If this is your first time hearing or is unclear about the Axie Infinity model, read the article “Everything about Axie Infinity” before continuing.
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* Disclaimer:
➤ This article does not intend to criticize or recommend that people should not play Axie Infinity. In contrast, ThinkZone recognizes the success and breakthrough that Axie Infinity creates with its Play-to-earn model, and the great impact that Axie brings to players globally. However, like all forms of investment, ThinkZone believes that each of us should clearly understand the potential and risks associated with it, to have the most appropriate view and expectations. This is also the main content of this article.
➤ The arguments in the article are compiled from many different discussion sources, along with ThinkZone's opinion, and also shared directly from Co-founder & CEO of Sky Mavis. If readers have comments, please comment on the articles or contact ThinkZone so we can have the most comprehensive view on this topic.
1. HOW HAS AXIE INFINITY CHANGED THE WORLD?
In the previous article, it was negligent that ThinkZone did not carefully analyze the positive impacts and potential that Axie Infinity brings. As mentioned above, Axie Infinity is a groundbreaking game, with the unprecedented impact it brings to millions of players around the world.
Play-to-earn model
If only looked at from a gameplay perspective, perhaps Axie Infinity will not be too outstanding compared to other card games (card game) with adorable pets named Axie. Axie's breakthrough factor lies in its model Play-to-earn, allowing players to make money from the game, not just a few but a lot of players, not a few but even enough money to cover their lives.
Simply put, to make money from Axie Infinity, new players will have to spend an initial amount of money to buy at least 3 Axies above. marketplace of the game. At current prices, this average amount is about $750 - $800 for a squad with mid-range strength. (price continuously changes according to market supply and demand). With 3 initial Axies, you can play games and do missions to earn AXS (a token with many functions in the game) and SLP (token used to breed new Axie). From 3 Axie, AXS and SLP, you will have 2 ways to make money:
➤ Breed Axies, create new Axies and resell them on the marketplace at a higher price than the purchase price. You can also sell other in-game items (houses, land,...) on this marketplace.
➤ Exchange AXS and SLP tokens into USD through Binance or Uniswap exchanges.
Marketplace by Axie Infinity.
Selling rare skins or items in the game to make money is not strange to the gaming community. Readers who have played Vo Lam Truyen Ky have probably heard the story "selling Xich Tho horse skins is enough money to buy SH cars", or with League of Legends, earning tens to hundreds of millions of dong through selling rare skins like PAX Jax, Ryze Thoi Nien, Black Alista,...
However, Axie Infinity is a pioneering game that builds one marketplace for players to trade in-game items, turning it into one of the official activities of the game, not just out-of-game transactions like before.
With blockchain technology as the foundation, Axie has created a decentralized system that allows the exchange of in-game items to take place entirely based on market supply and demand. NFT technology allows each item to be unique, with elements remaining decentralization Address the risk of game publishers manipulating item values by releasing/withdrawing in-game items.
More detailed model of the economic structure in the game.
Read the article "Everything about Axie Infinity" to understand better.
Positively impact the lives of millions of people
Perhaps at first, the Sky Mavis team could not foresee the great impact that Axie could create. According to Co-founder & CEO Nguyen Thanh Trung, Axie was inspired by Pokémon, and Axie Infinity was built with the expectation of becoming a popular game, an identity known to the whole world as Pokémon, meaning the Play-to-earn element did not have too many expectations in the beginning.
Axie was also first launched in developed countries such as the UK and US, and then gradually through word-of-mouth, this game spread to the markets where players needed it the most: developing countries, where players' knowledge of new terms like blockchain or NFT is not even high compared to other developed countries.
And despite the investment of nearly $1,000 and 7 "cumbersome" steps to start playing the game, the number of Axie Infinity players in these countries still grows miraculously, because there, Axie has become a living channel for many people. Currently in more 2.7 million Monthly Active Users of Axie, 40.5% of players come from the Philippines, followed by Venezuela (6.31%), Thailand (4.73%), Brazil (3.3%),...
