Axie’s Economic OverhangNov 1, 2021
Axie Infinity is the largest crypto-native game, but there are a few important factors that feed into the economics of its in-game utility token, Smooth Love Potion (SLP). Since the game started to take off, a booming scholarship ecosystem has formed around the game to provide underprivileged users with the resources to play the game and breed Axies. These scholarships have largely had a positive impact on the lives of those in developing nations, giving them alternative means to generate income.
In order to play the game, you need 3 Axies. When you win a game, you earn SLP, which serves as the primary income stream for many players. But in order to monetize their gameplay, they must sell SLP for fiat, which effectively increases net SLP emissions. This supply increase can be offset by stronger demand for breeding as breeding requires players to burn SLP. However, demand for breeding has weakened, in part because the floor price on Axies has slid. In other words, breeding is not as profitable as it was a few months ago, hence one reason why net SLP emissions are on the rise.
AXS is also required to breed Axies, and its price has increased over 20x over just the last four months alone. Breeding costs were reduced from 2 AXS to 1 AXS in September, but that hasn’t been enough to incite enough demand to breed to offset recent SLP emissions.