Axie Infinity broke out. "Playing while earning" is the next liquid mining?


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With the development of blockchain games, there will gradually be a trend of lower profitability and improved playability, and finally balance.

Original title: “Play-to-Earn is the next Liquidity Mining, is Axie Infinity overrated?” 》 Written by: Bai Fengxiao and Li Yuanqi, partners and analysts of Foresight Ventures, respectively

We mentioned that Axie’s NFT sales skyrocketed in the ” Axie Infinity Drives the NFT Sector Rise Against the Trend | Foresight Ventures Weekly Brief ” published on July 5th. Axie infinity ignited the metaverse track within the following week, which was in the crypto market The continued downturn in July produced some “DeFi Summer” flavors.

We elaborated on the “Play to Earn” model, the rationality of its existence, and the brand new industries it brings. Its model has been established for a long time. P2E games are not even subverting the traditional game industry, but rather subverting the professions mainly engaged in by low-income groups such as UBER drivers.

Finally, through the analysis of the actual data of Axie Infinity, we believe that even if the current currency price has some overheating, its business fundamentals are still very strong, and in the long run, it will disturb the encryption ecosystem including DeFi mining.

What is “Play-to-Earn”?

The business model of Plan to earn has been in traditional games for a long time, and there are a group of players in World of Warcraft, Onmyoji and other games that make money by selling equipment or equipment. In blockchain games, this model has been upgraded. Players can earn real money by playing games with cryptocurrency-based assets (NFTs). By actively participating in these virtual economies, players can earn rewards, such as in-game assets and tokens, which can then be traded or sold on the open market.

This is an important change in the game world, because traditionally, in-game asset transactions are only in the game ecosystem, and it is difficult for players to trade or sell their digital assets outside of the platform.

In developing countries, most people have very limited sources of income, and now they can earn more income through digital devices and the Internet. Filipino players of the blockchain game Axie Infinity can earn US$500 a month in the game, which is 2-3 times the local minimum wage.

From Free-to-play to Play-to-Earn

In the beginning, players needed to pay for game licenses. After entering the Internet era, the free game model has gradually developed. The so-called free game means that players can get basic game experience at zero cost, while getting advanced game experience or personalized items is required Pay additional fees. At present, most of the highest-paid games in the world are actually these so-called free games. In June 2021, Tencent’s “Honor of Kings” mobile game attracted nearly US$277 million (approximately RMB 1.79 billion) in the global App Store and Google Play, an increase of 21% year-on-year in June 2020. These free games have earned billions of dollars in revenue each year, which just shows that the business model of free games has matured, and developers have learned the art of monetizing free games.


We think P2E is an evolved version of free games. Blockchain technology gives players ownership of in-game assets and allows them to increase their value by actively playing games. It is a key component of the game’s P2E model. Most of the revenue in P2E games no longer belongs to large centralized game companies, but to excellent players. By participating in the in-game economy, players are creating value for other players and developers. In turn, they are rewarded with assets in the game. These digital assets can be any encrypted assets that are confirmed on the blockchain. This is why the P2E model is very compatible with blockchain games .

In fact, P2E games may not be free games. Taking Axie Infinity as an example, players need to purchase at least 3 Axies to start the game, which may cost hundreds of dollars at present. We think this is reasonable. First, the matching of input and output is a long-term and healthy economic model; second, game development requires costs. Because players can finally get value by selling encrypted assets, it is acceptable for players to pay some start-up costs. On the contrary, if the game is completely free of prostitution, we believe that such an economic model is unsustainable.

P2E inspires a whole new industry

The P2E model driven by blockchain technology is opening up digital native economic opportunities to new population segments. Playing games is no longer just a consumer behavior to kill time. By playing games day after day, players are more like working, giving time and labor, and earning income for the family. Axie Infinity is a good example. The most important thing is that, especially during the new crown pandemic, poor groups who need ancillary income often benefit the most. Since part of the mission of cryptocurrency has been financial inclusion and the open source of the digital economy from the beginning, it is crucial to bring the people who need it most-P2E 2.0 finally achieved this. Axie’s economic model clarifies the concept of cryptocurrency from provable scarcity to how monetary policy can be applied in the context of playing games and earning.

The P2E business model has also inspired ecological organizations such as game developers, players, and guilds.