In one reportage About Axie Infinity in the Philippines, many people in Cabanatuan City, from young people to 75-year-old couples, from drivers to grocery store owners, are playing Axie Infinity to earn extra money. $5 - $6 income per day. Many families facing unemployment due to Covid can play up to 20 hours/day, earning up to $1,000/month, a decent income in countries where the average worker's income is only about $135/month.
Scholarship model
Referring to the social impact of Axie Infinity, it is impossible not to mention the scholarship model, created to help players who do not have enough money to buy the initial amount of Axie to still be able to play the game.
Specifically, Axie Infinity allows players to create multiple accounts, and rent those accounts to other players. Account renters, say Mr. A, are people who have capital and experience playing games, but don't have much time to play games. Then they can spend money to buy Axie, and rent out their accounts so that other people who don't have money to buy the original Axie, say B, can also play the game.
In essence, this can be considered a form of "renting", however with Axie Infinity, this model allows many people with not so good financial conditions to play and make money from the game. In the example above, Mr. A, with capital and experience, buys Axie and guides friend B to play the game, the revenue is then divided between the two people. On a large scale, even in Vietnam, this model has helped many young people and unemployed people earn extra income to cover their lives.
With 2.7 million players worldwide, mainly from developing countries, the positive impact that Axie Infinity brings is truly great, groundbreaking, and changes the lives of many working people.
Even more proud when this was created by a Vietnamese-founded startup, and that startup also became a unicorn. (only after 4 years of establishment). Congratulations once again to the Sky Mavis team for this inspiring achievement!
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2. SO, WHERE DOES THE RISK LIE IN THE PLAY-TO-EARN MODEL?
Of course, it is not without reason that communities not only in Vietnam but around the world are still arguing about the risks of Axie Infinity's Play-to-earn model, with common keywords such as "Zero-sum game", "Ponzi Tower", or even "multi-level model".
2.1. Why is it risky?
Let's take a look at how players make money from the game:
Spend money to buy Axie → Play games to earn items and create Axie → Resell Axie
So, who do you buy your Axie from? From other players like you. Who do you sell Axie to? For other players like you.
In an economic structure, sellers create products and sell them to buyers, in exchange for money; The buyer pays in exchange for the product's use value. However, in the Play-to-earn model, everyone wants to buy and then become a seller.
The later player pays the previous player to buy Axie, to later sell it to another player at a higher price. So how long will this process last? Who will be the last? The flow of money coming from players and flowing back and forth between players will create one closed model, the consequence is one Zero-sum game: If someone makes a profit, someone will definitely lose money.
* Above is a simplified illustration of the game mechanics for readers to easily visualize. In reality, this mechanism is more complicated, players often combine to make profits from both selling Axie and trading AXS and SLP coins on exchanges when prices fluctuate, but the general mechanism is still a closed model, money flows back and forth between players (both new players and old players add money to the game).
2.2. How long can this model last?
In order for players to always earn a monthly profit from selling Axie and trading AXS, SLP, we need: The amount of new money poured into the game every month is large enough (through AXS, SLP and Axie marketplace trading floors) to meet the needs of current players to sell Axie and trade tokens. This money can come from new players or old players who continue to pour money into the game, but mainly comes from new players so the game can be maintained long term.
This requires the game to always keep the heat, always have more players, and also always have more money pouring in from outside to pay old players. Players spend money to buy Axies because they believe that Axies are valuable, so that they can later breed and create new, more valuable Axies. This model will endure, as long as Axies and tokens (AXS, SLP) is also valuable to players, because when these items lose value in the eyes of players, sellers who have spent a lot of money to play the game will not be able to find buyers, meaning they will lose money, even a lot of money.. Then the Play-to-earn model begins to collapse.
This raises a big question: So what factors make the value of an NFT item like Axie? Why is Axie valuable? And how long will it retain its value?
