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🤔 What is Axie Infinity ?

Axie Infinity is a blockchain-based massive multiplayer game(MMO).

The game is inspired by popular games like Pokemon, Cryptokitties and Tamagotchi. The players collect, breed, raise, battle and trade creatures known as “Axie” in the game.

💡 Tokens in Axie Infinity

Smooth love potions (SLP)

SLP is a utility token. It is used for breeding Axie:

Players earn SLP tokens by competing in battles and completing daily quests.

Axie infinity shards (AXS)

It is the second token in Axie Infinity ecosystem. Its role is:

  • AXS tokens are also required in addition to SLP tokens for breeding Axie.
  • Currently, the game is controlled by Axie Infinity team. However, they have plans to make the game decentralized and hand over the governance to the community in the future. AXS token is the governance token that grants voting rights to its holders.
  • AXS holders can stake their tokens to earn passive yield.

📝 Origin of Axie Infinity

  • Founders of Axie Infinity: Trung Nguyen, Aleksander Leonard Larsen and Jeffrey Samuel Kim Zirlin met each other while playing Cryptokitties in 2017.
  • They founded Sky Mavis, a game studio for developing Axie Infinity in 2018.
  • The team launched Axie Infinity on Etherium in 2018.
  • Axie Infinity’s Etherium sidechain “Ronin” was launched in Jun 2020 to overcome scaling and high gas cost of Etherium.

👴🏻 Founders

Trung Nguyen

  • He did Bachelor of Science in Computer software engineering from FPT University, Vietnam.
  • Trung co-founded Lozi(a social network for food bloggers for sharing their experiences) in 2012.
  • He also worked as Software engineer at Anduin Transactions(an automation tool for fund managers) from 2015 to 2018.
  • Trung co-founded Axie Infinity in 2018.

Aleksander Leonard Larsen

  • He studied Economics and administration at Norwegian Bussiness School from 20009 to 2011.
  • Aleksander has been a competitive Warcraft and Dota 2 player. He also founded one of the largest gaming community in Norway.
  • He is the co-founder of Axie Infinity and the current chief operating officer of Axie Infinity.

Jeffrey Samuel Kim Zirlin

  • He holds Bachelor’s degree in History from Yale University.
  • He has been one of the best world of warcraft player in US.
  • He is co-founder and growth lead of Axie Infinity.

🤖 How does it work ?

Axie

Players collect, breed, raise, battle and trade creatures known as “Axie”.

An axie can belong to any one of the 9 categories.

Each category has different characteristics:

Categories have advantages/weaknesses compared to other classes:

Players can use cards to enhance their axie’s abilities.

Each axie also has 6 of over 500 body parts, which affect Axie’s characteristics:

Each Axie also has dominant, recessive and minor recessive genes.

The dominant gene determines which body part is physically present on the Axie. When breeding, each gene has a chance to be passed down to offspring:

  • Dominant : 37.5% 
  • Recessive: 9.375% 
  • Minor Recessive: 3.125%

37.5 + 9.375 + 3.125 = 50. The other 50% of genes come from other parent.

Some physical attributes are more desirable than others. This depends on:

  • Category of Axie
  • Team being used for combat

There is also a limit on how many times an axie can be bred. It also costs SLP and AXS tokens to breed an axie.

Game modes

Presently, there are 3 game modes:

  • Adventure mode: Players fight with computer to level up their Axie and earn SLP.
  • Arena battle(PVP Player vs Player): In this mode, players compete with other humans.
    • The Axie battle system is a turn-based card game where the goal is to eliminate all enemies.
    • Loosing player looses MMR(Match making rating).
    • The winner gains SLP tokens and MMR.
  • Breeding:

Axie scholarship program

A player needs 3 Axies to play. A new player buys Axies from the marketplace which could cost several thousand dollars.

Players who do not have so much money but want to play become scholars. Scholars borrow Axie from managers, players who have more than 3 axie. In return, scholars share their SLP earnings with managers.

Lunasia

Land in Axie Infinity is divided into 90,601 tokenized plots which act as homes for axies. There are 6 types of land:

The map also contains:

  • Roads: Axie travel 300% faster on road.
  • Rivers: Cannot be crossed by axie.

The plots of land can be bought/sold/developed or rented out.

Lunasia SDK

Developers can use Lunasia SDK to create games and experiences on their plot of land.

🏛️ Governance model

The team controls and develops Axie infinity:

  • Ronin sidechain is a permissioned blockchain centrally controlled by Sky mavericks. The team controls all the validator nodes of Ronin sidechain.
  • The team actively bans players who play make more than 1 account to earn extra SLP(more than the daily limit).

The team plans to decentralize the governance of Axie Infinity to AXS token holders. However, there is no fix timeline as to when this will happen.

