Axie Infinity is a play-to-earn crypto game that lets players earn ‘Smooth Love Potion’ or the SLP Token for training Axies. The game is one of the most played crypto games, even in 2022. Recently however, Axie has been making the news for the wrong reasons. The Ronin Bridge hack led to $650 million of investor’s money being stolen from their wallets. With the recent crypto slump, Axie Infinity has been losing players and token value at a steady rate, but some suspect it is due to other reasons.
People made a lot of money off of Axie Infinity (AXS). The crypto token shot up from about 14 cents to above $150 between 2020 and 2021… resulting in a staggering 107,000%+ return within one year. This didn’t just benefit investors. Many of the players in poorer countries, like the Philippines, earned up to $3,500 a month.
That’s 300% more than the average Filipino earns. It’s the equivalent of an American making $160,000 a year playing video games. These players weren’t professional players. They weren’t on an esports team. Sponsors didn’t pay them. The money came from playing video games.
How amazing is that?
Like many unsustainable crypto projects, this one did not end well. The price of AXIE has dropped below $20 once again. Its user base has dropped by 60%, with players now earning a few dollars a day at most. What happened?
Axie Fails to Regulate Token Creation, Investors Lose Money
Axie screwed up the one thing you can’t afford to screw up in building a successful crypto project…
Tokenomics. In crypto, tokenomics are everything. Tokenomics set the rules for how a crypto token operates. They determine:
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The number of tokens in circulation
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and the process of creating new tokens
- How old tokens are destroyed
- The process of using a token
- What value the token accrues from the underlying crypto business (if there is one)
Bitcoin’s tokenomics, for instance, regulate how many bitcoins can ever be created. The key difference between crypto and the stock market is that in the stock market, strict rules dictate what companies can do with their own stock. For example, Netflix (NASDAQ:NFLX). About 444 million shares of Netflix stock are traded on the market. Each shares a portion of the company’s equity.
Can you imagine if Netflix management could create 500 million shares out of thin air whenever it pleased? That would dilute ownership and result in investor losses. This is why issuing new shares of stock is only permitted under certain circumstances. Currently, there is no such rulebook for crypto. The developers who write the blockchain code set the rules for their projects.
Some rules are beneficial for investors, like bitcoin. Other set rules are equally damaging to investors, such as Axie’s.
Smooth Love Potion Price Plummets By 98% Due to Hyperinflation
Axie suffered from hyperinflation…
Axie players earned money through an in-game currency known as Smooth Love Potion (SLP). SLP’s token reached $0.42 last summer. In the game, players earned “magic internet money” which they were able to convert into real US dollars. The price of SLP plummeted by 98%, dropping to $0.005.
To put it simply, SLP’s tokenomics were awful. Although players were able to create a lot of SLP on a daily basis, there were few ways to actually use the currency. Eventually, the currency crashed. SLP became worthless.No one wanted to play Axie anymore.
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