ThinkZone also does not have an answer to this question. Below are some arguments for readers to form their own opinions.
➤ The value of an object is determined by the beliefs of the majority. We consider diamonds, Monalisa paintings, banknotes, etc. valuable because everyone around us considers them valuable. So the problem of Axie Infinity is to maintain a loyal community of players, because the people who pay to buy Axie are the players, those players make the Axie valuable, and once the game runs out of players, the Axie also loses value. → This makes many people believe that a game with deep gameplay and loyal player base like Axie Infinity will maintain its Play-to-earn model for at least the next few years.
➤ Many people compare Axie Infinity's model of buying low and selling high to make a profit with the stock market model, with the argument that the stock market still exists sustainably, so Axie Infinity will too. However, companies on the stock market create products/services that have surplus value for society, and that value is durable and recognized by the market, thereby creating a Positive-sum Game that makes the stock market sustainable. As for NFT items in games, their value is something new and ambiguous, is it surplus value for society, and will it still retain that value in the long run? This is still an unanswered question.
Sharing from Axie Infinity players, Axie's price is currently decreasing compared to before, and the main challenge of the game today is that the SLP coin is gradually becoming inflationary, as the number of SLPs on the market is increasing. Normally, players can earn SLP through being rewarded for playing games daily or through trading on the floor. Having too many SLPs can lead to a number of consequences:
➤ Players can breed Axies massively → Risk of Axie price inflation.
➤ SLP prices on exchanges decreased → Players no longer earn money from trading SLP.
This is a notable sign for the upcoming developments of the Axie Infinity team, because if in the future Axie and the game's tokens lose value, the end of the Zero-sum Game will occur. So how to avoid the collapse of the Play-to-earn model? Let's come up with some opinions below.
2.3. Is there a way to keep this model from collapsing?
The Axie Infinity team has also proposed many measures regarding both game mechanics and future directions to solve, or delay, the ending of Zero-sum Game.
Limit the number of Axie breeds
Currently each Axie is limited to a maximum of 7 breedings, for a fee (including AXS and SLP) getting higher and higher after each mixing. This mechanism helps limit the growth rate of Axie on the marketplace.
Specifically, when your current Axie cannot be bred to create a new Axie, and these Axies often have low prices on the marketplace, so if they sell for not much, you will need to buy more Axies. (let's say from player X) to continue breeding and selling Axie. Thus, player X can make a profit from selling Axie to you (is an available player), instead of having to wait for new players to join the game.
Some players also proposed the idea of "burned Axie", which means that Axies will be "destroyed" after a certain period of time, to further reduce the amount of Axie on the market.
However, this is only a temporary stopgap by slowing Axie growth and reducing the need for new players. The moment you spend money to buy more Axie is also the time you put more money into the game, and if you cannot sell Axie later to collect capital and make a profit, you will still lose money, the Pay-to-earn model will still collapse.
Reduced the amount of bonus SLP players receive
After the game update in August this year, the minimum amount of SLP that players receive daily was reduced by half. This policy helps reduce the number of SLPs in the market, curbing the long-term risks mentioned above, but also makes many players unhappy at the risk of their short-term income being affected.
Just like limiting the number of Axie breeding times, this is also a short to medium-term solution, but does not completely solve the Zero-sum game problem.
Earn money from external sources to pay players
Zero-sum game risk comes from the closed model when cash flow only comes and circulates between players. One way to solve this problem is to turn it into an open model, meaning Axie Infinity can earn additional money from outside the game, then through some gameplay mechanics to pay players.
This orientation has also been mentioned in Axie Infinity's long-term development plan, including advertising & sponsorship, selling game-related items/souvenirs, or organizing offline events/tournaments.
Through these events, Axie can collect money from outside the game (from fans, sponsoring/advertising brands...). However, this is only a short to medium-term solution, because if you look at current data, the amount of money sponsoring or selling this item will have to bring in an amount of about $1,000/player/month (and this number will continue to increase) to ensure all players are profitable → An unbelievable number 2.7 million MAUs by Axie Infinity.
