The success of Axie Infinity has got everyone worked up both inside and outside the crypto world. Bunchu is poised to become the president of the Philippines I hear. Crypto folks who had written off NFTs are now shilling weird game projects. Bloomberg has an article about how to invest in the governance token of the Axie universe although they don’t call it that. Every single shitty game with no community is pointing at Axie Infinity and saying, “see! Valuation here please”. Why is what Sky Mavis did different? How did they build this overnight success the last 3 and a half years? It has been an interesting experiment.
One that it is hard to call anything but successful. although it is far from over. I do agree with many that this is a proof of concept for play to earn. I doubt most projects trying to grab this coattail will make it though. I have had interest in this game in a few different phases. I bred an Axie back when you still did this right on Ethereum (my grandchildren will never believe me)! Shortly after I bred that friend, I got obsessed with Defi, blockspace got to be the most precious thing in the world and I stopped keeping up with the Axies. Now that there is an application specific side chain, bazillions of dollars of volume and some new game play coming up, I’m going to check back in on them.
There are several of my degenerate colleagues at dGEN Network that are much more in the weeds on this project. They are too busy to write this introduction. Everyone in that corner of the market is inundated with new scholarship requests and the unexpected burden of managing humans. These dudes were just collecting jpegs, maybe playing a few games, now they’ve got servers and employees to manage. So here are some semi-informed thoughts on Axie Infinity and how wonderfully it has been doing.
I, like many others, am very exciting for the changes that blockchains are bringing to gaming. I grew up playing video games. I have been ready for and excited about crypto gaming, it just hasn’t happened for me yet. I have seen some games with cute characters and games that have proven to be marketable as collectables. I have yet to play a blockchain game that is fun so far. Lots of people seem to think Axie is fun to play. Even more people and funds are betting that more people find it fun to play in the future.
Gaming and cryptocurrencies have always been connected. It was gpus that had previously been used for gaming that were first adopted to mine Bitcoin and Ethereum. Lore has it that the primary impetus for Vitalik playing around and inventing Ethereum was him losing a character on WoW (World of Warcraft). The resultant epiphanies he had regarding property rights, gaming and blockchains led to him starting the work and conversations that would turn in to the Ethereum community we all love so much.
Jeff Zirlin, the growth lead for Sky Mavis got his WoW account banned by blizzard for being associated with a guild that was helping gear up characters later used to farm gold. Jeff was even sent to a boarding school for playing WoW too much. He experienced many of the flaws of secondary markets that form around centralized projects when he tried to trade Neopets. These markets are rife with scam. I do seem to recall that not every time I gave my dad’s money to an anon did, I end up receiving currency in my game world.
I got interested in mmorpgs (massively multiplayer online role-playing games) at a young age. When I was ten, I remember playing Everquest and getting completely absorbed. My arm was broken that summer, so I was precluded from participation in many of my regular little boy activities. This was a perfect storm for me. The escapist in me fell in love with it and I quickly wanted to spend all of my time on the game. This means that the in-game currency was important to me.
So, I borrowed my father’s money and I attempted to turn it to gold or platinum in Norrath. I spent hours finding weirdos on eBay and emailing with them to get to meet up in game. It was laborious and sketchy. Back then there was no good way around the centralization inherent in a game that was made by one group for their sole profit. Years later I would do something similar for the credits in Star Wars galaxies. This game had a shit ton better graphics, but the market issues surrounding it were the same. Game technology has come a great deal. The markets for in game items, the rights we have in game communities and the control of in game universes has only started to evolve recently.
The decentralized coordination mechanisms afforded to us through blockchains have allowed this evolution. The monopolization of these markets for in game items serves only to benefit the game developers to the detriment of game players or community members. It seems that decades of frustration with players lack of rights and autonomy in digital spaces has led to a group of adults excited to experiment with non-extractive coordination in games. Just as the excitement for defi is borne out of seeing the problems with traditional finance, The crypto-gaming movement has been born by players and builders dissatisfied with what the blizzards of the world will give us. We now have a generation of grownups, who spent their childhoods valuing the acquisition and hording of digital goods.
Many of the founders of Sky Mavis and Axie infinity met each other breeding crypto kitties, the original blockchain pet game, in late 2017. Before that, they, like many of us played Pokémon games and collected the cards. Trung Thanh Nguyen is another person who grew up enjoying time in game spaces. During his time in university, he not only represented Vietnam in the ACM-ICPC (collegiate level programming competition) World Final for 2014 but founded Lozi a social network and ecommerce platform. After writing software for Anduin transactions for a couple of years he fell in love with CryptoKitties and the possibilities of NFTs. He then went full time crypto.
Sky Mavis is a technology focused game studio that was founded by Trung in 2018. The very same year they founded they launched Axie Infinity. This a Pokémon or Tamagotchi style collectible digital pet universe. I use the vague term universe on purpose here. This game has had a vibrant community since its inception, but it has exploded this year. So far is a collecting, breeding, and battling game, wherein all the asset or creatures are stored on the blockchain.
