Axie Leads “Play to Earn” Gaming
Happy Sunday! Today’s profile is Axie Infinity, the first major mover in the “play-to-earn” space. They’ve been on quite the impressive ride which I’m happy to share with you now.
The Profile Basics
Startup Name:
Axie Infinity
Industry:
Web3 - Consumer (Play-to-Earn)
Funding Stage:
Series B
Break It Down for Me
The Problem:
An estimated 2 billion people around the world are considered “gamers” in some form. Many people spend time and pay money to play digital games for fun or as a social outlet, yet only the top gamers (those with visibility and fame) are able to monetize their time.
The Solution:
Thanks to Web3, gamers earn monetary rewards for their time and effort, as well as are able to participate in the financial upside of the games they play, especially as the games grow in the number of users and the game’s token (in-game currency) accrues value. Axie was one of the first massive examples of this phenomenon.
Core Users:
Blue-collar workers —
Axie onboarded hundreds of thousands of workers from Indonesia in May of this year.
Since its massive popularity and success starting earlier this year, Axie has also attracted scholar programs, such as
YGG
, LootSquad, and Perion who lend the Axie NFT assets for game usage and earning rewards.
Walk Me Through It:
Think of Axie Infinity as a Pokemon mobile game with the opportunity for players to earn money.
To play, users are required to purchase (or borrow) three Axies (monster characters aka Pokemons), each of which are NFT assets that have different qualities and skills. Players are given limited energy points per day to either choose quests (adventure mode) or player-versus player mode (two users battling each other via their Axies), with battles involving card-game mechanics.
Users earn tokens (that can be converted to any local currency) by breeding or selling Axies or competing in arena battles or daily quests.
Show Me the Money
Currently:
Axie’s model is predicated on a large number of users and usage, since it makes money through their 4.25% transaction fee, which goes back to the community treasury.
Be Wary
Though Axie has experienced incredible growth and made significant positive financial impact on the lives of many, there are a couple of concerns from an investment perspective. First, as the game has grown, the price of NFT assets have risen tremendously. Players used to be able to purchase Axies with $5 to $10 earlier this year, yet now the minimum price for an Axie is more than $300 (remember, three are needed to start playing). Though scholarship programs have helped with this problem, it makes for a higher barrier to entry for most as scholarship programs entail applications or additional hoops to jump through.
Second — and more importantly — what is the sustainability of Axie’s model? It is unclear what percent of users are playing due to genuine enjoyment of the game versus pure economic need; if there are other blockchain-based games that enable users to earn more or offer better gameplay this could threaten the future success of Axie. Ironically, the token incentives that provide for the financial upside and early adoption success that Axie has experienced might hinder platform growth at a certain scale if users decide to leave for other newer, higher-upside gaming options.
Now Get Excited
I am still super excited about Axie and you should be too.
First is Axie’s tremendous growth. Axie was released in 2018, and it did not experience significant sales volume until May 2021 when it started producing over $1 million in sales per day. In the following months since May 2021, Axie has produced over $3 billion in sales.
Second is the global accessibility. Due to its mobile platform, people around the world have the opportunity to gain upward mobility. Axie has enabled hundreds of thousands of blue-collar workers to earn twice (or more) their local minimum wage. In fact, the ramifications of this cannot be understated as more and more jobs continue to be automated away, especially as interactions and opportunities move online. Axie has set a precedent that all blockchain-based games are trying to model in some form.
Third, Axie has served as an onboarding platform to Web3. Its educational tools and strategic gameplay provide a simple yet engaging way for “first-timers” in Web3, regardless of location or socioeconomic background to understand the benefits, like staking rewards or lending assets. In this way, Axie serves as a gateway for many of its users to participate in other blockchain-based games, as well as crypto in general.
Finally, Axie has a lot of potential for expansion by:
The product - Axie has experienced it’s growth all through a relatively simple, two dimensional interface. Axie can expand its interface and gameplay not only to improve graphics but also to make for a more immersive experience for users to be able to own their own land, build houses or breeding stables for their creatures, and integrate cross-NFT IP to enable users to display within the game any NFT art, music, or other assets that they own outside of Axie.
The target user market - Geography-based expansion. Axie has experienced tremendous growth in Southeast Asia, but it’s game — especially with the benefit of its own and third-party scholarship programs — can expand to a variety of other developing areas of the world including Africa, Latin America, and the US as well.
Revenue generation - Axie should create revenue share programs with top gaming streamers and monetize their already strong online community through merchandise and ticket sales from both online and in-person events. Axie could also benefit from creating more of a monetary presence like a docu-series that highlights the lives of the many users that went from unemployed during COVID to financially free through playing Axie.
And that’s a wrap. As always, I welcome all replies - I love to hear what you enjoyed and didn’t.
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