What is Axie Infinity (AXS)? Your ultimate guide

• Updated

Axie Infinity suffered a major hack in March 2022 and is only now recovering

Laptop showing an Axie Infinity battle                                 
Players can trade, battle and level up monsters called Axies – Photo: Alamy
                                

Watching the colourful digital pets attacking and flailing at each other, Axie Infinity may not look much like a lucrative investment. But there is much more to the Axie universe than meets the eye.

Axie Infinity is a play-to-earn game, which rewards players with crypto tokens when their vibrant cartoon monsters win a battle. Players can also trade their monsters on the non-fungible token (NFT) marketplace using the game’s cryptocurrency, Axie Infinity Shards (AXS).

The AXS price shot up in 2021, from $1 to above $100. This allowed users to make a stable income just from playing the game. But this high has not lasted, especially after the network saw a major hack. This has left many to question how does Axie Infinity work.

Read on to have everything you need to know about Axie Infinity explained…

What is Axie Infinity?

Axie Infinity started off as a fun and educational way to introduce the world to blockchain technology, but it has since attracted worldwide investors, and its AXS token is currently sitting at number 42 on CoinMarketCap.

The Pokémon-inspired NFT game was created by Sky Mavis, a game studio based in Vietnam. Many of the original Sky Mavis team met playing CryptoKitties, another NFT game. Trung Nguyen founded the game studio, which has a valuation just below $3bn since it raised $152m from crypto investors in Series B funding last October.

It’s not the only time Sky Mavis has attracted substantial investment. Its first round of funding reached $7.5m with a contribution from American entrepreneur Mark Cuban.

Axie Infinity has created a videogame phenomenon by combining the Ethereum blockchain with a play-to-earn model. This means that players are given crypto rewards for their time and investments.

There are two main ways players can earn through Axie Infinity. By battling with other players, users can gain rewards in the form of the game’s tokens. The gameplay uses a turn-based strategy where the players’ Axies attack each other using different cards. There are two different crypto tokens up for grabs: the Small Love Potion (SLP) and AXS. SLP is more common and has lower worth, while AXS has a higher price and is a rarer asset.

Every Axie is unique, from its body parts to attack moves, giving them individual worth that is utilised through the blockchain. Each Axie and every piece of equipment is an NFT, which can be traded on the marketplace. This allows frequent users to reap profits as engaging in battles levels up the Axies, which increases their worth on the marketplace. Players can also use tokens to breed new Axies, which can then be sold on.

The trading elements and gameplay of Axie Infinity are proving an attractive combination. Earlier this year, Axie Infinity recorded more than 600,000 users, making it the second most-played NFT game, according to Statista. PlayerCounter’s daily live player count shows more than 110,000 people active on 30 June. 

According to PlayerCounter, Axie Infinity’s main market is the Philippines, with 40% of players based in the southeast Asian country. This key market is identified by Google Trends as well, which discovered that the most searches for ‘what is Axie Infinity’ come from the Philippines.

This has gained media attention because the Philippines economy was hit hard by the pandemic, and Axie Infinity provided a solution for the unemployed. A documentary followed Filipinos who were playing Axie Infinity and earning a constant income from it. The documentary followed a mother, a recent college graduate, a cab driver and an elderly married couple – all gamers earning crypto rewards.

What is AXS crypto?

The digital pet game has its own cryptocurrency called Axie Infinity Shards, which is a token created and hosted on the Ethereum blockchain. There is a total token supply of 270 million AXS and there are currently 82.4 million in circulating supply.

Sky Mavis has already detailed how it will distribute the Axie Infinity crypto. 49% will be given to users through playing the game and staking the currency. 21% is dedicated just for the Sky Mavis core team, while 15% will be sold through public and private sales. The rest is given to advisers and an Ecosystem fund.

Once you hold the AXS crypto, there are number of ways the token can be used. The most simple method is for in-game purchases. The marketplace accepts AXS as a currency to buy Axies, equipment and a tokenised plot of land in the Axie universe. There are even exclusive sales, conducted by the Sky Mavis team, that are auctioned using the Axie Infinity crypto.