They started out storing metadata on Ethereum, but they migrated to a custom side chain(ronin) last year sometime. The game launched in May 2018 with the ability to breed and collect Axies. They were then introduced to secondary markets for trading, but there wasn’t much of a game to play for quite some time. So initially it took a great deal of foresight or hope to get involved. Many an enthusiast and venture capitalist had this. Before Sky Mavis officially launched any additional game play, the community made flappy Axie. This was a version of flappy birds with Axies and goes to show how involved the community has been for years.
Since that time there have been two tokens launched and a battle feature. These combine to create a play to earn incentive flywheel that has gone fucking nuts. Land ownership promises to bring new gameplay elements and options. I call this a universe because it started with nothing and is growing to everything. It was pure speculation, then game, then job, community, and social network. This team is far from done working and I imagine this universe will expand. Now playing can and does earn something. This is a something that is appreciable to many of the people involved, both economically and socially. Let’s dip into the economics briefly
Now that the game is going wild the two cryptocurrencies associated with the game have gone nuts as well. The world of traditional finance has taken note and even tried to offer advice on how to shoehorn these new assets into your existing portfolio paradigm
Here’s a website telling our grandparents how to get in on the hype. This article tells you how to buy the token (only AXS) from Binance and put it on a hardware wallet. This is a lame way to gain “exposure” to this “exciting new asset class”. You don’t play the game, you don’t meet any other players and you don’t even see the cute Axies if you take that advice. You get an asset, lock it up and let it appreciate. If it does appreciate you will have no idea why or what the fuck it represents. I believe this represents a fundamental, and generational, misunderstanding of what is being built in these universes and how to interact with them.
AXS is the governance token that was released November of 2020. The tokenomics of this system were designed with a lot of help from Delphi Digital. If you haven’t heard of them, that is because they do not make games. Nor do these folks play games when it comes to their money. These are some of the most in the shit venture capitalists, and they are very involved in the Axie economy. They even own one of the quadruple mystics.
Other firms with a stake in the Axie community include Blocktower Capital, Konvoy Ventures, Libertus, Consensys, Hashed and Pangea Blockchain fund in addition to many individual investors, notably Marc Cuban. Informal investment and gaming guilds have popped up around the Axie universe. One example of this is Yield Guild Gang. They give scholarships to people who lack the initial capital to make a team. AXS is used to signal votes when it comes to governance decisions concerning the future of the game and universe.
Many of the creators and founders of Axie Infinity have described what they are building as a nation. If it is a nation than AXS is a proof of civic involvement that helps align the incentives of all who call this nation home. The hope is that through continued decentralization and iteration, the incentives of the players, makers, earners, speculators, and tourists of the nation can all point towards a successful and collaborative future. The Sky Mavis team retains enough centralized control over the world that they can still ensure a fun and fair play environment.
The team seems ruthlessly pragmatic and recognized that decentralization for the sake of it may not result in the best game experience or in the longevity of the network. Alexander Laarsen has even been critical of the ideas of DAOs and their recent place on a pedestal in the Ethereum community. The idea that any of these smart contracts will ever be autonomous is a bit naive. I agree with him here. The mission of this nation has broadly been defined as making a future where work and play are more similar.
SLP stands for smooth love potion. This was formerly known as a small love potion, and I for one prefer that nomenclature. For some reason a Smooth Love Potion (SLP) creeps me out. Anyway, this is the currency that is used inside the actual game. This came live January of 2020. This is earned from playing the game, as well as being consumed in parts of the game. It requires the consumption of SLP to breed Axies. The amount of SLP one can earn is capped per day.
This is the token that is central to the play to earn bit. It acts as a sort of universal basic income for players of a certain proficiency. Although basic, this income is far from negligible for many. This was the first token that they added to the game and the first one to be tradeable. This was the first example I heard about of what could be called peer to contract liquidity. The holy grail of blockchain gaming compose ability is game to game compose ability, but this starts with peer to contract. At this point Axie Infinity has showed a proof of game to market if not game to game compose ability on a blockchain.
Both SLP and AXS trade not only on several centralized exchanges but on many a dex as well. It is hard to invest what you do not have. If the only barrier to investing and growing wealth is initial capitol, play to earn can be an alternative. This system can allow people to invest time and skill rather than capitol. It is far from perfect so far.
At this point there is an extremely high capital requirement just to get a team to play AI with. This is where Yield Guild Games stepped in with their scholarship program. This is basically matching people who want to play to earn but lack the upfront capitol to start a team with people who have more Axies than they can effectively utilize with their time. YGG invests in yield bearing NFTs in the most promising games and metaverses. They then lend them out to their guild-mates for no interest and requiring no collateral. These guild-mates or scholarship recipients can keep 70% of the yield they generate in game.
