Axie Infinity - ‘Virtuous’ cycle (or is it?)

Axie Infinity is the proof-of-concept for play-to-earn - players earn SLP through playing.

A few facts to start off -

• since Axie Infinity migrated to its native Ronin sidechain in May, there has been a parabolic rise in the number of so-called ‘scholarships’. Scholarships are partnerships between scholarship managers (owners of Axies) and scholars (people who don’t own Axies but want to play the game and earn SLP). The scholarship managers let scholars play with their Axies in exchange for a percentage of the earned SLP (say for example 30% to the manager and 70% to the scholar).
• a lot of people in third-world countries are hearing about this and lining up to become scholars, causing demand for new Axies to accomodate more scholarships.

Where does SLP come from and why does it have value? SLP is minted by playing - it’s that simple. If you win a PVP battle or a PVE level you earn SLP (providing you have ‘energy’ - different energy limits apply depending on how many Axies you own, another incentive to own more than just the minimum three that makes up one team). It has value because SLP is used to breed another Axie.

Why would one want to breed an Axie? A few reasons -

• flip it to make profit.
• you’re a scholarship manager and you need more Axies for your growing band of scholars (so you can kick back and manage all the SLP pouring in from their earnings).
• specific type of genes you’re looking for in an Axie to collect or battle yourself.

But mainly people breed so that demand for more Axies can be met so more people can play and more people can earn - that is the virtuous cycle. OK - so let’s go back to third-world populations. At present one could earn at least 20 USD just for completing tasks in the ‘Daily quest’. There are a lot of variables but let’s leave it at 20 USD for now. One could play longer and earn more but that would require more energy - and to get that energy you’d need more Axies. The average scholar will only have three Axies. Even after the scholarship manager takes their cut, it’s likely that the scholar will have earned more playing Axie Infinity than they would have earned from most blue-collar jobs (At least 80% of humanity lives on less than $10 a day - source). Of course this will attract more and more people into the ecosystem when they hear about it. Currently there are 300,000+ daily active users. However, this number is growing crazy-fast. 100,000 and 200,000 were major milestones and it only seems like yesterday that they were achieved. I think this number will continue to rise quickly. But this has to end at some point, right? The music will stop. Wait a second - there are 7.5 billion+ people in the world today - 80% of that number is 6 billion. I tried to find the percentage of the third world population that has access to a smartphone with an internet connection but was unable to find it. Let’s say - hypothetically - 50% of people living in third-world countries have a smartphone and an internet connection, we get down to 3 billion (the hypothetical 50% number will also increase in time too). From 300,000 to 3 billion, that’s 10,000x - that’s the bull-case.

That’s not factoring in people living in developed countries - when AXS staking and landplay kick in, it’s highly likely that these people who were early Axie community members should have the means to support themselves by participating regularly in the Axie ecosystem. A portion of marketplace and breeding fees will be distributed to AXS landholders. Regarding landplay, we don’t have many details yet, but it’s expected that landholders should have additional passive income streams (renting out land is an obvious one). Then there’s the incoming airdropped AXS for those who, prior to October 29 2020, played Axie Infinity, owned Axies, owned land, used the Axie Infinity marketplace. This from a low cost base. Prior to October 29, Axies and land were a lot cheaper than they are now. Folks can enter the space now by buying AXS, Axies and land for future returns, it’s just that the initial cost is higher at today’s prices.

Axie feels very bubble-like now, but if it is 10,000x from here there’s still a long run-way ahead. The founding team (Sky Mavis) have a few levers to pull to slow growth to a more sustainable rate (for example, just last week they increased the AXS cost to breed), but the question of ‘What happens when the music stops?’ is far off. Axie Infinity will pretty much be totally decentralised by then and, with an extremely engaged community, who knows just how it will be able to change the way we work and play?

EDIT: Thinking about this a little more - I’m not suggesting that up to 6 billion people around the world would or should give up their jobs to play Axie Infinity. That would have disastrous economic effects. However folks could do it in addition to meaningful employment and if they’re not happy in their jobs, they would potentially be able to give it all in. In other words, it offers freedom to impoverished people.

Also of the 6 billion people, if the ‘working-age’ population is 15-65-ish, and about 65% of the population fits in that age range, then that takes us down to about 4 billion.