The Biggest NFT Video Game’s Economy Is Collapsing Because NFT Games Don’t Work

It is currently the largest NFT-related game available. Axie Infinity, a game—similar to Pokémon—in which players collect and battle monsters which resemble axolotl salamanders.

Business model Axie InfinityNearly all non-fungible token (NFT), games are called “”You can play to win.” These games require that all players purchase NFT characters via a marketplace. All in-game currencies and assets can be traded on cryptocurrency exchanges so that everything is valuable. Although the upfront costs of purchasing the game are often high, the potential to make money playing the game makes them worthwhile.

This game is attracting Web3 investors who are very excited. Alexis Ohanian is the co-founder of Reddit. Investors who are you? Axie InfinityAccording to a report, play-to-earn will become a popular game. In five years, 90 percent of gaming’s market will be gone. Sky Mavis is the developer who makes Axie Infinity,The company was able to stay ahead of its competitors for years. In 2018, their NFT-game was launched. They were already operational, and NFTs became very popular. Investors decided that blockchain technology would revolutionize gaming. 

Because they were the first to move in this small space, this studio became an independent one. raise $150 millionAt a value of $3 billion, in Oct 2021 financing. Sky Mavis also highlighted its phenomenal subscriber growth at the time. The number of active users per day grew to more than two million in the third quarter 2021.The December issue of Axie Infinity Shards – ASXThe game’s Governance tokenMarket capitalization was higher than that of the Ubisoft, a French publisher of gamesThis makes it possible to: Assassin’s Creed, Far CryPlease see the following: Watch Dogs games. Juli: A single Axie rare monster was sold for 369etherIt was worth more than $800,000. A Rare plots of land within the game were sold at 550 Ether($2.5million) despite not being able to access the game’s in-game land features. 

However, there are some serious problems. Axie InfinityYou are here: Value of an in-game currency known as Smooth Love Potions, (SLP), crashedFrom last summer’s record high of $0.40 to $0.01 in January 2022 (a lower price than the one year prior when very few people knew about NFTs) – this is a significant drop from its previous value. This is an important problem. Axie InfinityThis is because “playing to win” is the objective of the game, and SLP (Spending Money) is what you get by playing. Due to plunging prices, there has been a significant increase in transactions on Axie assets. It is possible that as high as 70 may have been lostIn just two months, it had fallen to 5% from its peak. There are many factors that influence the effectiveness of The Floor price for the cheapest Axie characterIn January 2022 it was $30. That is a sign that users are disposing of their assets. It often costs much more to create one character than to make. AXS, which is the governance token has experienced a 40% drop in value, representing a huge paper loss and a cost of over $1 trillion.

Examining what is going wrong Axie InfinityWe can clearly see that the business model of play-to-earn has many problems and no obvious solutions.

Gaming NFTs Don’t Look Like Other NFTs

These NFTs can be found here unique tokens on a blockchainDigital assets are often attached with images. These images can be considered works of art and are owned by the token holder. The NFT can also be used as a key, or membership card. You can take the example of the “popular” Bored Ape Yacht ClubNFT has created Discord chats where Ape owners can meet celebrities and other crypto influencers. Bored Ape has airdroppedHosted NFTs: New NFTs for free to NFT owners who have the original collection a live Ape Fest eventIn New York, summer 2021. Parties that Bored Ape owners can attend.

It is not clear if these benefits are worth the high prices at which NFTs can be traded. However, there is an argument that NFTs with the highest demand for NFTs have their prices justified due to the potential of receiving valuable airdrops and other benefits. They are speculation investments, and those who buy them may have their own theories as to why the assets might become more valuable in the future. In January 2022 the floor price of the lowest assets was set by the Apes. Continued to climbWhile The wider crypto industry has lost more than $1 trillion in value

Play-to-earn NFTs for gaming are becoming a lot less intuitive. They aren’t works of art. These are not memberships to clubs. These are not status symbols. They’re just objects in a videogame, which is why they are valuable. Because they are able to earn money, the NFT characters can be valuable. Therefore, NFT characters are valuable because they can make money. What is the rate at which your initial investment can pay off and begin earning you profit through gameplay? What happens to your initial investment if you have unrealistic expectations?

This is how it should work.

The Axie Economy

These resources are Axie InfinityAs it stands now, it includes Axie monsters and AXS crypto, which are prizes for the best players. All other players have to purchase it. SLP is an in-game reward currency, also available on cryptocurrency exchanges. You can earn cash by selling your extra SLP.

An Axie monster is kind of like a Pokémon, and Axie battles are similar to Pokémon battles, but each monster is connected to a token and can be sold on crypto exchanges. To play the game, you need at least three of them, and you have to start by buying your monsters for real money from other players—there’s no Pokémon professor to give you a starter monster, and you can’t catch anything in the game.

Only existing Axies can be bred to produce new Axies. If two Axies are crossed, the eggs will produce a egg. The egg will then hatch into an NFT monster after five days. A mix of traits inherited from your parentsThese could include random mutations. The Breeding of Axies A fee of AXS tokens or a variable amount in SLP is required to pay.Depending on the number of offspring produced by parent Axies in the past. 

