caused a real boom among crypto-enthusiasts and crypto-enthusiasts. Still, it has also attracted the attention of many users outside of the cryptocurrency industry. However, behind all this success lie three key problems, not specifically related to Axie Infinity but to P2E gaming in general.

Firstly, generating revenue requires investment: players need to purchase a pet first to start earning. At the peak of Axie Infinity's popularity, the minimum cost of pets rose to around $150, and at least 3 NFTs had to be purchased to start the game. Along with the increase in popularity, competition among players grew, making it more challenging to earn the same income.

The second problem was the volatility of the SLP game token that players earned. Most of the popularity was because low-income people could make as much in the game as possible in a full-time job. This became especially true during the pandemic when many Filipinos lost their main source of income. This explains why the game's popularity grew so rapidly in 2021: while there were just over 3,000 users at the beginning of May, by the end of November, there were over 720,000 users. In other words, in just 7 months, the number of players has grown more than 200 times. This fact smoothly leads to the third problem of the game, namely the dependence on the influx of new players.

Suppose we abstract from the concepts of blockchain, P2E gaming and NFT. In that case, it is clear that Axie Infinity is similar to a pyramid scheme in its structure: while the game is adding new users, current players maintain or even increase their level of income, and the game token grows, just like NFT. However, it lasted like that up to a certain point until a new bear market cycle started in the crypto industry.

Tokenomics

There are two tokens present in the Axie Infinity game:

• AXS,
• SPL.

AXS (Axie Infinity Shards) is an ERC-20 standard management token issued on the Ethereum blockchain. The AXS token is used to vote on major governance issues for the Axie Infinity game.

The token reached an absolute high of $165.37 in November 2021 and has since declined more than 96% to $5.91.A total of 142,271 million AXS have been issued out of a possible 270 million, and the token has a capitalisation of around $842 million. The AXS token is traded on major exchanges such as Binance, Coinbase, Kraken, Gemini and Bitfinex.

Another token, SLP, serves as an in-game currency: it is earned by players, used to buy Axie NFT on the marketplace and also for breeding pets. SLP is also based on the Ethereum blockchain. At its peak, the SLP token exchange rate reached $0.41, but by November 2023, it had dropped more than 99% to $0.0023. The SLP token is traded on Binance, OKX, Bitstamp, KuCoin, Gate.io and several other exchanges.

The fall in token value was significantly affected by the Ronin sidechain hack and the prolonged "crypto winter", but since the beginning of the year, AXS and SLP have grown in value, as well as most other tokens. The project prospects directly depend on the inflow rate of new players.