Michaël van de Poppe - 23 March 2022
The future of gaming?
Recently, a blockchain company raised a stunning $152mln through a Series B funding round. The company, Sky Mavis, is in the crypto industry considered to be a pioneer. Their game called ‘Axie Infinity’ has become so big, that the revenue on the platform exceeds most other crypto protocols. Thanks to the Series B round, Sky Mavis is now valued at $3bln, about half the valuation of Ubisoft. The native token called AXS has pulled a x1000 over the past year.
It is insane to realise that their game only took off this year and that the company is now valued at $3bln. This post will serve as a highlight for what the game is and the numbers it has pulled over the past year. It shows how big blockchain-based games have become and that this is only the beginning for this industry.
Gaming on the blockchain?
When most people talk about blockchain or crypto, they talk about the currencies, like Bitcoin and Litecoin, or the NFTs. However, recently there has been an industry on the rise: blockchain-based gaming. Built on the blockchain, developers have made a whole new business model: Play-2-Earn. By playing the game users can be rewarded in the form of Non-Fungible Tokens (NFTs) or fungible tokens.
Axie Infinity is a pioneer in this realm. The game really has pushed the boundaries as to what is possible with blockchain technology. The game makes use of an interesting tokenomics model to have players create monsters that can be traded or used in battle.
The Axie Ecosystem
In the Axie ecosystem there are two tokens, AXS (fixed supply) and Smart Love Potions(SLP, elastic supply). SLP are burned in order to create monsters, called Axies. The monsters are used in battle against other players or AI controlled opponents to win AXS and SLP. At the time of writing, the tokenomics of AXS have caused the price to skyrocket thanks to the implementation of staking. Holders can stake AXS to earn revenue generated on the Axie marketplace. Funnily enough, the tokenomics of SLP have caused the price to decrease. This is mainly because of the reflexive supply that causes supply to exceed demand. It has been rumored that the tokenomics for SLP are changing, but nothing is set in stone yet.
As can be seen from the following metrics, Axie Infinity has become incredibly popular. At the time of writing there are about 2 million daily active players on the game.
They are trading over $20 million in NFTs. Over the past 180 days the protocol had a revenue of $820mln. This makes Axie the second protocol in terms of protocol revenue. Over the course of the platforms’ existence it has traded over $2 billion in terms of volume.
Only recently, it has become an option to stake the native AXS crypto currency. Within a day over $1billion worth of AXS was staked as stakers received a juicy 100+% APR. It was a huge improvement for the tokenomics of the AXS token and it caused the token to double in value as a lot of tokens were removed from the markets to the staking contracts, creating scarcity. Holders can stake AXS to earn revenue generated on the Axie marketplace. Funnily enough, the tokenomics of SLP have caused the price to decrease. This is mainly because of the reflexive supply that causes supply to exceed demand. It has been rumored that the tokenomics for SLP are changing, but nothing is set in stone yet.
You can see that, despite the strong price move upwards of AXS, the revenue stayed the same, meaning that the price increase was caused by better tokenomics (the addition of staking). It also highlights the difference in price between SLP and AXS. The latter has very strong tokenomics, while SLP is missing that, causing worse price performance.
It is astonishing, yet amazing to see the numbers Axie Infinity is pulling. Over the past year they have built a strong community, but more so a strong product. Sky Mavis has found a way to make blockchain gaming a pleasant experience for players. From the in-game mechanics, like the breeding and the battling, to the sidechain that powers all the blockchain activity. The game is well developed and works as it is supposed to.
However, there are still areas of the game Sky Mavis can improve on, for example the tokenomics of SLP or expanding the metaverse with other games. Fortunately for them, they just had a Series B funding round and they raised $152mln. This money will be used to improve the company, the game, and multiple other games for the metaverse that is in the works.
Axie Infinity is pioneering and setting boundaries in the blockchain gaming industry. Over the past year the game gained a very strong and passionate community, whilst also providing a new form of income through the Play-2-Earn business model. This has become very impacting for people in certain third world countries that can now afford to play this game full-time and live from it.
With their recent Series B investment round we expect the game to improve more over the next year and hopefully we see more additions to the metaverse they are building which will add more utility to the tokens and enforce their market position.