To produce an NFT character you will have to pay $30-$80 crypto depending on current AXS prices. Additionally, you’ll need to pay SLP, which represents the hours played and is worth what may seem like a lot of real money at times. The value of parent Axies is also affected by the cost of producing offspring. This happens because of an increase in the SLP costs of breeding Axies. After seven breeding cycles, Axies are no longer able to produce offspring.

Axie breeding can be viewed as a risky and expensive activity. It is also the only game activity that takes SLP money out of circulation.

An “uncapped utility token” is SLP. This means that it’s a cryptocurrency you can earn for fulfilling tasks in the game. And there are no limits on the amount of it you can produce. SLP makes up almost every reward in the game. It’s a fancy term for “in-game currency” like gold. World of WarcraftBells or in Animal Crossing. 

SLP is earned when players win battles with other players in arena mode or clear levels with computer-controlled enemy in adventure mode. A player can get 100 SLP every day by playing adventure mode. 50 additional SLP is available for daily quests, which require the completion of adventure levels as well as winning arena games. You can earn more by winning arena matches. The amount of SLP that is awarded to an arena winner varies.It all depends on how high-ranked the player. An average to good player will earn 6-12 SLP for every win. Top players may get 24.

For winning arena matches and collecting Axie Monsters (which can be expensive), you will get more SLP. SLP can be earned for every action in the game. You also get the opportunity to earn more SLP by spending more money or progressing. The object of the game is to get as many SLP as possible. If SLP are worthless then the NFT assets that are valued based on their SLP earning ability are also worthless.

With a base team of monsters and a low ranking, he will receive modest rewards through arena wins. You can make approximately 220 SLP per DayYou can play for approximately three hours. For six to eight hours of play, the highest-ranked players can make more than 800 SLP. A casual player will earn about $75 for 220 SLP at $0.35 per hour. A SLP worth $0.01 is equivalent to 220 SLP worth just $2.20.

What Caused the SLP to Crash?

This is how play to earn works in real life: 40% of active Axie Infinity gamers are in the PhilippinesWherever possible, The per capita GDP averages $3,300 each year. TheVenezuela has the second highest concentration Axie playersWherever possible, Since 2013, the economy is in total collapseHyperinflation rendered local currencies almost worthless About 6.5% Axie InfinityThe playersYou can live and work in the United States. For games such as Axie InfinityTo acquire players from the advanced world, because there are many gamers despise NFTsWhile these games appear and work like browser apps and free-to use phones or web browsers, they do require you to purchase NFTs worth hundreds of dollars to get your game started.

The majority of players from the global south have access to the game via the internet “scholarships,” arrangements in which a manager—sometimes a player in the developed world with a large stable of extra monsters, and sometimes a crypto investor who is speculating on Axie assets—loans a player a squad of Axie monsters to play with in exchange for a cut of their SLP earnings. They aren’t trying to accumulate large amounts of money or rise up the competition ladder. They don’t approach. Axie Infinity as gamers or investors—they’re being hired as laborers. These workers harvest roughly 220 SLP each day that players can earn with an inexpensive NFT team. GrindingYou can earn 100 SLP per day by playing adventure mode. The currency that they have earned is never bred again; it’s always sold quickly on cryptocurrency exchanges.

This arrangement is attractive for investors as well as “scholars.” SLP can be very expensive. If the player generates $70 per day, the investor will receive a $147 weekly income on a team NFT characters. The “scholar”, however, earns $343 per week in the country the “scholar” lives. Minimum wage in the United States is approximately $7/day. In the Philippines, players were able get into the game during the summer 2021 boom. Purchase housesWith the profits from their gaming.

Game economies work differently to real ones, where currency payments are made from finite and circulating money. Instead, in-game currencies are created whenever someone earns a reward—in the case of Axie InfinityClearing adventure levels or winning arena matches are all examples of game currency. Game currency can be deleted when it’s spent on “Sink,”—some activity which induces players to pay the currency back to the game. In Axie’sIn this case, SLP’s sink is creating new monsters. 

SLP is generated at a higher rate than it is spent on breeding. It is only 5 percent of Axies have been bred by players.Only 5 percent of Axies have been bred again within the same month. The majority of players are creating SLP via their gaming and selling it to the market, while smaller percentages of the population consume SLP from breeding Axies. Each day about 250 million SLP are manufactured, and only 50 million of them each year.These are used to breed. The result is massive inflation because there’s an annual surplus of 6 million SLP. It was a long time. Investors were buying up currency for speculative purposesIt was seen as a way to save money on NFT gaming. Workers in developing nations discovered how much they could make from this game and began to farm for SLP. As a result, their investments were devalued due to the large amount of currency flooding into the market. 