Some very powerful guilds have been born in P2E games, and these guilds will occupy a pivotal position in the future game industry. Take Yield Guild Games (YGG) in Southeast Asia as an example. They have four main goals:

  1. Invest in the NFT that generates the best return in Metaverse;
  2. Build a global game player economy;
  3. Generate income through operating and leasing NFT;
  4. Encourage the community to participate in the guild.

YGG has established a scholarship program (scholarships), which designs a structure of guild-community manager-scholars. The guild is responsible for cultivating and renting in-game NFTs, which lowers the barriers for players to enter the game. The community manager is responsible for recruiting, training and mentoring new players. This is the key to Yield Guild’s replication, expansion and success in Southeast Asia.

Through the community manager, Yield Guild does not need to directly manage any scholars, just find a suitable community manager to cooperate. The income of the scholars is divided, and the scholars can only get 70% of the game income, in addition, the guild gets 10% and the community manager gets 20%.

This is actually a very traditional business model. Capitalists provide the means of production to the proletarians, the proletarians earn labor income, and the capitalists obtain the value of surplus labor. As long as the economic ecology of the game is large enough, the guild will gain very large economic value.

Amy Wu said that P2E created Guild 2.0, which is an income-generating organization that purchases, cultivates, and leases assets and provides employment opportunities in addition to the community. They can solve the cold start challenges of new Nft games and become the dominant buyers of new assets (such as Axies). Most of Axie Infinity’s 500,000 DAUs are scholarship earners. For these players, their replacement is not games like Fortnite, but Axie replaces Uber or Grab positions.

Is Play-to-Earn a false proposition

In fact, when I first came into contact with the Axie Infinity model, I first thought of Qu Toutiao. As one of the three giants in China’s sinking market, Qu Toutiao actually adopted the “read to earn” subsidy model. Qutoutiao users can obtain cash rewards through registration, reading, sharing, and new updates. This model once brought rapid user growth to Qutoutiao, making Qutoutiao landed on the Nasdaq in just two years. But judging from Qutoutiao’s stock price and financial data, this model can almost be said to be a failure. Qutoutiao’s stock price has fallen from its highest point of $18 to less than $2 at present.

Qutoutiao’s main criticism is that its low-quality user base is difficult to attract high-quality advertisers. Almost all of its users are fleece parties. Such users have low requirements for news content, which leads to spam on the platform. Moreover, such users are not loyal to the platform, and it is difficult to achieve the conversion goal of advertising. Therefore, it is difficult for the news business to form a healthy income and expenditure balance.

At first glance, the P2E model is very similar to the Qutoutiao model, but we think the P2E model can be established. It is the advertisers who pay for the users of Qutoutiao, but because of the low conversion rate, the advertisers are not very motivated to pay. In P2E, the economic model is endogenous, and essentially what players share is the benefits of game ecological growth. With more and more game players, the demand for in-game crypto assets is increasing. Players sell assets to each other, forming the embryonic form of a metaverse economy. There are farmers, merchants, and consumers in this world. The key is that the interests of these players are close, unlike the relationship between users and advertisers in Qutoutiao that squeeze value from each other.

Why do we say that Play-to-Earn is the next Liquidity Mining?

The “DeFi summer” in 2020 ignited the DeFi industry, and the amount of DeFi locked positions increased by more than 100 times in one year. Currently, UNI, LINK, and AAVE have entered the top 30 of the cryptocurrency market value list. The development of DeFi is absolutely inseparable from the creation of Liquidity Mining. It can be said that Liquidity Mining is the greatest contributor to the DeFi industry.

In the early days of Liquidity Mining’s launch, we could hear a lot of doubts, because it was very similar to the previous ICO. At first, users provided their own ETH and stable coins to get rewards of platform coins. This was regarded by the doubters as a new Ponzi scheme and bubble. . But a year later, Liquidity Mining’s model has been proven by the market. The main reason for the success is that these DeFi agreements actually create value, and the income of Liquidity Provider is actually the share of the agreement’s growth income.

As mentioned earlier, the P2E model is also for players to share the benefits of game ecological growth. As long as the game ecology continues to grow, this economic flywheel can continue to rotate, even if the project has over-issued assets, price drops and other bubbles clear up during the process. , We believe that our own model is established.

