Last year, the Axie Infinity (AXS) “Play to Earn” game broke all records, with trading volumes reaching record highs. But then the momentum ran out, and AXS and SLP prices failed to recover. This necessitated changes to the business model, according to the project teams.
Axie Infinity rethinks its business model
Axie Infinity’s popularity had exploded last year when it was launched on the Ronin sidechain. The game had actually existed since 2018 on the Ethereum blockchain (ETH), and it wasn’t until it was able to cut its costs that it really found its audience. But Axie Infinity’s business model may have been too generous, according to a release from the project teams.
At least that’s what comes out of the Season 20 announcement, which was released late last week. It looks back on the last few months of the project:
“We’ve all felt euphoria with this incredible growth and prosperity, but we’ve also more recently entered a period of economic uncertainty. [That] has made the last few months difficult for everyone.”
Volumes that have plummeted
Looking at Axie Infinity’s daily revenue on the Ronin blockchain, it is indeed clear that the last few months have been far from laughable for the game.
The project’s governance token, AXS, had also seen its price plummet recently. It reached $47 in early February, while it had set an all-time high of $164 only 3 months earlier. This was also the case for SLP, the reward token that is distributed to players, which is currently hovering around $0.014.
The average price of Axie Infinity NFTs, on which the game’s economy is based, has also fallen sharply.
According to the project team’s statement, Axie Infinity’s economic crash is mostly due to SLP inflation. Every day, four times as many SLPs are created as they are burned, which is a problem:
“We are in the process of creating more ‘burn’ mechanisms […] and we are also looking at ways to strategically reduce supply to balance the economy.”
Reduce the supply of SLP
Axie Infinity is revising its business model as follows: SLP tokens will no longer be distributed in the single player adventure mode. They will also disappear from daily quests. The change will also affect the PvP mode, with SLP rewards not being removed, but reduced.
The project teams also confirm that other burn mechanisms will be introduced, and that these are not the only changes that will be made to Axie Infinity’s business model:
“The supply reductions will not be enough to regain the full power of our economic engine, but they are a necessary step to building a fully functional and sustainable economy.”
Axie Infinity is experiencing the backlash from the considerable enthusiasm it unleashed during 2021. This will be a crucial time for the game to determine whether it will be economically viable in the long term, once the initial wave of interest has passed.