Parsing Is Axie Infinity (AXS) sustainable?
Article translation: Block unicorn
Article translation: Block unicorn
The Axie economy currently relies on depositing ETH into the ecosystem driven by demand from Axies.
Current Axie demand is likely to be primarily driven by new players.
When new player growth slows for a long period of time, if players generally earn more ETH than they put into the game, the economy will decline.
To ensure sustainability, existing players will need to generate more demand for Axies [or other in-game NFTs] for non-monetary value such as fun, achievements, mastery, and social connections.
Upcoming features should help bring additional non-monetary value to players, such as land play, crafting, and soulbound axes.
There are many other functional ideas that can also bring non-monetary value to players, such as collectible objects, cosmetics, and virtual pet gameplay.
Overall, long-term Axie [and other in-game NFT] demand poses a real risk to the sustainability of the game. However, Sky Mavis is ready to solve this problem and has the ability to do so.
Source: Axie World
Source: Axie World
With this, more and more people are also aware of this new "play to earn" game model, where players can earn real money by playing games. The general reaction to this is...who is funding it and how is it sustainable? To understand this, let's first explore how the overall economy works.
AXS Economic Model
Here is a visual representation of the Axie economy:
The main funds flowing into the Axie ecosystem come from external ETH accounts. Ultimately, Axie Infinity needs to have inflows of ETH deposits consistently higher than ETH withdrawals so that people within the ecosystem can continue to make money sustainably.
Demand for ETH deposits is driven by incentives to purchase Axies to Battle (where SLP can be earned), Breed (where SLP is burned), and/or collect. Here are some scenarios for how the current economy might shift:
Increased demand for Axies
Axie price increases > farming profitability increases > SLP/AXS farming demand increases > SLP/AXS prices increase
Gained too much SLP in battle
SLP inflates > SLP price decreases > breeding cost decreases > more breeding > Axie inflates > Axie price decreases until breeding becomes less profitable
sustainability
sustainability
Axie Demand Risk
According to the economy outlined, the entire system is currently driven by Axies demand. This is where I need to make some educated guesses, as I don't have data from Sky Mavis or any proper player research available. Here are some assumptions based on my observations:
While there are certainly plenty of hardcore and early gamers who buy Axies purely for PvP and collecting, with the recent explosion in popularity and the "play for money" parlance, there may now be more players purely for money and money. Axies wouldn't be earned and played if it weren't for the earning potential.
PvP players have a complex meta but only so many combinations of Axies that they actually need, and at some point they may stop or slow down spending newly deposited ETH on Axies.
Therefore, the majority of Axie demand and net newly deposited ETH in the Axie ecosystem is likely driven by new players right now.
Sky Mavis also mentioned several times that the growth of new players is important to sustain a new product like Axie Infinity. So there is definitely a risk at the moment that if the growth of new players to the game slows down, demand for Axies will drop and the overall market could go into a downward spiral. Declining Axie demand > Decreasing breeding profitability > Decreasing SLP/AXS demand > Decreasing SLP/AXS value.
No one knows when the growth of new players will slow down, but given that Axie Infinity is relatively early on gaining any mainstream recognition, there could be a plausible runway. However, Sky Mavis really needs to address this before reaching a point of steady growth.
They've told us and have been very vocal about how they're addressing this issue here: Axie Population & Long-term Sustainability. I'll touch on some of these tactical points later, but first let's see how rather than primarily Axie demand from new players, they can drive intrinsic demand for Axies from existing players.
Intrinsic need for Axies [or other NFTs]
Ultimately, Sky Mavis needs to ensure that over time there is enough demand for Axies [or other in-game NFTs] from those who essentially want Axies [or other in-game NFTs] to fight/collect/progress in-game, and not just to make money. If most players just want to earn and withdraw more ETH than they deposit into the game, and if not enough new players end up coming in, there simply won't be enough ETH left in the economy for everyone to behave positively one side.