However, the game is not designed to be centralised. The primary use of the AXS token is for governance. Stakers of the Axie Infinity crypto can vote on the future direction of the game. There is also a community treasury for AXS stakers, which receives funding from transactions and fees. As well as receiving rewards from the treasury, AXS stakers govern it.

Is Axie Infinity in trouble?

Axie Infinity’s main market is the Philippines, but data from Naavik shows this userbase could stop playing. A lot of the players are ‘scholars’, meaning they don’t actually own the Axies but are given Axie accounts by investors to play, with the scholars gaining a proportion of the rewards. The research looked at different experience levels of these players and found their daily income has fallen below the Philippines’ daily average wage.

The majority of scholars are rewarded through SLP, Axie Infinity’s other token. The results showed that there was a high earning period from May to August, but daily rewards started falling in September and have not picked up – although there was a spike in October when Sky Mavis decided to remove SLP rewards for players below a certain level of experience.

The fight to retain this userbase is far from over. In April 2022, Axie Infinity launched a completely new version of the game under the title Origins. The main improvements Sky Mavis focused on was to the user interface and gameplay mechanics. 

However, AXS has still been struggling since November, which was fuelled by Axie Infinity’s own Ronin Network being victim to one of the largest DeFi hacks. A total of $622m worth of USDC and ETH was stolen by hackers in March 2022. Sky Mavis said this was down to a phishing attack that an employee was vulnerable to. 

It took the team over three months to get the network back up and running. As of 28 June, users can now deposit and withdraw funds. Sky Mavis has also stated it is reimbursing the liabilities from the hack in full. 

AXS price history

The AXS crypto price made huge strides in 2021, increasing by over 100%. It started off the year below $1 and saw movement in the spring as it hit $10.85 on 28 April. In August, the AXS price began a bullish trend with a peak close of $82.31 on 5 September.

After a brief pause, the upward trajectory continued in October and eventually reached its all-time high of $165.37 on 6 November. 

However, these gains did not last and AXS plummetted over the following months. By the end of the year, it had fallen below the $100 mark. This price drop was exacerbated by the hack in March with it trading close to $60 that month. At the time of writing, on 30 June, it has stooped to $13.45.

Axie Infinity review

There is a risk with decentralised projects that they will lose momentum. Sky Mavis recognised this in the Axie Infinity whitepaper, which said: “In the past, projects have been abandoned and become stagnant, using the term ‘decentralisation’ as a ruse.”

However, Axie Infinity’s bustling community means this is an unlikely result. BeInCrypto said: “Axie Infinity has a thriving community of gamers and investors who contribute to its growth and keep it relevant.”

Sky Mavis has encouraged growth with the cross-platform compatibility of Axie Infinity, as users are able to play on their phones as well as computers. This attracts a broader userbase and gives the game possibilities for future expansion.

However, there is one high barrier to entry: money. In order to start playing Axie Infinity, players must purchase three Axies. Currently, the lowest-priced Axies on the marketplace cost around $125, meaning a player would have to invest $400 just to start playing.

This is why some users are turning to scholarships – but as the recent Naavik research showed, scholarship rewards are becoming increasingly less profitable.

But Axie Infinity has a more existential problem at hand. Its $622m hack has left doubt in the mind of investors and it now has more advanced competition like Illuvium entering the market. Both the token and the platform are still waiting to make a comeback. 

FAQs

There is a total supply limit of 270 million AXS and currently there are 82.4 million in circulation, according to CoinMarketCap.

The play-to-earn model may be initially surprising, as users are given rewards with a real-world value, which is unprecedented in the gaming industry. Axie Infinity has become one of the leading play-to-earn games, with 600,000 monthly users. Players in the Philippines have even managed to make their living from the game.

The AXS token can be bought on exchanges like Binance or Uniswap, but it can also be given in the form for rewards to users who play the game. Although the AXS price has seen a significant increase in 2021, it has fallen victim to 2022’s bearish market and was also vulnerable to a major hack. Remember, never invest more than you can afford to lose.

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