In recent months, the popularity of play-to-earn games based on blockchain technology has continued to grow. The online video game Axie Infinity, developed by Vietnamese company Sky Mavis, has become a symbol of this trend. However, the race to create a digital universe supported by decentralised transactions may have suffered its first setback.
"Axie is a digital nation where people globally come together with their Axies to play, earn, and live. Welcome to our revolution." This is how Sky Mavis presents its mission statement. The experiment launched by the Vietnamese startup has created a real player-owned economy, making the possibility of earning thousands of dollars a month by breeding, collecting and trading their unique avatars - digitised as NFTs - a reality for dedicated players. The currency of the exchanges, and the main source of income on the Axie platform, are ERC-20 tokens called Smooth Love Potion (SLP). Until a few months ago, this cryptocurrency could be accumulated indefinitely by completing quests or winning battles and redeemed for new game features, or alternatively converted into real money.
According to Aleksander Larsen, co-founder and COO of Axie Infinity, the secret to Axie's success lies in the substantial monetary incentive offered to users in exchange for the time they spend on the game every day. However, on February 4th, the game's developers decided to take drastic action to balance the system, removing the rewards for 'Adventure Mode' and 'Daily Quest', effectively capping the amount of SLPs issued each day in order to limit inflation. While at its peak, a player could earn up to 150 SLPs per day, worth up to US$54, in December last year the maximum loot was halved to 75 SLPs, worth no more than two dollars. Simultaneously, the base price of Axies dropped from around $300 in August to just $25 in February.
The collapse of the SLP price is said to be explained by the tendency of players to convert tokens into real currency instead of reinvesting them within the game, causing an oversupply: the ways in which SLPs were 'burned' through the breeding of new Axies could not keep up with the speed at which large amounts of tokens were being issued on the market.
Jeffrey Zirlin, another co-founder of the game, was not surprised by these imbalances and compared the volatility in terms of capital flow to that which typically characterises emerging market nations. On the contrary, he emphasised the innovative strength of Axie Infinity, a pioneer in the trend of transforming digital gaming platforms into economies owned by real players that, consequently, often finds itself having to deal with unprecedented challenges.
In fact, it only took the announcement of the updated version - with its associated adjustments in terms of SLP supply - to reverse a long-running downward trend. Within just 24 hours of the launch of 'Season 20', the value of the game's cryptocurrency rose by 40%. In addition, the significant changes made are believed to hint at a number of other benefits, including increased chances that the game's economy can develop in a healthy and sustainable manner over time. "We believe the fastest way to reduce this volatility is for us all of us to come to terms with our collective responsibilities within Axie, and quickly work to build consensus and enable each other’s community efforts," reads the official presentation of the update. "Prosperity amongst a community comes when it collectively creates more value than it consumes."
However, uncertainty in the world of cryptocurrencies does not only depend on market fluctuations. At the end of March, Ronin, the blockchain network that supports the video game, was targeted in a hacking attack during which the equivalent of more than $600 (real) million in Ethereum was stolen from the famous videogame. Larsen reaffirmed the financial strength of Sky Mavis, which has since set about fully compensating players for their losses. However, he told Bloomberg that the partial recovery of stolen funds could take up to two years. It remains to be seen whether the game's popularity will survive this record-breaking theft and whether the Ho Chi Minh-based company will be able to respond promptly and effectively to these unprecedented and unforeseen attacks on its security systems, confirming its position as a leader in the crypto gaming industry.
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