In terms of market participation roles, the participants of Liquidity Mining have “institutions-users-digging, selling and promoting farmers”, and the participants of P2E have “guilds-players-wool party”. The circular logic of the entire economy is the same.

To be optimistic, the market for P2E is much larger than that of Liquidity Mining. In terms of income, on July 16, Axie Infinity had a single-day income of US$8.8 million, and the average daily income of King Glory in June was US$9.2 million.


In terms of the number of users, Axie Infinity’s DAU has exceeded 500,000, and the top ten 24-hour users of the DEX protocol on July 17th totaled less than 300,000. What is shocking is that Axie Infinity’s DAU has been in three months There were less than 30,000 people before. At the same time, most of the players of Axie Infinity didn’t understand blockchain technology before, and even now they don’t understand blockchain. Compared with DeFi, blockchain games have a very low threshold, especially after opening up the legal currency into gold channels and using low-cost side chains, the game experience is almost the same as traditional Internet games. This is also the reason why Axie Infinity’s players have grown so fast. It is also foreseeable that blockchain games will go out of the circle at a faster speed and gain a larger user group than DeFi, which is a huge market than DeFi.


NFT Play a Core Role

NFT plays a vital role in the economic ecology of a game, and NTF affects the game’s gameplay and revenue. They all use different types of rarity to ensure the limited supply of some rare NFTs, rather than the disorderly growth (excessive inflation) of NFTs as the game progresses. The growth rate algorithm of NFT was pioneered by Crypto Kitties and developed more maturely in Axie Infinity and Zed Run.

Game makes NFT generate revenue

Players can earn revenue from the battles in Axie Infinity and the racing in Zed Run, which are generated through interaction with NFT. These NFTs that can generate cash flow can be used for leases or loans, as YGG does. Compared with NFTs of art and collectibles, the game creates usage scenarios and utility for NFTs, and improves the fundamental value (use value) of NFTs.

Source: outlier ventures

The use of NFT is more important to make virtual items truly property. The ownership of items in centralized games is actually controlled by the platform, while in blockchain games, due to the transparency and immutability of smart contracts, players control the ownership of encrypted assets, and you use the assets you own to propagate the assets The same belongs to you.

… The democratization of property is not through the abolition of property, but through the popularization of property, so that every citizen can become the owner without exception. This is much easier than people think: in two words, learn To create wealth and learn to distribute wealth, you should combine material grandeur with moral grandeur. -Victor Hugo, Les Misérables, 1862

Let’s take Axie Infinity as an example to actually analyze the current performance of the P2E blockchain game that was the first big fire.

The cost of admission continues to rise

Axie Infinity marketplace is the most important channel for players to enter and purchase Axies. The game mechanics are designed to buy three Axies to form a team to participate in the game and start making money.

The current market price changes extremely fast. Around July 8th, the price of Axies was about $250, July 12 was about $350, and it basically rose to $450 on July 14, according to the rapid increase in the number of players and the impact of the increase in SLP. , Axies’ return cycle will rapidly decrease, which in turn will affect Axies’ prices. The current cost of admission is approximately US$1,300.

Source: Axie Infinity

The cost of reproduction continues to rise

It was observed that Axies’ single-day trading volume began to skyrocket around May 1 this year. This is because around April 28th, the platform officially completed the technical upgrade, and the game was migrated from ETH to the self-developed sidechain Ronin. (Through this change, there is no need to pay additional gas fees when playing the game, and any profit is not required. Able to reach the account in seconds).

Total reproduction cost = fixed cost (not related to the number of reproduction, pay ETH or AXS) + variable cost (related to the number of reproduction, pay SLP)

From April to the present, the fixed reproductive cost has gone through three stages.

The first stage: Axie Infinity runs on the ETH network in April, and only needs to pay the GAS fee instead of AXS.

Based on the ETH price and gas fee at the end of April, the gas fee for reproduction is:

2500*0.005=12.5 USD

The second stage: After transferring to the Ronin chain in early May, there is no need to pay GAS fee, but 2 AXS need to be paid:

10*2=20 USD

The third stage: In early July, the reproduction cost was changed to 4AXS, and the price of AXS increased:

20*4=80 USD

From the perspective of players, the migration of the ETH main chain to the Ronin chain did not actually reduce the cost of reproduction. On the contrary, as the price of AXS increased, it further pushed up the cost of reproduction. However, as the price of Axies increased, the cost of reproduction increased. The proportion is gradually shrinking.

