The play-to-earn model has revolutionized crypto games, propelling Axie Infinity pricing to the top of the leaderboard with a market valuation of $9.4B. But how do Axie Infinity’s pricing mechanics work?
At the moment, Axie Infinity is the most popular blockchain game in which players earn incentives in the form of crypto tokens that can be exchanged for fiat money. In the gaming business, this is referred to as “play-to-earn.”
In addition to producing seismic upheavals in finance, the blockchain has lately influenced the gaming sector. For example, the blockchain has given rise to the play-to-earn model, a new business and monetization method for video games that have gained widespread acceptance (P2E). However, understanding P2E as the next – and perhaps the most economically robust – evolution in the gaming business requires considering the gaming business model, play-to-earn model development, and Axie Infinity price mechanics.
A Look at the Play-to-Earn Model
Play-to-earn is becoming a popular business strategy that is sweeping the DeFi gaming sector. For the majority of us, earning money while playing a game sounds like a fantasy. However, as a result of the play-to-earn trend, that situation is becoming more plausible. Since May 2021, blockchain-based games have seen considerable success. 754,000 accounts or wallets were associated with blockchain gaming, many of which were involved in gaming. Compared to Q2, game-connected unique active wallets (UAW) climbed by 25% year over year. Even if the number of UAW is an on-chain statistic that does not always correspond to users, sufficient data suggests that demand is increasing.
Pay-to-play (P2P) was the industry’s initial method of monetization, dating back to arcade machines and the first home consoles. Simply put, this approach allowed gamers to obtain entire and irreversible access to game material in exchange for a single payment. Variations of this type remain popular to the present day.
The free-to-play (F2P) model is a more modern development of the original pay-to-play (P2P) concept. Rather than needing an upfront purchase to access a game’s base content, the F2P model allows free access to the main game area. However, the creator earns money by selling in-game items on a recurrent basis. These items have become a pillar of modern gaming, serving as the foundation for commercialising popular titles such as Fortnite, League of Legends, and Clash Royale. They range from just ornamental skins to unique character improvements and have become a hallmark of modern gaming, creating the financial backbone of the aforementioned popular titles.
The incentivization of in-game items from popular games over the years gave rise to what we have today: play-to-earn. This strategy is unique because it focuses on gamers being the primary beneficiaries of a game’s success. P2E games, like other forms of games, reward gamers with in-game assets for their active participation in the community. P2E games are distinguished from previous models because they establish an active secondary market for these virtual goods, allowing users to swap in-game rewards for cryptocurrency, which can then be converted to real-world fiat money.
Axie Infinity Price Mechanics
Axie Infinity has undoubtedly maximized the P2E model’s potential, both in terms of developing a healthy in-game economy and boosting its users’ socioeconomic standing. It is centered on a collection of miniature, NFT-based creatures called Axies.
By putting their Axies into player-vs-player combat, players work to strengthen their Axies. Apart from battle, users can breed Axies to generate unique genetic variation, buy and sell land, and trade Axies and in-game materials through a player-owned economy. As a result, the game has gained popularity, lately producing $200 million in revenue over 30 days, more than the total income of the game’s ten closest competitors. Axie Infinity’s success can partly be attributed to the intelligent pricing mechanics that help govern the in-game assets.
A Practical Perspective on P2E
While the initial investment in Axie Infinity is substantial, players who approach the game with caution and determination should have little difficulty breaking even and eventually turning a profit. To join Lunacia, the Axie universe’s metaverse setting, players must establish a startup squad made of three Axies. According to the official Axie marketplace, the cheapest Axies were available for between $200 and $300 at writing. So naturally, users seeking to set up a startup team that is not composed entirely of so-called “floor Axies” should expect to pay a premium. New players should anticipate an initial investment of at least $700 in Ether without significant price changes. According to historical precedence, prospective players should not anticipate that floor pricing would remain at this $700 level. Axies’ price has increased dramatically over the last two months, with floor prices increasing by a factor of five, and this trend is expected to continue as interest in the game grows.
Many newcomers to the Axie universe are eager to know how long they may anticipate playing before seeing a decent return on investment. Fortunately, with various options for recouping the initial investment, the time to pay back should be relatively quick for many players. In Axie Infinity, the major means of generating income is through farming $SLP, the game’s native currency. Users can earn $SLP by completing daily tasks and winning matches. With payoffs ranging from 1 to 50 $SLP for each mission completed, players can anticipate earning up to 250 $SLP per day.
