Axie Infinity White Paper Review Part 2
Welcome back to Part 2! I hope you enjoyed the analysis in Part 1 and are buckled in for what is next, because there is a lot of HYPE coming up. Without further ado let’s get into it…
AXS — Axie Infinity Shards:
In the most simplest form, AXS is what makes Lunacia “go ‘round”. AXS, an ERC-20, is the governance token for Axie Infinity. What does that mean? From the team itself:
- claim rewards if you are staking (access to the treasury, A.I. revenue streams)
- play the game (think crafting items, marketplace interactions, etc.)
- participate in key governance votes
How can you earn AXS? By simply playing the “various” (interesting) games available. You get rewarded for playing the game. Pay to play? No, paid to play. The team presented us with this graphic to show how AXS will be used in the game. Let’s start with their analysis of it:
- To reward players for interacting with Axie Infinity while simultaneously incentivizing them to hold on to their tokens so they can claim additional rewards.
- To decentralize the ownership and governance of Axie Infinity.
At the top of the diamond we have the players. The players are the most important part of the equation as their interactions with the game drive the value of AXS. Users can benefit in two ways: by being both players and holders. If you play and spend inside of the Game Universe, you are rewarded with AXS. This is the incentive to really grind it out in the game, the rewards can be significant. The revenue and AXS collected in the Game Universe is then held in the Community Treasury (will go live in 2021), which is responsible for governing and regulating the game itself.
The second role users can take is to stake and hold. From staking (Playing and Voting) you get access to the revenue that is stored in the community treasury. This sentence alone is revolutionary. Everyone has potential access to the revenue of the game. This is truly community owned and decentralization at its finest. Users from all over the world, from all walks of life, from any age group, can earn from staking their AXS. Imagine a game that generates millions of dollars worth of revenue, and it is distributed back to the owners of AXS. The potential for this is massive.
I know that people love the idea of decentralization, and I love it too, but rushing too soon into a decentralized game can have its downfalls. There needs to be someone, or something, that steers the ship and sets the course before autopilot can engage. Which is why I truly appreciate the team’s understanding of this. They know how important it is for Axie to be driven in the right direction before full decentralization takes place. This is why decentralizing the game will happen gradually over time.
Allocations and Unlock Schedule:
The attention to detail with this token release is evident in the allocations and unlock schedule. The team and Delphi Digital, took everything into consideration when designing. We have seen so often when teams initially release tokens they hoard large percentages of it. This made many crypto investors weary of when they buy into Initial Exchange Offerings, and rightfully so. But the fact that this token release happens over 6 years is very encouraging for the long term growth of Axie Infinity.
Additionally, I am all for teams rewarding themselves. Everyone should be sufficiently rewarded for their risks and effort, and this team especially has put in consistent work in bear markets over the last 2+ years. But what I love about this release is that the team allocated sufficient tokens to everyone. Token distribution of 21% for the team is less than the combined Play to Earn and Ecosystem allocation. This shows that they are truly invested in the decentralized, Play to Earn mentality. They want to share what they made with the world.
Play to Earn:
The Play To Earn fund consists of 20% of the total supply, 54,000,000 tokens released of 4.5 years. The Play to Earn tokens will be unlocked immediately, but if the team deems they need to enforce a locking period, they can. I think this is important, you don’t want people dumping the token and manipulating/ruining the game economy.
From the team:
“The goal of the play to earn tokens is to attract a wide range of players to the Axie ecosystem in the hunt for token rewards and to give ownership and stake to the most active community members.”
The Play To Earn designation drives incentives for players. It is what Axie Infinity will use to market the game; players will seek out Axie Infinity because of these rewards. However, instead of just wasting money for advertisements or influencers, it goes right to the community. In Jiho’s words, “Reward the community”.
The behaviors that the team wants to reward are:
- competing in the arena and winning matches (season rewards???)
- Winning Tournaments
- Interacting and tending your land plots (“passive” income???)
- Using the Axie Infinity Marketplace
- Breeding Axies
- Using future Axie products that haven’t been announced yet (wait, there is more good stuff coming?)
These are all things you want the team to reward as they are the fundamental parts of the game itself. If you participate in the most basic functions of the game, you can be rewarded.
What the team says next is what has built the strongest community in blockchain gaming and is a clear mission that everyone can get behind:
“A game needs players. By simply playing the game, community members are adding value to the network and should be rewarded. It’s simple, but revolutionary. We’re looking for missionaries to align incentives with as we change the gaming world forever.
Axie is a living, breathing organism; it’s still a toddler. Our revolution is young but spreading quickly — AXS has been designed as a growth hormone to take the toddler to maturity.”
The network effect in Axie Infinity is real. The value of the network is driven from the number of users that play Axie Infinity. By rewarding users, you encourage more users to play, more users join, and so on the cycle continues. The incentives for the team and community are easily aligned: change the gaming world forever. AXS makes that possible.