Invest in gameplay, keep loyal players
As mentioned above, the value of Axie and the tokens in the game are determined by the needs of game players. As long as Axie Infinity has players, these Axies and tokens will have value.
In-depth gameplay is also a bright spot of Axie Infinity compared to many other pure Play-to-earn games, because if it is purely Play-to-earn, players will soon leave as soon as the market has a downtrend. If the gameplay is good enough and has a loyal player base, the game will stand firm against market fluctuations, and help maintain the value of in-game items. In this direction, Axie Infinity's problem lies in community building, game balance, and gameplay development.
However, it should be noted once again that the value of these items is still very vague, and people are always concerned about how long this value can be kept, what will happen in 3 years, 5 years, or 10 years?
Changing perspectives and expectations: We don't play games just for money?
It seems that the novelty of the Play-to-earn model has made us focus too much on this aspect and forget that: Axie Infinity is essentially a game. And like many other games, we play games for many other factors: entertainment, brain training, or the joy of winning and reaching the top of the rankings.
Looking back, Axie Infinity is a tactical card game, with in-depth gameplay with lovely Axies and the mysterious land of Lunacia. Aren't those interesting factors that attract us to the games we've played so far like Boom Online, Vo Lam Truyen Ky, Dota, or League of Legends?
And up until now, we have still accepted to spend money on those games in exchange for fun and self-expression without any expectation of profit.
So, why does everyone seem to have such a harsh view of Axie's Play-to-earn nature?
In an episode of The Growth Podcast (produced by UpYouth), Co-founder & CEO Nguyen Thanh Trung directly shared about this:
"If you simply look at the financial value of Axie Infinity, it will clearly be a Zero-sum game, some people will lose it. That will definitely not be sustainable. For Axie to be sustainable, there will need to be players participating in the game without expectation of financial profit, but mainly looking for fun and enjoyment when playing the game. Then Axie Infinity, after all, will still be a game for entertainment, and the Play-to-earn element is just one part. add-on value only"
And in fact, Axie also has a large number of loyal players who play the game for the gameplay, not for the financial aspect. These players can be found in Axie tournaments around the world, or the Axie player association from day one. The Axie team also surveyed player motivation, and 37% which says they play for the community, instead of the economic aspect.
However, in one analysis article based on the current price of Axie, so that the money invested by non-earning players can be enough to bring profits to earning players in a sustainable way, at a rate earning players/ non-earning players must be kept at a stable level 1:700, is still too far from the current rate.
This means that the Axie Infinity team may have to do more to change the player's orientation, positioning Axie Infinity as “an entertaining game with Play-to-earn elements”, instead of being a Play-to-earn game as many people currently think.
SUMMARY
Above is a summary of the analysis of the breakthrough and great impact that Axie Infinity has brought to players around the world, along with the accompanying risks in the long run, specifically the Zero-sum game problem.
It should also be noted that the blockchain gaming industry is still in its infancy, with more and more startups/large corporations joining together to solve this problem. We still have the right to hope for a near future when the Zero-sum game problem will be solved, maybe by Axie, maybe by another startup, with a more perfect Play-to-earn model, helping millions of people around the world change their lives and earn income from games in a sustainable way.
At that time, we will likely see the next Apple, Facebook or Google. And it would be very proud if it was a company from Vietnam.
* Sincere thanks for comments from Pham Phung Hao (about the scholarship model, gameplay), Nguyen Dat (about Axie's updated value), and many other community members who helped ThinkZone improve this article.
Reference:
https://medium.com/coinmonks/axie-infinity-gaming-nft-revolution-or-ponzi-scheme-3d81b1647429
https://www.notboring.co/p/infinity-revenue-infinity-possibilities
https://www.youtube.com/watch?v=Yo-BrASMHU4