AXS, RON and SLP rise after Axie Infinity improved tokenomics

Since its launch in 2018, Axie Infinity has amassed over 2 million daily active users (DAUs) and its decentralized exchange Katana has a market cap of $5.5 billion la, but this growth process has its own challenges.

The Axie Infinity game’s Smooth Love Potion (SLP) token is down nearly 93% from its all-time high of $0.39 on July 13, 2021 as it faces runaway inflation. As a result, the team has announced that they will be significantly removing SLP releases from the game, making them harder to farm.

In doing so, players and guilds will turn their attention to strategic competitive advantages, and an increase in the SLP price will inevitably lead to an increase in the Axies price, as the breeding costs will increase in equal measure.

SLP 4 hour price chart | Source: Trade View

According to the data, the output of SLP is 4 times larger than the amount burned, which has caused the price to plunge below $0.01 in the past 7 days. However, the team at Axie Infinity will fix the economic imbalance with in-game modifications scheduled for release on February 10th at the start of Season 20.

SLP firing/pouring ratio | Source: Nansen.ai

Since the announcement of the economic rebalancing plan, the price of Axie Infinity’s AXS governance token and its blockchain token RON has skyrocketed. Since Season’s release, SLP is up almost 24% in 24 hours.

Scaling and finding balance amid rapid growth is no easy feat, but can these economic tradeoffs benefit players?

SLP rewards decrease while AXS incentives increase

Starting February 9th, Axie Infinity will no longer issue SLPs to Adventure Mode players or reward those who complete daily quests. By eliminating these token issuance methods, the team reduces the number of SLPs minted daily by approximately 175 million SLPs.

Average number of SLP memorized daily game | Source: Axie Infinity

The above two release mechanisms account for nearly 84% of SLP generated in-game, with nearly 14% being minted for players completing daily quests route economic development of Axie Infinity.

Based on these estimates, more than 250 million SLPs are minted daily and only about 40 million SLPs are burned as demand for Axies breeding has decreased as players and breeders are still waiting for the new Battle version Origins.

By removing most of the SLP rewards that Axie Infinity was doling out to players on a daily basis, the team wanted to bring the players’ attention back to the competitive nature of the game. As a result, the team has increased the rewards for leaderboards, and now the top 300,000 players can win AXS instead of only awarding 1,000 previously.

Allocation of AXS Awards on the Leaderboard | The source: Axe Infinity

By increasing the distribution of AXS rewards to players, the team intends to reward approximately 117,676 AXS, worth over $7 million at current prices.

With this plan, Axie Infinity will distribute a significant amount of its governance tokens, benefiting those playing RON staking, breeding and farming.

The sudden drop in SLP release is not only a shock to the system but also to the player as many have been making the same recommendations for months. It is not yet clear whether these changes will be sustainable with economic growth, but stakeholders are making their assessments.

Players decide the effectiveness of economic adjustments

In addition to balancing economics and modifying tokenoimics (token economics), the team is also determined to improve its overall communications. Team Axie Infinity recognizes the community’s sentiment regarding a general lack of transparency and the fact that these economic issues could have been resolved much sooner.

On January 14th, the team asked the community to come up with suggestions on how to support economic equilibrium and the changes that are about to take place.

In response, players, investors and content creators have voiced potential consequences in terms of economic equilibria. Some people are still unaware of this, but hopefully this can impact DAU.

On the surface, it appears that efforts to restore P2E viability will be negatively impacted as SLP output has dropped significantly. However, since development went live, the need for team members to play with has also increased.

It’s not yet clear how these changes will affect teams in the long-term, especially as future changes and developments are anticipated, but it could be a long-term adjustment that Axie Infinity needs.

While these economic changes are paramount to curbing SLP inflation, only time will tell how existing players will react and how ready new entrants will be to them.

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