Axie Infinity’s Strategize to Revitalize P2E Game Using SLP Token
The formerly dominant Play-to-Earn game Axie Infinity changed its strategies as it decided to cap the SLP token supply at 44 billion to reach its target of revitalizing the P2E Game. Aside from being capped, the Smooth Love Potion token will also be supported by a “stability fund”.
Axie Infinity’s decision to cap the SLP token is a strategic move by Sky Mavis’ P2E battling game. The cap on SLP tokens would be implemented through a “social contract,” which means that the game’s developer will regulate the issuance of SLP to ensure the number in circulation doesn’t exceed the cap. This strategy differs from a technical cap, which would be implemented through a smart contract.
Tokens in Axie Infinity
There are three different tokens utilized by Axie Infinity, which are described below:
- SLP (Smooth Love Potion): Players earn primary in-game currency through gameplay.
- AXS (Axie Infinity Shards): The governance token allows holders to participate in key decisions about the game’s future.
- RON: Used for transaction fees on Axie’s Ronin blockchain, an Ethereum sidechain explicitly designed about the game’s future.
Axie Infinity’s Strategy with SLP
Axie plans to have a Stability Fund for SLP to achieve a deflation rate of 2%, and a stability fund has been created. This fund adds 2 SLP tokens for every 10 SLPs burned, providing a buffer against excessive inflation. Axie’s initial funding of 60,000 USDC has been allocated to kickstart this mechanism.
The fund’s role is crucial in maintaining a balance between the supply and demand of SLP, thereby stabilizing its value. Despite the measures made by Axie, the value has been volatile after reaching its peak in 2021; the token’s value plunged by more than 99%. However, following the announcement of these changes with SLP, there was an 8% increase in its price. The price increase suggests that the market is responsive to the game’s economic strategies.
New Gameplay Modes and Economic Strategies
Axie Infinity introduced the Premium Cursed Coliseum mode, a significant addition. Players pay 150 SLP to enter but can earn escalating rewards based on their performance. This mode offers players a new way to earn SLP and serves as a mechanism for token burning, as 20% of the entry fees are destroyed. This burning mechanism helps to reduce the overall supply of SLP, countering inflation.
SLP earned in the new Coliseum mode cannot be withdrawn or exchanged, but the team has announced plans to enable these features shortly. This decision likely aims to prevent immediate selling pressure on SLP and to stabilize its economy.
Axie Infinity’s Market Dynamics
The game grew tremendously in 2021, driving the play-to-earn trend and contributing significantly to the NFT market. However, the subsequent crash in SLP’s value highlighted the challenges of managing a cryptocurrency-based game economy. The excessive distribution of SLP compared to its burning rate led to inflation, which the team is now addressing with new measures.
Axie Infinity’s recent updates reflect a concerted effort to stabilize its in-game economy, particularly addressing the challenges posed by SLP inflation. Introducing a supply cap, a stability fund, and new game modes are part of a broader strategy to balance supply and demand, ultimately aiming to enhance the game’s sustainability and player experience.
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