Is Axie Infinity a Scam?

Key Takeaways

• Axie Infinity’s play-to-earn model provides income opportunities, particularly in developing countries.
• Challenges like SLP inflation and sustainability raise concerns about its long-term economic viability.
• Sky Mavis is focusing on enhancing gameplay and diversifying the Axie Infinity ecosystem.
• AXS price breakout above $13 could be the signal for a bullish momentum move in price targeting up to $40-$164.

Axie Infinity, a blockchain-based game developed by Sky Mavis, came onto the gaming scene in 2021, offering players worldwide but mainly focused in Asia, with its innovative “play-to-earn” model. 

This model allows players to earn real-world income by playing the game, leading to its widespread adoption, particularly in developing countries. However, the game has also faced scrutiny and controversy, with questions raised about its sustainability and potential for being a scam. 

This article tries to understand Axie Infinity, exploring its mechanics, its impact on livelihoods, the challenges it faces, and its future prospects.

Axie Infinity’s Game Mechanics and the Play-to-Earn Model

Axie Infinity revolves around collecting, breeding, and battling creatures called Axies, which are represented as non-fungible tokens (NFTs)  on the Ethereum blockchain. Each Axie possesses unique characteristics and abilities, categorized into different classes (e.g., Plant, Beast, Aquatic) with strengths and weaknesses against each other, similar to the Pokémon series.

Players can earn two types of cryptocurrencies within the game:

• Smooth Love Potion (SLP): Earned by playing the game in Adventure mode (player vs. environment) and Arena mode (player vs. player). SLP is primarily used for breeding new Axies.
• Axie Infinity Shards (AXS): The governance token of the Axie Infinity ecosystem. AXS holders can participate in governance decisions and stake their tokens for rewards.

The play-to-earn model works by allowing players to convert their in-game earnings (SLP) into real-world currency through cryptocurrency exchanges. This model has proven particularly attractive in countries with lower average incomes, where the potential to earn more than local wages by playing a game has been a significant draw.

Axie Infinity and Livelihoods: Real-World Impact

Axie Infinity’s impact on livelihoods, particularly in developing economies, cannot be ignored. The game provided a source of income for many individuals during the COVID-19 pandemic when traditional jobs were scarce.

• The Philippines: The Philippines became a hotspot for Axie Infinity adoption. Many Filipinos turned to the game as a primary source of income during lockdowns. Stories emerged of people earning enough SLP to support their families, pay bills, and even purchase homes. The game became so prevalent that some even considered it a form of employment.

Examples of Livelihood Impact:

• Replacing lost income: Many individuals who lost their jobs due to the pandemic were able to replace their lost income by playing Axie Infinity.
• Supplementing existing income: For those with existing jobs, Axie Infinity provided a way to supplement their income and improve their financial situation.
• Creating new opportunities: The game also created new opportunities, such as Axie breeding and scholarship programs, where experienced players lend out Axies to new players in exchange for a share of their earnings.

These examples highlight how Axie Infinity has not only helped individuals recover or supplement their income but also created entirely new economic opportunities within its ecosystem. 

This phenomenon offers a glimpse into the potential future of earning in a digital-first world, where play-to-earn games and decentralized platforms could redefine how people generate income and participate in the global economy.

Challenges and Controversies

Despite its positive impact on some individuals’ lives, Axie Infinity has faced several challenges and controversies:

• High entry barrier: The initial cost of purchasing three Axies to start playing can be prohibitively high for many potential players. This creates a barrier to entry and raises concerns about accessibility.
• Ponzi-like tokenomics: The game’s economy relies on a constant influx of new players to drive demand for Axies and SLP. This has led to comparisons with Ponzi schemes, where early investors are paid with money from new investors. While early adopters may have benefited significantly, the game is not solely reliant on new investment for its value.
• SLP inflation and price volatility: The value of SLP is subject to inflation, and its price can fluctuate significantly. This makes it difficult for players to rely on a stable income stream.
• Ronin Network hack: In March 2022, the Ronin Network, a sidechain used by Axie Infinity, was the victim of a major hack, resulting in the loss of over $600 million in cryptocurrency. 
• Sustainability concerns: The long-term sustainability of the play-to-earn model is a major concern. As the game matures and the player base stabilizes, it may become more difficult for players to earn significant income.

The Future of Axie Infinity

The future of Axie Infinity is uncertain, but Sky Mavis continues to develop and update the game, introducing new features and addressing community concerns.

• Focus on Gameplay: Sky Mavis is shifting its focus towards enhancing the gameplay experience and making Axie Infinity more than just a way to earn money.
• New Game Modes and Features: New game modes and features are being introduced to diversify gameplay and increase player engagement.
• Ecosystem Expansion: Sky Mavis is working to expand the Axie Infinity ecosystem, including developing new games and applications that utilize Axies and other assets.

By focusing on improving gameplay, introducing new features, and expanding the ecosystem, Axie Infinity aims to create a more engaging and diverse experience for players. This shift signals an effort to balance economic opportunities with entertainment, making Axie Infinity not just a source of income but a thriving digital community with long-term potential.

Axie Infinity Price Evaluation

Axie Infinity (AXS) has been consolidating within the highlighted rectangle for over a year, ranging between key levels of support and resistance. This prolonged sideways movement reflects a period of accumulation or indecision, as seen with the 223% rallies of support to resistance.

A breakout above the rectangle, around the $13 level, could signal the start of a new bullish trend, especially with the return of the alt season. If Axie can get above $13 and reclaim a range, some potential targets are $40 and $164 and become plausible, following the explosive moves often seen in altcoin market cycles.

Conclusion

Axie Infinity represents a groundbreaking experiment in the intersection of gaming, cryptocurrency, and economics. It has demonstrated the potential for blockchain-based games to provide real-world income and impact livelihoods, particularly in developing countries. However, the game also faces significant challenges, including economic sustainability, security risks, and the need to balance the play-to-earn model with engaging gameplay.

Whether Axie Infinity can overcome these challenges and achieve long-term success remains to be seen. The game’s future will depend on Sky Mavis’s ability to innovate, adapt, and address the concerns of its community.

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