Is it possible to push more inner desires for Axies? Of course, AXS is first and foremost a game. Throughout the history of the game from the past to the present, they have gained intrinsic value from traditional game competitions, actively giving and getting anything, money returns, and doing simple and interesting things to obtain value. Combining social achievement. Many early players may have already mastered resources and achievements in this group, and more importantly, if the core cannot sustain the economy independently, a large number of players who purely pay to make money may need to switch.
Sky Mavis has to make sure Axie Infinity is a really fun game that people want to get Axies [or other in-game NFTs] to play regardless of revenue potential. From my personal experience, the current game itself is pretty fun once you get deep into the metaverse stats for PvP combat, but I'm having a hard time getting through the improvement loop due to the higher cost of certain meta-related Axies. For many players, they may find that pure PvP games are not enough to meet their needs. These are just a few areas that can be addressed to increase the fun factor.
increase internal demand
"Make games more fun" Get people to play games for fun, not for money. However, as I mentioned before, here Sky Mavis outlines a bunch of approaches they hope to address: Axie population and long-term sustainability. These include ways not only to increase overall game value, but also to increase demand for Axies for players who already derive non-monetary value from the game (such as competitive PvP players). Let’s explore some of the mechanics outlined in Sky Mavis’ white paper:
Land will introduce significant new game mechanics from which players can derive more intrinsic game value, driving more Axie demand. Additionally, there will be demand for Land itself, which will drive new ETH into the ecosystem. Players will be able to take more ownership over specific spaces in the game, regardless of monetary gain [think Animal Crossing! ]. The whole concept of hanging out in Lunacia with friends, fighting monsters, and participating in various activities sounds exciting in itself. This makes for a very popular and fun MMORPG style game!
Crafting Axie power-ups and Axie unleashing is likely to drive a lot of demand for Axies among hardcore PvP players who are primarily motivated by competition, as they may need to unleash Axies in order to craft items that enhance other Axies. This creates an Axie sink that doesn't currently exist at all.
Non-transferable and competitive Soulbound Axes in Arena will be a game-changer, allowing players to simply play and enjoy the game without investing a lot of money upfront. This will help them invest in the core PvP game loop so that when they decide to invest in non-soulbound AXS, they're more likely to do so without the pure motive of making money, but more to compete with others And get mastery.
There are many other areas that Sky Mavis can explore, including:
Collecting Goals: As with many other games of this genre (such as Pokémon), collecting different unique creatures is inherently exciting and fun. There are currently rare and definitely collectible Mystic Axes, but they are very expensive and not readily available. Sky Mavis can build gameplay where you have clear collection goals and guidance on which good Axies to collect. You can show off your collection of unique and rare Axies to others, as well as unlock various in-game perks. This type of gameplay is motivating and exciting for collectors and completion gamers alike.
Skins: Some of the biggest games profit entirely from skins [e.g. Fortnite, League of Legends]. Players want to be able to show off and express their unique identities in the game. If players could add skins to their Axies that other players would see in land and PvP games, they would definitely be very motivated to get them. Skins are NFTs that players can buy, trade, or earn. The great thing about it is that many players want to acquire them to keep and wear their Axies long term to show off, not necessarily for financial gain.
Virtual Pets: Neopets, tamagotchis, and many other virtual pet games have proven popular among more casual gamers. This is another area where Sky Mavis can further expand Axies by creating more gameplay where players can cultivate and form relationships with individual Axies. Players will be reluctant to release Axie if a genuine emotional bond is formed, and there's an inherent need to keep it as a pet rather than as a moneymaker.
in conclusion
in conclusion
As a new and innovative game, Axie Infinity is not without its challenges, and its sustainability is certainly at risk if player growth stagnates. However, the Sky Mavis team is well aware of these risks and is proactively addressing them in a sensible manner. Also, I don't think player base growth will plateau anytime soon, since it's far from mainstream notoriety. There can be volatility over time, though, so it's definitely something to be aware of for anyone investing in the game. Overall - I'm excited to see how the game develops over the next few years and progress as an Axie Infinity player.