Staking and Staking Rewards:
The total token distribution for staking is 78,300,000 tokens, or 29% of the total supply, released over 5.5 years. As stated, staking rewards will be initially available starting early 2021 which is not too far away. Early stakers will get higher rewards to incentivize early users to lock up AXS. This is awesome for loyal community members. Early supporters will have the opportunity to earn more on their initial investment as Axie grows. Not only do you get rewarded if/when the price of AXS increases, but also you get rewarded in AXS by staking. Take a second and think about that. By staking your AXS, you get rewarded from users playing a game. This is truly revolutionary.
It is important to note that the tokens generated from staking are locked for 1 year in escrow. Again the team is smart about the total token supply. By locking tokens, users will get their rewards but will not be able to dump them weekly/monthly on the marketplace, ensuring a proper economy for the game itself.
Under staking is the Axie Score, which is a method of evaluating and rewarding additional value provided by the stakers prior to them getting their reward. If the stakers provide additional value to Axie Infinity, the week prior to the close of their staking period (3, 6, or 12 months), they could receive more rewards or a special NFT. This is what I mean when I say the team and Delphi truly thought through everything. To further incentivize value being added to the network, they created the Axie Score. It is easy to stake and forget about your AXS, which could lose many active players to idle collecting. In order to deter this inactivity, there is an added bonus that you can receive by contributing to the network. This can be done by:
- Participating in governance votes when required
- Play the game (The required amount of games played per week is still being decided)
Say you don’t want to do the “work” required to generate a high Axie Score, or say you are a guild that has a significant amount of AXS pooled and not enough time or resources to do the work necessary to generate a high Axie Score, you can delegate this work to others. This allows investors with large sums of AXS to recruit high level PvP players. This opens up a whole different market for high level PvP players. The better you are, the more investors may pay for your services.
From my understanding the Ecosystem Fund is for growing the community. The funds, 21,600,000 tokens at 8% total distribution, will be unlocked over 4 years and distributed based on what the Axie Infinity team decides. The team will write up quarterly statements that describe what these funds have been used for. To me, these are funds that the team uses to distribute where they see fit to grow the community. Podcasts like Axie Chat or writers, streamers or other community creators could possibly get rewarded by the team for their efforts. The more content creators that we have in the community, the more we grow the community, and the bigger the community gets. The team laid out the principles for this fund clearly:
- Clear value added to the broader Axie Infinity community
- KPIs and goals that unlock funds (if applicable)
Eventually, the funds will be integrated with the DAO and the stakers will be able to vote on where these funds get distributed, rewarding the people that they see fit.
Sky Mavis Team:
The Sky Mavis team is crucial to the success of Axie Infinity, as they are the developers and team behind the magic! The token distribution for the team is a total of 56,700,000 tokens or 21% released over 4.5 years. As we can see from the distribution schedule, the team only received 10,800,000 tokens on Day 0. In my opinion, this is enough to provide them some liquidity at initial offering, but the more important part is the release schedule that follows. After the first year, about 6 million tokens start distributing every 6 months. This is a good balance because it provides sufficient incentive for the team to continue to build and provides them with rewards.
After a total of 54 months the game should be developed to the point where the DAO can make the necessary decisions to run the economy and the game itself.
We can analyze the advisors in depth in another article, looking at who they are and what they do, but for the sake of simplicity in this article let’s just analyze the advisor token distribution. The total amount of tokens provided for the advisors is 18,900,000, 7% of the total distribution released over 4 years. On Day 0, the advisors receive 4,500,000 tokens. This provides them with the ability to do with as they please, liquidate if necessary to recoup initial costs, at the release of the token. The second release is after month 3, where 1,800,000 tokens get distributed. This is a smaller amount but again is there to reward the early investors as the investors took the monetary risks. However, it is important to note that the next distribution of 2,700,000 tokens starts after 12 months and is released every 6 months. This helps mitigate possible dumping, which I doubt will happen. The investors knew what they were getting into and were happy to invest knowing the distribution would take several years.
The initial public sale was 29,700,000, 11% of the total token distribution. This provides enough liquidity for Binance to launch the token.
The team received $864,000 funding in 2020 from a private investor at 20% the token release. 10,800,000 tokens distributed at 4% of the total supply released every 6 months. Obviously every team needs funding to sustain operation and growth. This is expected in startups.
This wraps up Part 2 of the Axie Infinity White Paper Review! There is so much to unpack in this white paper as so many things have to be considered. The attention to detail and thought put into this release is evident. Each step of the way I am truly impressed and excited for the growth of this project. In Part 3 of the review I will tackle the community and more! I hope you enjoy going through this as much as I do. Don’t forget to follow, it is appreciated and makes me want to keep writing about Axie! If you have anything you want me to write about or talk about, my Twitter and discord handle are below:
on Twitter: https://twitter.com/the_YCB
Or in Axie Infinity’s Discord as YCB: https://discord.gg/axie