At the current conversion rate of $0.206/$SLP, gamers seeking immediate profits can earn up to USD$50 every day. On that note, clever players are sure to profit from various in-game income streams, such as breeding and selling Axies, as well as real estate speculation.
Indeed, the Axie universe’s greatest earners employ several well-documented tactics to maximize their earnings. For one thing, in addition to farming $SLP continuously via the aforementioned ways, the most astute players will forgo the immediate thrill of earning real-world money in favor of reinvesting their $SLP gains in breeding new Axies. Strategically, this can result in Axies that are better equipped to win battles, and hence create a higher daily influx of $SLP.
The most prominent Axie breeders have established large-scale breeding farms with the objective of increasing the number of Axies owned and new Axies bred by multiplicative reproduction. The ABC method is a well-known strategy employed by breeding farm owners. It entails starting with three Axies that are not immediately connected (i.e., neither parents nor siblings), breeding Axies A & B twice, and then breeding Axie C twice with one of A & B’s offspring. The cycle is repeated with the offspring of A and B and the second generation of Axies.
Above all, the Axie Scholarship Program is the most lucrative earning plan in Axie Infinity. Axie owners can sponsor players who lack the financial means to form their own beginning squad through this initiative. By doing so, sponsors lend their Axies to their sponsored parties in exchange for a percentage of the $SLP earned. At scale, this passive revenue stream can easily outweigh the earnings of customers who opt to play the game independently.
Regulating the $SLP Price Level
A study of Axie Infinity’s pricing mechanics must begin with the game’s in-game currency, Smooth Love Potion ($SLP). At the highest level, players can earn $SLP for participating in and winning matches, which they can then use to produce additional Axies. Given that $SLP is the primary medium of exchange for players to benefit from the game’s P2E model, safeguards must be in place to prevent the currency’s depreciation and to contain inflation in the virtual economy. The following are the mechanism:
Burning: to begin, $SLP tokens spent during Axie breeding are burned, effectively removing them from circulation. Given the demand for $SLP tokens to breed Axies, this burn mechanism functions as a natural inflation hedge by preventing an oversupply of $SLP.
Gradually increase the breeding costs: Whereas the first breed of a certain Axie costs 150 $SLP, the seventh and final breed before the Axie becomes sterile costs 3,150 $SLP. This cost dynamic ensures that when more Axies are bred, more $SLP is burned, ensuring that drops in $SLP supply generally correspond to rises in demand.
Controlling the Population of Axie
Another aspect of Axie Infinity’s pricing mechanisms is the inflation rate of the actual Axie population. As previously stated, joining the game requires the purchase of three Axies with Ether, which must be acquired using fiat currency; as such, the price of Axies must remain low enough to encourage new users to join and benefit from the P2E model. Additionally, the primary population control mechanism incorporated into the game is the provision of vertical rather than horizontal progression chances for existing players.
In essence, this means that players are rewarded for upgrading a limited selection of Axies rather than extending their collection. As per the Axie infinity guide, an upgrading mechanism is in place that serves as a supply sink for Axies, ensuring that their long-term population growth remains under a specified inflation rate and that their costs remain acceptable. Nonetheless, the short-term price of Axies can fluctuate substantially, recently going from $250 to approximately $450 during six days. This increases the short-term cost of entry into the market, resulting from both increased demand generated by new players and the rising price of $SLP.
Axie Infinity Price Prediction
Axie Infinity is now ranked 33rd on the cryptocurrency ranking website CoinGecko. On the other hand, will the recent upgrades, innovations, and modifications in the AXS blockchain assist in driving the coin price higher? The range of bullish AXS price predictions is $156 to $311 per share. AXS prices may potentially hit $350 soon, with a bearish market price estimate of $64.08 for 2021.
Axie Infinity is a poignant case study of just how effective this paradigm can be, but it will take time for P2E to supersede F2P as the prevalent gaming model. This is because the onboarding processes for these P2E games are still complicated, and the technical barriers to entry are much too high to establish an accurate, critical mass. However, as the Axie Infinity price continues to surge, the P2E gaming’s ability to alleviate widespread poverty is anticipated to overcome this challenge. Furthermore, the combination of NFTs and the P2E gaming model can provide for those not catered for by their governments, just like crypto-evangelists promise bitcoin and its successor currencies can bank the unbanked.
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