In the inspiration of CryptoKitties, Axie Infinity was created by Trung Nguyen, leading the Sky Mavis Game Studio. The game launched in March 18, 2018. After 3 years of silence, the popularity of Axie Infinity went through the roof during the gamefi summer in late 2021, which simultaneously accelarate the growth of Axie’s market cap to over $10 Billion USD. Although Axie’s market cap started cliff-falling shortly after the start of the bear market, it still managed to nail a 4500% growth at its ATH.
In short, this massive depreciation of Axie was a direct result of the combine of multiple negative elements: Bear market, extreme volatility, unhealthy macro economy, bad tokenomics, hacker’s heist.
Axie infinity is a Pokemon-go inspired game where players breed, feed and battle using their in-game pet called Axies. Axie infinity have their governance token called AXS and in-game token called SLP. You may use SLP and fixed amount of AXS to breed a pet and get it ready for battle.
By entering the game world of Axie Infinity, player are required to have a pet (Axies) in order to play. At Axie Infinity’s ATH, cost of breeding an axie once reached $571 (by calculating the token prices and ETH price/Gas fee at that time).
We can consider this $571 as an purchase price to be able to play the game, but a fun fact is: Most of the best AAA games in web2 space have an average price of $70. If people are not going in because of the “Play-to-Earn” trait, it is very hard to imagine why would players pay premium to play it.
Another fun fact: more than 50% of the players in Axie Infinity are citizens from poor/developing country, where average daily wage is around $7. Axie Infinity used to generate $10 during a 4-6 hours game session.
With such high of a entry barrier, many players can not afford to participate at the beginning. Therefore, the “Scholarship program” was born.
Scholarship offers new player to “borrow” someone else’s pet (Axie) and earn their in-game reward using other player’s asset. In return, “Lender” of the axie will take a huge cut from “borrower” income, usually around 30% - 60%.
To get enrolled into the program, player must fill out a application form and stand by for approval. Once approved, they will have their “scholarship” and start earning. In order to earn enough SLP (Native game token), players had to devote long hours to meet the minimum requirement by the program.
Players that did not earn enough to meet the requirement were kicked out.
By operating under complex rules and being too profit-driven, Axie Infinity was facing a huge inflation. Over 70% extra game tokens were earned every month, and there wasn’t enough burning to cover the over-issuance. All factors combined and lead to a detrimental outcome: the total crash of Axie Infinity (AXS) and Smoothed Love Potion (SLP)
Alongside the falling of this $10B gamefi titan, many gamefi projects failed miserably and we are in a bear market specifically in the gamefi sector.
More interesting and feasible economy models in gamefi will be invented, as everybody in this sector moving forward from the ashes, sustainability is closed to our reach.
Siddhart Menon, Co-founder of a Indian crypto exchange WazirX, along with SuperGaming’s John announced the launch of Tegro Game, where the future of gamefi is classified into 4 generations using the level of correlation between NFT and fungible tokens.
Gen 0: Pure NFT plays for games, low or zero trade activities
Gen 1: Higher in liquidity, a combination between fungible and non-fungible assets.
Gen 2: Predictable supply and long-term liquidity.
Gen 3: A well structured “Play-to-Earn” game that possess similar traits like a service economy or a job economy.