In the game, the number of SLPs paid varies according to the number of reproductions. According to the SLP price of 0.3 US dollars, the SLP cost for each reproduction ranges from 30-510 US dollars.

Source: Axie Infinity

The rate of return remains at an extremely high level

There are three sources of in-game revenue, among which daily SLP (love potion) and Axies breeding and sale are the main sources of income, and the other is to earn AXS tokens (platform governance tokens) through monthly qualifying. .

A fixed reward of 50 SLPs for daily missions, 80 SLPs can be obtained according to a 50% winning rate in daily battles, and up to 100 SLPs can be obtained daily through the story mode. If you are familiar with pets and skills, you can play 2 games a day About hours, it may take three hours if it is slower, and you can get about 130-230 SLP (floating).

A season system has been established. Through one season every month, AXS will be issued as season rewards to encourage players to invest more. The corresponding game reward is (1000 WAXS=1AXS):

Source: Axie Infinity

A total of 9350 AXS are issued each season, which is equivalent to US$187,000. Since only the top 300 players in the season can get AXS, most players cannot get this part of the income.

Source: Axie Infinity

According to the analysis of the trading behavior of Axies in the marketplace, most players reproduce for the sake of selling, and because Axies with more than 4 reproductions have a higher reproduction cost, the number of sales is small. Therefore, we can speculate that most players choose to breed no more than 4 times. So we assume that the player chooses to breed once every 5 days and stop breeding after 3 times. After that, SLP income is obtained only through battles and missions, and it is assumed that 150 SLP income is obtained per day. And use this to calculate the player’s rate of return.

Source: Delphi Digital, Axie Infinity

The first return of breeding: 450-100*0.3-4*20=340 USD

The second breeding income: 450-200*0.3-4*20=310 USD

The third breeding income: 450-300*0.3-4*20=280 USD

SLP income within 15 days: 150*15*0.3=675 USD

The cumulative gain in 15 days was US$1,605, which basically exceeded the input cost.

After 15 days, it will not reproduce by default, and only generate income through SLP.

Combining Axies sales and SLP income, you can get annualized income:

(((340+310+280)+(365-15)*150*0.3)/1400-1) 100%=1091%

The rate of return will fluctuate significantly with the price fluctuations of SLP and Axies. However, based on the current annualized rate of return of 11 times, whether it is compared to physical mining machine mining and DeFi liquidity mining, it has a significant appeal. Therefore, we believe that the Play to Earn model will attract a portion of the original mining funds.

Treasury economy (a way to protect AXS prices)

4.25% of the market transaction volume and all breeding expenses will be included in the community treasury, which will be shared by the holders of AXS.

Source: Axie Wrold According to the current incremental speed of the community vault, those who hold AXS in the future will have the right to allocate a huge amount of funds. In addition, after the staking incentives take effect, more AXS will be deposited, which will effectively support the AXS currency price, even in the future When DAU reaches a certain bottleneck, SLP is over-issued, and AXS will also get a certain buffer space.

Land economy (the future development potential of the game)

In addition to Axies, there is another land NFT in the game, with a total of 90,601. Same as Axies, players can directly trade in ETH in the Marketplace. The owner of the land can also get rewards in the land, such as AXS generation. In addition, in the future, players can use the SDK (map editor) to build their own homes on the land they own, and they can also purchase material upgrades or decorations in the MarketPlace. This is also the way Axie Infinty has the opportunity to become a metaverse in the future.

Source: Axie Infinity

Is the supply of Axies exceeding demand?

The supply-demand relationship of Axies is highly related to the robustness of the entire game economic system. If Axies reproduce excessively without new players buying, it will cause the price of Axies to fall, which in turn will affect the demand for SLP and the demand for AXS. This can be due to the unlimited issuance of SLP and the lack of corresponding in addition to reproduction. With the deflation mechanism, SLP will inflate severely, which will eventually cause the collapse of SLP prices.

