Will Axie Infinity (AXS) Last?

In this article, I’ll take a highly critical look at Axie Infinity. There are tons of hyped-up dollar-eyed reviews of Axie Infinity out there, so I thought I’d offer the opposing view. I have actually bought some AXS, but not as a long-term investment. I will not hold this investment for the long-term, because I don’t think Axie Infinity will last.

(I am negatively biased in this article, on purpose, to offer a counterweight to all the over-hyping articles. Please, remember to do your own research)

Axie Infinity will not last due to the necessity of onboarding new players at an exponential rate to keep the play-to-earn model profitable enough. With a high entry barrier of up to $1,000, the onboarding will eventually slow down; resulting in a crash in the value of SLP tokens and breeding new Axies not being profitable any longer. In addition, the developers/admins are acting suspiciously, banning players without warnings and manipulating the price of the in-game token.

Let’s break it down and try to wrap our heads around the problems surrounding Axie Infinity.

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Axie Infinity Explained:

If you are one of those who see Axie Infinity as an investment opportunity, then make sure to read this.

Because even though the concept of play-to-earn is old, I have found during my research that Axie Infinity lacks the sustainability required of a long-term investment project.

Gamers are already accustomed to the idea of in-game currencies that offers unique functionalities such as buying in-game items and/or progress in the game.

Axie Infinity is one such online game, offering a decent income for their active players. Many of its predecessors like the World of Warcraft and the world-famous life simulation game franchise “The Sims” included one to three-tiered in-game currencies, but none of them had any value in the real world.

But Axie Infinity is changing this. The in-game currency is actually valuable outside the game as well:

Launched in 2020, Axie Infinity is an increasingly popular game developed by Sky Mavis Vietnamese studio.

This Pokémon-style title has approximately 350,000 daily active players at the moment, 40% of which are located in countries like the Philippines, Venezuela, and the US.

The idea behind this game is to breed furry creatures called Axies that are tokenized as NFTs (a digital collectible that has some value). 

The game’s objective is to breed, acquire, and train these creatures, to complete challenges like battling online. These activities reward you with their in-game currency – SLP (small love potion).

Players can also farm resources, but the entire economy of this game relies on SLP and AXS (Axie Infinity Shard).

AXS, which is their governance token and SLP (mainly used for gameplay), has real-world value just like other cryptocurrencies.

To summarise:

Axie Infinity is a play-to-earn game where players breed, acquire, and train tokenized cute monsters called Axies and use them in battle and quests. They earn SLP, which is their in-game currency used for breeding. AXS is the governance token, which gives you ownership of the game, and a percent of the revenue.

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Why Axie Infinity Might Fail

When you play Axie Infinity, you get SLP, an ERC-20 (built on Ethereum). Players spend hours on this game to accrue as much SLP and AXS as possible.

However, breeding Axies consumes SLP, while AXS can be sold through crypto exchanges for US dollars. 

From playing Axie Infinity it is estimated that you can make around 150 SLPs per 3-4 hours, equivalent to $40 at today’s price.

So it’s easy to make up to $1,000 per month by playing this game which is more than the middle-class salary offered in developing countries.

This is exactly why Axie Infinity players’ majority is based in developing countries with a growing population like the Philippines. In fact, people in Vietnam and the Philippines are quitting their jobs to play Axie Infinity.

The game revenue has grown 30x since the beginning of 2021, which is higher than all Defi projects combined.

This all sounds amazing. It’s giving people in third-world countries a chance of making more money a decent income!

However, the devils in the details:

SLPs have non-zero values because players need them to breed their Axies, and if you are a new player of the Axie Infinity game, you must buy SLPs to get started, increasing the demand for SLP and driving the price up.

In other words, the price of SLP is dependant on new players joining. If no new players join, no one is buying SLP, leading to a price decline.

As SLP is the in-game token earned by players, their income will decline as well.

How long will this last?

Well, the longer it lasts, the harder the SLP price will crash.

