Axie Infinity is arguably the world’s most popular blockchain-based game. Through its innovative use of NFTs (non-fungible tokens) the game combines traditional gaming and cryptocurrencies. The Vietnamese title has paved the way for a whole new age of games, but at the same time, it has also exposed some of its dangers.
Axie Infinity was initially released in 2017, but it was only in 2021, with the hype around cryptocurrencies and NFTs, that the game became a worldwide sensation. The game’s popularity has led it to become the most lucrative non-fungible token project ever, generating $4 billion in NFTs sales to date. The model that has made Axie Infinity take off rewards players with native cryptocurrencies for performing daily missions and competing with other players. However, in order to get started in Axie Infinity players must purchase at least three NFT assets within the game.
That’s when the problems arise for many users who want to play. The ‘Axies’, which are like Pokémons are non-fungible tokens, which tend to be very expensive. As a result, this has led to the rise of so-called ‘scholarships’, a scheme in which an organisation, company, or even an individual lends three of its NFTs to someone who wants to play but cannot afford the initial investment. This loan model has divided opinions, with such types of arrangements entering a grey area and unregulated terrain in many countries. Infinity has been compared to a Ponzi scheme, since it relies on new players joining the platform to keep the game’s cryptocurrency, SLP, at high prices.
But that’s not all, since the game debuted, many industry insiders have debated whether this business model would result in high volatility and lead to an extremely unstable player-to-player exchange market. In addition, this model has also been described as a form of gambling, with players only being able to withdraw their tokens every fourteen days.
Ultimately, this hybrid model is largely untested, with other forms of online gaming and gambling being considered more reliable. For instance, individuals interested in joining platforms where they can play using real money will find that traditional games, such as online video slots, are a safer alternative. This is mostly due to the fact that online casinos and most gambling platforms follow strict regulations and do not rely on market fluctuations.
Struggles and Outcries
Earlier this year, the game developers sparked players’ fury by increasing the fees charged in the game’s official marketplace by 5.25%. This change was justified as an attempt to generate a ‘sustainable source of funding for marketing and growth initiatives’. However, the decision was met with anger and less than a week after the announcement, Sky Mavis, the publisher behind the game, reverted their decision.
The attempt to increase rates came as a response to the economic hardships the play-to-earn strategy is facing. In 2021, as a result of a large increase in revenues related to NFT sales, the game skyrocketed. This saw the game’s tokens, AXS and SLP, increase their price significantly. However, since November 2021, the volume traded decreased dramatically and SLP has had significant price drops ever since.
In February, in order to stabilise the fluctuation of prices, the game’s publisher decided to adjust its financing and business model. This new approach focused on restructuring the reward system, including a limitation on issuing SLP. This resulted in a slight increase in SLP’s price, but the company would soon suffer once again following a crypto hack, which led to over $615 million being stolen from Axie Infinity’s Ronin Network. While the company has been able to recover roughly $6 million, the hack has resulted in the loss of thousands of players and AXS’ value dropping 30% in two weeks.
For now, it is difficult to say what the future will be for Axie Infinity. The game and its business model had a promising start, but the financial struggles combined with the recent security breach have prompted many questions about the security of blockchain-based operations, but also the stability of ‘play-to-earn’ models and the role of scholarships in attracting new users.