The game’s popularity seemed to be growing steadily last year, but it was largely due to new players from developing countries joining the game in order to buy SLP on crypto markets. This was driving down the value of the currency. Because these players didn’t want to collect large amounts of Axies they also weren’t incentivized to breed them. Sky Mavis tried to regulate the game’s economy by increasing SLP costs and decreasing the ASX fees, but this has not been sufficient to create equilibrium between supply/demand.

The explosive game’s user growth in 2021 resulted almost exclusively from laborers in developing countries using NFT assets borrowed to buy currency for investors. It was like a house made of cards. As the daily task completions have increased in their value, so did SLP. Struck below the Philippines’ minimum wageMany of these players are no longer logging in.

Play to Win: The Problem

Sky Mavis touts a range of features it believes will help drive growth. They have a plan. Major overhaul of the Battle SystemA game mode that is built around in-game land resources and an upgrade system for Axie beasts. These new features could provide in-game use for SLP currency which will increase its demand. Jeff Zirlin (founder of Sky Mavis) said on DiscordSky Mavis announces that an “experimental source” of surplus resources is coming earlier than the major update. An event where players can “release” their Axies—permanently deleting their NFT characters—in exchange for cosmetic items that are also tied to NFTs, which players will be able to place on their in-game land in the not-yet-released land gameplay mode. The floor price of the most undesirable monsters was temporarily boosted by this. Developer statementsThe volatility in Axie’s markets was a result of Axie’s fast growth and unstoppable success.

Sky Mavis will also be relaunching the Sky Mavis experience to allow new players. use non-blockchain “starter” Axie monstersThe game is free to play and players don’t have to purchase NFT characters. This will allow them more players. Sky Mavis, in other words is addressing the unsustainable nature of its existing model by changing. Axie InfinityYou will be playing a completely different game. 

It was a great move by the developer to tackle structural issues and make large changes to their game. Analysts in the crypto industry receive plauditsSky Mavis and. Has a huge war chest of cashFrom its investors and stakers. Sky Mavis earned millions each day when transaction volumes were high. It collects 4.25 percent from each NFT transactionSo it can hire lots of economists, game designers and other specialists to work with them to resolve the game’s problems and develop new and exciting features. 

Players are now looking into other NFT games to find better returns on their investment, despite SLP’s low price and months-long delay. A horse racing game has been popularized by some players. PegaXYIt has an economy that is very similar to Axie Infinity’sWith an unlimited in-game currency that can be used to create new NFT characters, The main novelty of the system is its formalization of “scholarship” agreements between investors and players from developing worlds and support them with “Safe” and “trustless” systemsThis makes it easy for players to rent their NFT characters. This system does not require workers to be trustworthy and reliable in order for investors to reap the benefits. This game offers investors more attractive terms for “scholarship” agreements.. The newer NFT gaming platforms aren’t trying to adjust the game economy’s incentives to discourage these behaviors. They accept this as a way for play-to-earn to work and seek to maximize the returns on investors while sacrificing laborers. 

The sector will support this type of play as it evolves. Instead, rich investors may speculate on the in-game currency and assets, while outsourcing the actual game play to workers in developing countries who earn less than $1 an hour. This is until the massive inflation due to oversupply renders currency useless, when everyone migrates to other games to continue the cycle, and then people who overinvest in NFT assets in old games lose a lot.

No NFT game developer has yet presented anything that seems likely to solve the fundamental problem of the play-to-earn model: Any time the currency in a video game rises in price so that it has substantial real-money value—whether because of hype surrounding a new game, or investor interest in a title, or because of new features in an existing game like the ones Sky Mavis hopes will reverse the fortunes of Axie Infinity—the demand for the resource creates an incentive for laborers in developing countriesTo farm currency, players will need to join the game at large to get it. Players’ grinding time in games will create a market that can be traded for currency. BalanceWhen the currency’s value is determined by the cost of labor for the player whose work is most expensive, it is called pennies per hour for players in developing countries. 

Developers can’t manage the currency supply by punishing the gaming habits of gamers in developing countries. The game would lose its majority user base if they removed them. This would discourage players not to join the game. It would also make it impossible or impossible for those who are “scholars” to get their money back, or for others to grow their collections by playing the game.

Play-to-earn model require continuous user growth. A game such as Axie Infinity is zero sum—no money is produced inside the game, so the only money anyone can take out of the game is money somebody else has put into it. Everyone’s goal is to make money. They’re all playing to win. However, new players are the ones who invest more in the game than what they hope to gain. If there’s not enough players buying what they sell, then the game economy will collapse.

A play-to earn model could be created that rewards players who are less invested but does not create economic incentives to encourage them to play in ways which inevitably decrease the value the reward currency. However, the largest gaming publishers have been unable to resist. Previously tried but failedTo find sustainable solutions to bring real money into videogame player-to–player markets, blockchain technology is not the answer. NFT game developers, as well as their investors, may underestimate the challenges inherent to this business model. Sky Mavis and other developers who aren’t able to figure out how to keep what happened to SLP happening to rewards currencies will not be able to build “play-to earn.” It’s possible that the entire concept of “play-to-earn,” is based on the idea that video games can store real-money values.