Axie Infinity

Cute pets pay the bills.

Jan 05, 2022

Hey there,

Welcome to the fourth issue of 2 cents on a coin!

Today, my 2 cents are on Axie Infinity (AXS), the digital pet world which has captured the hearts of close to 3 million monthly users globally.

Axie Infinity is the one block-chain based game I have written on so far with a community so passionate and involved (check out my 2 cents on similar projects like Decentraland & The SandBox).
There are players with Axie podcasts, dedicated blogs and even Axie tattoos. The community is fanatical, thoroughly engaged and growing.

The gaming platform launched in October 2018 with the first mode and today has gathered close to 2 million daily active users, more players than any other blockchain-based game in the world.
So what exactly is Axie Infinity about and why has it been this successful?

How Axie Infinity works

Axies are fantasy creatures that players can battle, breed and raise.

Battle: Each Axie has traits that determine what kind of damage they can inflict on or receive from others. To battle, one must have a team of three Axies which are currently going for a minimum of $67 each. Successful gamers are skilled at pooling a team with complementary traits which can attack and defend the opponent’s to win. Winning a battle awards each of the winning team’s Axies a certain reward (SLP) which can be used to upgrade body parts to higher-level evolutions, improve an Axie’s traits, or breed them. A player can choose to use this reward for body part upgrades, traits or breeding.1 See the full guide from Axie’s team.

Breeding: Axies can be bred to create offspring. Each Axie has 6 body parts as well as a body shape. For each part, an Axie possesses 3 genes. A dominant (D), recessive (R1), and minor recessive gene (R2). The dominant gene is what determines the body part that is physically present on the Axie. When breeding, each gene has a chance to be passed down to offspring.2 Players can choose to use offspring in battle or sell them.

Land: The land in Axie Infinity is called Lunacia. It consists of 90,601 plots of land which can be traded. At the moment, this land is not open for user-generated games like is possible on Decentraland & The SandBox but it is a feature that the Axie development team is focusing on and aims to release sometime in 2022. This will enable user-generated content and could be a scaling strategy for new and diverse experiences in Axie Infinity.

Why has Axie Infinity grown so much in popularity?

A source of Income: If you are traditionally a game lover, you’d play an interesting game and be rewarded by the feeling of satisfaction you get when you cross major milestones and win. If you bought a console to access that game, your money went to the console manufacturer. If you downloaded it for free on the play store and bought any in-game upgrades, you paid the company behind its development for the opportunity and all you got in return was that sweet feeling of winning.
But what if you could earn money simply by playing the game?
Block-chain based games have now made this possible on a massive scale. Games like Axie Infinity contain in-game assets which are non-fungible tokens, allowing a player to truly own those assets - buy and sell them within and outside the gaming environment. This explodes the marketplace for such assets created in a game since they can be sold to a broader community.
You might be wondering - why would anyone want to pay a gamer for playing? The answer is: Because value has been generated. Money is always exchanged for value. Through winning battles, a player’s Axies, in this case, have climbed in the ranks. They are more powerful and resilient and stand a higher chance of winning the next game because of that player’s skill.
If someone else wanted to have access to those more powerful Axies, then they’d have to pay for the time and effort spent in up-skilling them.
In traditional, “off-blockchain” games, selling your game assets is not possible on the scale that it is with blockchain games today.
See a story of one community in the rural Philippines that has turned to Axie Infinity as a way to make ends meet:
Great user experience: Axie Infinity might look like a simple interface but there’s a lot that goes into playing and winning. It is modelled after the video game, Pokémon, which is the 4th best-selling video game franchise of all time. It also has a strong development team that has managed to build a game that can be played at scale without many bugs and kinks.
Investor interest: The traction that NFT-based games like Axie Infinity saw in 2021 fuelled investor interest which has channelled funds into the space, in turn, catalysing a virtuous cycle of growth in the industry. Axie Infinity is able to launch strong marketing campaigns in form of tournaments with attractive rewards which incentivise new joiners to compete for the prizes. The company raised $152 million from a16z in its latest funding round in October 2021.

AXS’s marketplace performance

1. 4-month price trend: Of the top 50 coins in CoinMarketCap’s Metaverse category, Axie Infinity ranks #47 by the 4-month price change. That price gain of 60% is nowhere as impressive as the 46 other tokens which recorded an average gain of 565%. Axie Infinity is the fourth most tradable token in its category with 143 market pairs.

2. Volume: At the time this data was pulled on 21.12.2021, AXS had the third-highest volume in trades, after The SandBox - close to $300 million in transactions within 24 hours. This speaks to the level of interest in the coin and its liquidity.

3. Unique value proposition: Although the game’s key selling point is in the ability for players to fully own and trade assets since other blockchain games offer this feature, that’s not particularly special. What has made this game special is:

Having early mover advantage: When it launched in 2018, there were only a handful of other blockchain games with NFTs which could be created and sold on the open market. The game slowly gained traction since then and was primed for a spike in adoption when the 2021 boom in NFT awareness arrived.
Strong team and CEO: the team at Sky Mavis (Owner of Axie Infinity) is made of talented engineers with good experience building immersive, fun-to-play games. Axie Infinity CEO and co-founder, Trung Thanh Nguyen, co-founded an e-commerce startup at the age of 19 which raised up to $10M in funding. He also had stints at Trusting Social - a company that raised $25M from Sequoia capital before founding Axie Infinity.
Clear vision: There is a laser focus on user experience before anything else. In April 2021, the team completed the migration from Ethereum to the private blockchain (called a Side Chain), Ronin, to improve transaction speed and reduce costs - compromising full decentralisation for efficiency. This move is one of the key drivers of the adoption of Axie Infinity. The price of AXS rallied 80% following migration to the side chain.

Drawbacks

1. High barrier to entry: Unlike Roblox and many other successful games which are free to play, it currently costs a minimum of $201 to start playing Axie Infinity (the lowest price of 1 Axie is $67) This creates a barrier to entry for the average person. One can circumvent this requirement by winning a scholarship.

2. Limited accessibility: Axie Infinity is not yet available on ios or app stores. However, the game can be played on a mobile phone. This is a convoluted process though.

3. Limited choice: There’s currently no option for users to create their own games like is possible in highly popular Roblox and other blockchain games. However, this is a feature on the roadmap for 2022.

In summary,

I think the AXS token could continue to grow in the next 12 months if:

1. Introduces a free-to-play option that drops the barrier to entry.

2. Improves accessibility by offering the mobile app version.

3. Launches the Lunacia SDK that allows developers to create their own games and environments in Axie Infinity.

Would you invest 2 cents in AXS, yes or no, and why?

Please leave a comment below.

2 cents on a coin