They have over 3000 people playing for them and earning, primarily from Indonesia, Venezuela, India, the Philippines, and Brazil. Although YGG was the first I heard of to employ this business model, they are no longer alone. Several of the contributors to this website sponsor Axie players around the world. Thus far, all these scholarships have been made person to person outside the Axie Universe.
Mr. Laarson has expressed interest in formalizing this structure and bringing everything in universe. I’m uncertain if I like this idea more or less than the organic sort of organizations that have popped up so far. What is certain is there is a great deal of demand for scholarships. If you read any tweet about Axie Infinity, there will inevitably be people in the comments asking for scholarships.
The first wave of land plots were sold at the beginning of 2019. These have yet to be incorporated into gameplay, but they have seen significant traction on the secondary market. Speaking of secondary market, a small commission is taken from every sale on the marketplace. This commission goes to the team treasury. There are plans for incremental decentralization of this treasury. There is also a small fee taken from each time an Axie is bred.
This is a dynamic fee that increases with each time the Axie is bred. It is a combination of how much previous breeding went into the parents. All this SLP is burnt. During the crazy rise in prices and involvement we have seen over the last few months, this burn has exceeded the mint that comes from people playing. Additionally, there are a shit ton of people speculating on both tokens who aren’t even playing the game. The initial land sales, the sale of the origin Axies, special edition items and a few other special sales went straight to the treasury. Initially, the team minted just 4088 origin Axies.
Of these, there was a 30% chance of having a mystic trait. There are 102 double mystics, or Axies with 2 mystic traits. There are only 19 triple mystics and 3 quadruple mystics in existence. Trading of these mystics picked up a whole lot last year. Just about everything Axie related picked up a great deal last year. Axie holders increased 700% and the volume of Axie NFTs sold on the market increased 600% during 2020. The discord analytics and involvement went through the roof. This year has seen even more mainstream adoption. There have been an increasing number of social media accounts, podcasts, YouTube channels and all manner of media coming out from the Axie universe. The community is extremely involved with the future direction of Axie Infinity.
So, the Axie heads oversee the community there, that’s great, do they have anything to teach us about the broader world? I’d say probably yes. There have been some interesting papers written about the economics of Eve online, Ultima and Everquest. These early mmorpgs provided a place to experiment with game theory and economics. A place where you could try new things without the government getting angry. A great deal of experimentation has gone on in the last few years in the world of decentralized finance, and now the US government is pissed.
The economic experiments and attempts at complex coordination that we try in games may help us solve real world problems. The centralized control of monetary technology has proved to be a bit of a problem for most humans. It is a problem we don’t have a clear solution for though. It is a problem no single entity will ever solve as it needs to serve all of us folks that interact with the “economy”. I believe iteration and experimentation are necessary to learning and designing new systems. I also believe the federal government of my home country does not want anyone to iterate on or research how to make better money.
I think the work being done in the Axie universe, and other decentralized social communities, will have many implications on our wider world that I am not bright enough to forecast. My only hope is to have boots on the ground in these communities so I can see this world develop.
In conclusion, I have had a wee technical issue with migrating my Axies over to Ronin. I’m going to get in touch with some helpful folks at Sky Mavis and I’m sure it’ll be worked out. Rather than letting you know that I am irresponsibly trying to publish opinions on a game I have never fully played, I say this to show there are still real barriers to adoption. The on boarding process for this rich universe is a bit harder than putting a cartridge in a console or downloading an app on your iPhone.
Despite these barriers, this game is crushing it and more and more people are playing. If people are willing to play this much, invest this much and engage this much now, imagine how it blows up next. Mr. Laarsen, in a recent interview on unconfirmed, described some of the improvements that are coming to the universe. He said that the game play and graphics are getting a bit of a revamp shortly. Some new mechanics for fights, land-based game play and a new dex for ronin are coming soon.
Most importantly, they are coming for the mainstream community and coming to the app store. One thing that strikes me as I think of Axie content and interviews with the team I have heard over the last year or two: This team is nimble but uncompromising. It is disheartening to see a team chase whatever is hot in the market. It is also disheartening to see teams dismiss reality for their vision. The geniuses over at Mavis have been quick to pivot where necessary.
Game play has been changed a bit so it can be fun and rewarding. These self-described eth maxis built on Ethereum till they reached its limits. They then collaborated with existing L2 solutions. When the existing L2s did not cut it, they made their own god damned chain. What they do not compromise on is their commitment to the community. Indeed, at this point there is less and less space between the founding team and the community.
I am excited not only to watch this community grow, but hopefully to grow within it. YCB@the_YCB captured the excitement well on twitter when they said “Axie Infinity is different because players truly feel a part of a digital revolution. A nation. You can’t replicate that feeling of being a part of something bigger than yourself.”