Axie Infinity is having a hard time | Inktomi

Launched in 2018 by Vietnamese developer Sky Mavis, Axie Infinity is a highly successful game. This is a real feat in the world of cryptocurrencies. Moreover, it is considered as one of the ideal candidates for the mainstream blockchain application. Thanks to him, some players got the opportunity to work full time. At its peak, the entry price was over $1,000. At the same time, Mavis herself was valued at $3 billion after a $152 million seed round led by Andreessen Horowitz. Most impressively, Axie Infinity was meant to lift the veil on a new era of play-to-earn games powered by crypto technologies.

Axi’s future becomes uncertain a year later

A few weeks ago, at the end of March to be exact, the Sky Mavis Ronin blockchain was catastrophically hacked. This resulted in him losing over $600 million to hackers. As such, players’ funds are in limbo as Ronin’s transactions have been frozen by Sky Mavis. Therefore, the future of the game looks quite complicated. However, before this Sky Mavis had already faced more serious problems, especially when it came to its durability.

Combining a free crypto market with the complex economics of a multiplayer game, Axie Infinity’s game world has been struggling for months. He tried to develop several strategies that would allow him to avoid a financial crisis. To reinvent himself, he developed a new free-to-play game, but this is where the situation provides a glimpse of what can happen when the hype reaches its limit.

Close-up on the principle of Axie Infinity

The creators also call Axie Infinity “a nation” and “a modern game that includes unfinished, risky and highly experimental technologies.” It’s a bit like a hyper-funded Pokémon. To play, you need to buy or rent three non-fungible tokens (or NFTs), which are related to cartoon axolotls called “axes”. It should be noted that each has a set of related stats and combat cards. Each time you win battles, you will receive a token called “Sweet Love Potion” or SLP. Additionally, you can “cross” the axes with SLP and a third token called AXS. This allows the production of new NFTs.

In order to generate interest among its users and thus generate sales, Axie offers the possibility of converting these tokens into real money. You can sell SLP and axes for cryptocurrency. In addition, you can earn SLP by participating in the “wallet” system or by playing the game directly. The first option is to lend your axes to other players and then get a share of the winnings. This leads to a kind of very popular in-game capital market. Here, axel holders have the opportunity to earn on investments without even playing the game.

Play for free and earn money

Like most blockchain applications, Axie Infinity also dreams of getting paid to do what you do for free online. Who wouldn’t want to play games, have fun and make money? It is better to leave aside the philosophical questions that arise about the nature of pleasure. However, there is one major problem: so far, Axie Infinity’s in-game economy has relied on constant growth to keep it going, with inflation built into the mechanic. While the game was able to get past the recent hacking issue, Sky Mavis says it hasn’t been able to get out of that phase.

The pillars of the Axie Ifinity economy are based on three main resources: axes that live as in-game items, the in-game SLP cryptocurrency, and the “governance token” AXS. Two of these resources are produced by the game in increasing quantities. SLP is offered in player-to-player battles. It was also available until recently when the player completed daily quests and grinded in solo mode. You can produce new creatures by breeding axes multiple times.

In general, they are largely immortal. Thus, the NFT pool is increased by the production mechanism. Economic sinks are often built into games. This is, for example, the cost of maintaining gaming equipment or cosmetic items. This leads to the depletion of resources without the creation of new ones. Axie Infinity players, on the other hand, had two main options: either they sold their SLP, or they used it to breed axies whose main function is to produce more SLP. In any case, you produce more resources and reduce the value of everything that was obtained in the game.

Gameplay issue caused by immortal axolotls.

According to Machinations co-founder and CEO Mihai Geza, “From a macroeconomic[économique], you’ve created a positive feedback loop.” Those involved in the games, especially scientists, will use axes to create SLPs, SLPs will create more axes, and axes will produce even more players producing SLPs, which definitely causes inflation. In order for new players to join Axie Infinity, Skye Mavis said he needed a growing axie pool. That’s because the studio didn’t have to just create more characters from scratch, unlike a traditional game.

He eventually considered adding more pits and expected people to acquire axles because of the “intrinsic value they can bring to players in the form of competitive, social fun and achievement and based on progress.” In the short term, their main use was to produce currencies that could create more NFTs to sell or rent. However, to make it work, you needed people who could buy. Sky Mavis acknowledged that “Axie’s economy, by design, will depend on new entrants.”

Therefore, it can be said that the system is only sustainable if there is a large demand for more SLPs and axles. Moreover, maintaining this would require a functionally infinite number of new registrations. It is impossible to know when the crash will occur, but it was still seen that by the end of 2021, the token prices and sales volumes had plummeted in the game. Indeed, the SLP token fell from 39 cents to one penny. .

Victim of your own success

Irritation over Axie Infinity’s economic difficulties was fueled by the popularity of the stock market model. So says John Jordan, blockchain gaming consultant and early adopter of Axie Infinity. One of the main innovations of the game was the Axie exchange.

However, when it became one of the most interesting parts of the game, it quickly created a huge class of regular players. They were focused on producing and recycling as many SLPs as possible. Jordan states that “he has become a victim of his own success.” He added that “there was an economy that was probably unbalanced, but it was not terribly unbalanced in one direction – and then it became terribly unbalanced. »

When Axie Infinity started providing new economic indicators, the whole system was hacked. The hacker stole more than half a billion dollars in cryptocurrency from the Ronin network. The latter exploited a series of vulnerabilities at the end of March. No in-game tokens were stolen during the invasion.

However, the invasion disrupted the economy of the real money game and left Axie Infinity players with no easy way to spend their winnings. Damage is estimated between $600 million and $625 million. This figure will depend on the volatility of Ethereum. For Sky Mavis, returning players’ money is the “top priority” at the moment. However, hacking will not sink either the company or the game.

In fact, Sky Mavis has already raised $150 million with the help of Binance and its partners in a funding round dedicated to reimbursing all victims of this largest hack ever recorded.

The Lazarus group came to the attention of the FBI

According to FBI investigations, the hacker behind this multi-million dollar theft was none other than the Lazarus Group. “Through our investigation, we were able to confirm that Lazarus Group and APT38, online entities linked to North Korea, were responsible for the theft of $620 million in Ethereum that was reported on March 29,” the FBI said in a statement.

In addition, the FBI, together with the US Cyber ​​Security Agency and the US Department of the Treasury, issued a warning about cyber threats related to the theft of cryptocurrencies. In particular, they denounce the tactics used by North Korean-sponsored cyber actors. You will find this warning here.

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