Sky Mavis thought an upgrade would serve as the band-aid Axie Infinity much needed to keep players from leaving over dwindling earnings, but Forkast learns the development risks alienating loyalists who made the game synonymous with the play-to-earn or GameFi phenomenon.

The ability of the play-to-earn industry pioneer to make the phenomenon viable has broader implications for the cryptocurrency industry, especially in developing countries where people out-of-work rely on the game and its spawns as a source of income. 

Despite changes to the game’s economics over the past few months, earnings from Axie Infinity have fallen below the minimum wage in countries such as the Philippines, where once entire communities were able to put food on the table by playing the game.

“Honestly, the game is not doing well in terms of earnings,” a player in the Philippines who wished to be known by Porky, an online moniker, told Forkast

Sky Mavis had hoped that the update, V3, Axie: Origin, would address the flaws that led to the bottoming out of its in-game currency while making the game accessible to a wider audience — even if not all players are convinced. 

“I don’t think Axie Infinity will return to its golden times.”

– Justin Dela Cruz

“I don’t think Axie Infinity will return to its golden times,” said Justin Dela Cruz, another Philippines-based player, “even if the game brings out something fresh and novel to the players.”

A victim of its own success

Axie Infinity hit a home run by letting its players earn in-game cryptocurrency by breeding and fighting with Pokémon type creatures named “Axies” which were represented by non-fungible tokens (NFTs). 

This in-game currency, known as Smooth Love Potion, or SLP, is used to progress in the game or can be cashed out on cryptocurrency exchanges.

To overcome the barrier of entry, unofficial programs, also known as “scholarships” emerged that would lend entrants the requisite Axies in lieu of SLP earned till the loan was paid off. 

Porky managed over 100 such “scholars” at a time, earning over US$20,000 a month at the peak of the game’s popularity last year.

However as the growth in the number of users slowed, the supply of SLP quickly began to outpace demand, leading to its price plummeting. Claims began circling that the tokenomics model was unviable and newer players were being fed into what some have called a “Ponzi Scheme.”  

Porky said he was fortunate to have enough from the heydays. He has now diversified into newer Gamified Finance (GameFi) projects.

But others are not so lucky.

Hand in the till?

“My concern [is for] the scholars, since they are earning less and some have already quit,” Porky said. He is holding onto some SLP in hopes of a critical role for the currency as the GameFi industry expands beyond short-term hiccups.

As player earnings were drying up, Sky Mavis announced a plan to increase the fees for trading Axies on its marketplace from 4.25% to 5.25%, ostensibly to pay the difference forward to content creators within the community.

However, they quickly changed course after a strong backlash from the community.

“Paying content creators should come out of your pocket and not from the users,” one player tweeted to game developers in Spanish before Sky Mavis withdrew the plan. “Did they think about the consequences for the breeders?”

Others felt this decision could have been put to a community vote in the Axie Decentralized Autonomous Organization (DAO), though voting with the AXS token has not yet been enabled.

Fixing what’s broken

Launched on April 7 in its Alpha stage, V3 does not yet allow players to earn in-game tokens, instead focusing on addressing any bugs and giving players a taste of the new gameplay mechanics. 

Despite the lack of tokenomics, the launch was received well with roughly 300,000 active daily users on its first day and over 500,000 installs within the week, Sky Mavis told Forkast

“We are seeing a lot of excitement about Axie: Origin,” said Aleksander Larsen, co-founder and chief operating officer of Sky Mavis. 

V3 is a higher quality game than the previous version Axie: Classic, he told Forkast

“Deeper gameplay overall with fresh … gameplay mechanics,” said Larsen. “More focus on live-operations with tournaments and quests which keeps the game fresh.” 

Despite perhaps being the first thing that comes to mind when most people think of GameFi, Larsen says Sky Mavis prefers to distance itself from the term which they believe more accurately described smaller leaderboard-based games on platforms such as Robinhood.

“We view Axie as a game that uses blockchain technology and NFTs to create a more engaging and fair game,” Larsen said. “This is also likely where the industry is headed, more quality products.”

For better or worse

Some new game mechanics impact more than just the gameplay; V3 introduces runes and charms that improve Axie performance which must be crafted by spending SLP and the other off-chain currency Moonshard.

These items disappear after each season forcing players to use the in-game currency to remain competitive. 

Effectively a token-burning mechanism, it is hoped that this will stabilize the price of the SLP by forcing players to use the token in-game as opposed to cashing it out immediately. 

In another first for the game, V3 will offer free, non-NFT Axies to allow new players to see if they like the game before choosing to buy into it. 

Developers say these non-NFT Axies will be competitive in the main game, but will not allow players to earn any tokens for playing, encouraging them to eventually invest in the full version of the game.

It’s new features like these, said one industry watcher, that keeps the community strong despite the plummeting profits.

A billion-dollar payday?

“People still have so much faith in the actual community because you can see [Sky Mavis] are actively trying to fix the problem,” said Brian Lu, founding partner of Infinity Ventures Crypto.

Ultimately, creating a stable economy in this competitive industry is the billion-dollar question, says Lu, suggesting one way to do so might be to limit the supply of a secondary token such as SLP and having it backed by a primary governance token such as AXS. 

“If you can figure out the tokenomics where nobody buys another in-game asset or nobody buys anything in your game and sustain the tokenomics for 100 years, then you’ve figured this thing out,” Lu told Forkast

It was far from smooth sailing leading into the launch however, as Ronin, the Ethereum sidechain that hosts all Axie NFTs was hacked for over US$600 million the week before the launch of V3, in one of the biggest hacks in history

The following week Sky Mavis raised US$150 million to compensate users following the hack, news of which sent Axie Infinity sales surging.    

“We chose to delay the game a couple of days due to the Ronin incident so that engineering had time to prioritize security,” said Larsen. “And after we resolved the concerns around users’ funds, things are starting to get back to normal,” he said. 

Despite setbacks like the hack and the rocky road to stable economics, Porky is confident GameFi is here to stay in developing countries like the Philippines.

“Traditional finance here is not available to all,” he said, explaining the many barriers such as documentation and financial literacy can be a barrier to many in his community. “I need more assets to start a business here,” Porky told Forkast. “Unlike in crypto, small funds can turn into a financial freedom.”