If the game has a million players earning and selling SLP, but only 1000 new players join every day, buying the SLP token, the SLP price will crash to near-zero value.

The only thing that can save the value of SLP is if they introduce a “earning difficulty adjustment mechanism”, making it harder to earn SLP when more players join, decreasing the selling pressure from the earners.

The earners of SLP have the same role as the miners of Bitcoin. If there were no “difficulty adjustment” when more people started mining Bitcoin, the price would have NEVER reached more than $1.

Put simply, a dynamic difficulty of earning SLP is necessary for Axie Infinity to remain sustainable.

However, the current model makes it evident that the players’ earnings depend on new players joining the system and spending money in-game buying SLP and Axies.

It is a classic pyramid-scheme model that favors players higher in the hierarchy by the money spent by new players joining the bandwagon.

The profitability of playing Axie Infinity will end when there are no new sign-ups – resulting in funds not going into the system.

At some point in the future, when the hype drops, the SLP token will drop to near-zero, due to tons of selling, and little buying.

Is Axie Infinity Legal?

The game, which is all about raising and collecting fantasy creatures called Axies, sounds pretty harmless for people who have little to no experience with the risks involved with such projects.

Axie is not for you if you’re uncomfortable buying/selling AXS and SLP on non-US exchanges or think of it as risky business.

At the time of writing, AXS and SLP are not available on US exchanges. Their reason could be failing to meet the legal criteria and other necessary demands required by the US regulators. 

I’m not a lawyer, so I can’t tell you why. In all fairness, it might be because both of these tokens are so new.

However, once the IRS and SEC see people earning serious money playing this game, you can bet they will claim their share and start regulating the life out of it.

A few other red flags:

There are no Github links available for Axie Infinity to check and verify its repositories and codes.

Axie Infinity is not available on either Twitter or Bitcointalk thread, raising questions in many investor’s minds.

All one has for Axie Infinity is its official website, a simplified whitepaper, a Reddit page, game support for PC and mobile phones, a listing on CoinMarketCap, Coingecko and some non-US crypto exchanges.

Let me be clear:

Axie Infinity is legal, but it’s not certain that it will remain legal in the future. It is not yet regulated properly in the US, and will without a doubt raise some eyebrows in the IRS and SEC.

Axie Infinity Has a Lot of Bad Reviews

As expected from a project like this, there are several bad reviews online about Axie Infinity.

 I have chosen 3 such verified reviews posted by daily active players in this section.

“Search “Axie Infinity Unplayable” No one speaks about this. The game is unplayable for months. You have to dedicate the whole day if you want to do something.”

“If the premise of something as volatile as this feels too good to be true, then it probably is. I pity those who are gaming the system with this because there are better ways to use your cryptocurrency.”

“Definitely a scam for the following reasons: A modern version of the Ponzi scheme!”

Read more reviews here: https://www.facebook.com/AxieInfinity/reviews/

How Much Does It Cost To Play Axie Infinity?

You can’t just “jump in” with this game – You have to “buy in”. You need to buy three Axies to enter fights and quests, and these are not cheap… They cost 250 USD.

Since you need at least 3 Axies to form a team and start playing, you need at least 3×250 USD + gas fees for the very basic Axies. In total, it’s roughly $1000 when gas fees are high and closer to $800 when they are cheap.

Selling these basic Axies to new players is one of the main sources of income for players in this game.

When the game is saturated, and no new people are interested in joining the game, no one will pay for the new Axies (the price crashes), and the SLP token will lose its value leaving the later joining player with massive losses. 

In other words, neither breeding/selling Axies to new players or selling earned SLP tokens is sustainably profitable.

The developing team knows it is ultimately failing and the economics are not sustainable, yet they do nothing about it.

Conclusion: Axie Infinity Will Not Last

The necessity for an exponential increase in new players to make the game profitable will cause Axie Infinity to fail. It might last three years, three months, or three days, but at some point, it will eventually crash under its own weight – Not unlike a Ponzi scheme.