Due to the design of the game mechanism for each person holding three Axies in the game, it is more appropriate to consider the overall ratio of Axies to DAU between 4 and 5. The following will look back on the data of the past two weeks.


We take the average of the data in the past two weeks to calculate the growth of Axies for a period of time in the future. The number of Axies on June 28 was 1.15 million, and by July 5 it was 1.5 million, with a growth rate of 30.4%; as of July 12, it was 1.96 million. , The growth rate is 30.6%; we take 30.5% as the recent growth rate, the number of Axies on July 19 (one week later) is about 2.55 million, and the number of Axies on July 26 (two weeks later) is about 3.338 million.


According to the performance of DAU data, we can conclude that DAU was 250,000 on June 28, and DAU was 350,000 on July 5, a growth rate of 40%; on July 12, DAU was 500,000, a growth rate of 42.8%; we take 41% is the recent growth rate, so the DAU on July 19 (one week later) was about 705,000, and the DAU on July 26 was about 994,000.

Based on the above data, we can get:

If the recent growth in the number of Axies and DAU is maintained, the ratio of Axies to DAU will continue to decrease for a period of time in the future, leading to a further increase in the price of Axies, forming a positive cycle with the price of AXS and SLP, and further Push up overall prices. Judging from the current data, the supply and demand relationship of Axies is still relatively healthy.

However, we believe that with the gradual increase in the entry threshold, the growth of DAU will not always maintain such a high growth rate, and players will look for games of the same type but with a lower threshold. These factors will have an inhibitory effect on the growth rate of DAU, but the reproduction of Axies will maintain a certain inertia and will continue to maintain exponential growth, eventually leading to oversupply. In order to maintain the stability of the Axies economic system, the development team needs to continue to grow users, create new demands, and maintain the ability of the economic system to absorb.

Competitive Analysis:

According to Buffy’s moat theory, the company’s moat mainly comes from four aspects, we: intangible assets (brand, patent, team), network effects, switching costs (the cost of changing products after users use it is very high) and cost advantages .

  • Brand: Axie Infinity is a phenomenon-level product, including its investors Animoca and YGG, which have formed certain brands among competitors.
  • Team: The game’s playability, economic model design, and operation capabilities reflect the strong strength of the team.
  • Network effect: Axie Infinity already has 500,000 DAU, and thanks to the help of the guild, it maintains a very strong momentum of spread. The “guild-manager-player” three-tier structure adopted by the guild has the potential for viral expansion and contributes to the enhancement of network effects.
  • Conversion cost: The conversion cost of traditional online games is relatively low. Considering that Axies has certain development attributes, players may have a certain affection for Axies, so conversion requires a certain emotional cost. The guild is a double-edged sword. The guild has extremely strong social attributes, and the conversion cost of social networks is the highest. If the guild is overly dependent on bringing new players to the guild, then when the guild itself migrates to other games, it will face more Strong pressure to lose players. Axie Infinity can also increase the conversion cost of players through the expansion of the economic system.

Industry concentration:

According to the traditional industry, we predict the degree of concentration: DEX>LEND>Games. The game industry will form an industry pattern in which many projects coexist.

Summary: Can the flywheel of Play-to-Earn keep spinning?

The P2E model has a long-term survival in the traditional game industry, and blockchain games have given it greater power. Take Axie Infinity as an example. Axie Infinity’s current ultra-high yields are attractive to many wool party players. If the yield drops, these players will be lost, and the attractiveness of Axies, AXS and SLP to secondary market buyers will be reduced. . The excessively fast reproduction speed and the rise in currency prices make people worry about who will support the value of these virtual assets in the end. In fact, the answer is very simple. Of course, it is supported by the players who consume in the game. In traditional games, 5% of high-spending players often support the development and operation costs of the game. Even if there are short-term game downtime, reduced deposits, over-reproduction and other issues that cause the bubble to puncture, this is only a short-term problem. If the game can attract enough consumer players, it can support its long-term operation. We predict that with the development of blockchain games, there will gradually be a trend of reduced profitability and improved playability, and eventually a healthy balance will be formed.

reference Amy Wu on Twitter: “1/ After spending more time in the @AxieInfinity ecosystem, I feel that the heart of the play-to-earn (P2E) model lies in the new guild system, like @YieldGuild” / Twitter