Moreover, Sky mavis is a for-profit company generating billions of dollars of revenue. It is not in their best interest to decentralize the governance of Axie Infinity.

🤑 How much money does the project have for future development ?

  • The company has raised around $200 million in various funding rounds from private investors.
  • The project holds:
    • 21% of the total supply of AXS tokens.
    • 75% of land plots in Lunasia are yet to be sold.
  • The project generates revenue from:
    • 4.25% of every sale on the marketplace goes to Axie infinity fund.
    • The project also charges 40 dollars for breeding axies.

👍 Tailwinds

  • Play to earn model: It is the first game that pays its players. Many players living in poor countries generate decent income playing Axie Infinity.
  • Community: Axie Infinity has one of the most loyal following.
  • Ronin sidechain: Running Axie Infinity on Etherium sidechain allows it to use Etherium ecosystem without having to deal with scalability issues.
  • Funds: The project has a large treasury and sources of revenue, which will be used for future development.
  • Rise of gaming industry: Gaming market is growing at an exponential pace.
  • First mover advantage: Axie Infinity is the first blockchain game to offer play to earn model.
  • Network effects: Value of SLP token will rise as more and more new players start playing Axie Infinity.  This will attract developers who will make the games using Lunasia SDK. Thus attracting even more players. This positive feedback loop will cause exponential growth.
  • Switching costs: Players would be hesitant to leave Axie Infinity after spending considerable time and resources.

😨 Risks & challenges

  • The game economics is set up as a pyramid. New players have to buy 3 axies to play. This creates demand for axie and gives value to SLPtokens, which are required to breed axie. Demand for axie and price of SLP token will fall once there are no new players and all the old players have acquired sufficient axies.
  • Blockchain gaming industry is at a nascent stage. Success of Axie Infinity and gamers’ demand for ownership of their assets will force the gaming industry to enter the market.
  • Axie Infinity and Ronin sidechain is controlled by Sky mavis.

💰 Tokenomics

SLP

  • SLP was not premined. Its supply started from 0 and can be earned by playing the game. It does not have max supply.
  • SLP is required for breeding axie.
  • SLP used for breeding is burned.

AXS

AXS has max supply of 270 million, which has been distributed as follows:

This supply will be released as follows:

Demand pressure

Token’s price increases due to demand pressure.

Demand pressure on AXS token will come from:

  • Governance: AXS is governance token. Sky mavis plans to hand over the governance of Axie Infinity to AXS token holders.
  • Staking: AXS holders can stake AXS tokens to earn additional AXS tokens.
  • Breeding: AXS tokens are also required in addition to SLP tokens for breeding axie.
  • Speculators: They will buy AXS tokens and plan to sell them at a higher price in the future.

Demand pressure on SLP token will come from:

  • Beeding: SLP token is required to breed axies.
  • Speculators: They will buy SLP tokens and plan to sell them at a higher price in the future.

Market cap

Gaming is a multi-trillion dollar industry growing at an exponential rate:

Although holding AXS and SLP token is not like holding equity in a company. But their price will increase if:

  • Price of SLP will increase to reflect demand for breeding axie.
  • 4.5% of marketplace fees is distributed to AXS holders. AXS price will increase to reflect the volume of trades happening on the Axie Infinity marketplace. In addition, AXS is also a governance token. Hence its price will also increase to reflect the amount of funds held in Axie Infinity treasury and their control over the game.

🧐 Indicators to watch out for

  • Axie Infinity’s Youtube channel is growing:
  • Their Twitter account is growing:
  • Prices are reflection of demand. Axie are getting more and more expensive:
  • No of users is increasing:
  • Number of transactions is growing:

👋 Final remarks

Axie Infinity has introduced far more people to crypto than Bitcoin maximalists, that too in a fun way. Many crypto projects like MakerDAO, AAVE, Kyber network etc are airdropping their tokens to Axie Infinity’s community.

Investors planning to invest in Axie Infinity should keep following things in mind:

  • It is difficult to estimate value of SLP token in the long term value which depends on:
    • Number of players earning and selling SLP tokens.
    • Demand for SLP for breeding axies.
  • Whereas AXS price depends on:
    • When will Sky mavis decentralize the governance of Axie Infinity?
    • Trade volume on Axie Infinity marketplace.

According to me:

  • Only those investors who understand, play and follow online games should invest.
  • Better to invest and stake in AXS than SLP because:
    • AXS has fix supply with a good vesting schedule.
    • Investors can stake AXS to overcome AXS inflation.
    • AXS is Axie Infinity’s governance token and a better play on Axie Infinity’s long-term future.

😊 Do further research

You can continue your research by using following resources:

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