Axie Infinity (AXS) is the governance and staking token of Axie Infinity, a blockchain game made by the Vietnamese studio Sky Mavis in which players collect, breed and battle creatures called Axies. AXS is staked by holders for rewards, used to pay certain in-game fees such as breeding, and gives holders a vote on how the game's community treasury is spent. It became the best-known token of the play-to-earn boom of 2021.
AXS is separate from the Axies themselves, which are non-fungible tokens, and from Smooth Love Potion (SLP), a second token earned by playing and spent on breeding. The game runs on Ronin, a blockchain built by Sky Mavis for gaming. Axie Infinity is a central case study in NFTs in gaming, alongside networks such as Immutable (IMX) and Flow (FLOW).
Axie Infinity in plain terms
Picture a trading-card game in which every card is a small cartoon creature that you truly own. You can battle with it, breed two of them to make a new one, or sell it to another player for real money. Playing well earns you a game currency that other players need, so time spent in the game can be turned into income.
AXS is like a share in the club that runs the game. Holding it lets you vote on how the club's savings are used, and locking it up earns you more AXS. The catch, as players discovered in 2022, is that the income depends on a steady stream of new players willing to buy creatures and currency. When newcomers stop arriving, earnings fall quickly.
History
Sky Mavis was founded in Ho Chi Minh City in 2018 by Trung Nguyen, Aleksander Larsen and others, and Axie Infinity began on the Ethereum Blockchain. AXS was sold to the public through Binance Launchpad in November 2020. Because Ethereum fees made small trades costly, Sky Mavis moved the game to its own Ronin chain in 2021. Usage then exploded, especially in the Philippines, where many people played full time during pandemic lockdowns, and the game reported more than two million daily players at its peak in late 2021. Its economy weakened in 2022 as the price of SLP collapsed, and Sky Mavis later launched Axie Origins, a free-to-start version of the game.
How it works
Players need a team of Axies to play the main modes. Winning battles and completing tasks earns rewards, and two Axies can be bred to create a new one, a process that costs both SLP and AXS and becomes more expensive each time the same Axie breeds. Many owners lent their Axies to other players through "scholarship" schemes and took a share of the earnings, which drew in players who could not afford a team. Fees from marketplace trades and breeding flow into a community treasury that AXS holders oversee. Assets move between Ronin and Ethereum through a crypto bridge. Ronin itself was designed for fast, cheap game transactions and has since attracted other games beyond Axie, using a small set of validators that critics consider centralized.
Token supply and uses
AXS has a fixed total supply of 270 million tokens, released over several years to Sky Mavis, investors, the public sale, the ecosystem fund and staking and play rewards. Its main uses are:
- Staking. Holders lock AXS to earn a share of newly released tokens; see staking.
- Governance. AXS holders vote on the use of the community treasury, a form of decentralized autonomous organization.
- In-game payments. AXS pays breeding fees and some other costs in the game.
- Trading. AXS is listed on major cryptocurrency exchanges.
Scheduled token unlocks add to the circulating supply and have weighed on the price at times.
The Ronin bridge hack
On 23 March 2022 attackers stole about 173,600 ether and 25.5 million USDC, worth roughly $600 million at the time, from the bridge linking Ronin to Ethereum. The bridge needed signatures from five of its nine validators; the attackers gained control of four keys held by Sky Mavis and a fifth belonging to the Axie DAO, which had been given temporary signing permission and never revoked. The theft went unnoticed for six days. In April 2022 the FBI attributed the attack to the Lazarus Group, a hacking group linked to North Korea. Sky Mavis raised $150 million in a round led by Binance to reimburse users, and the bridge reopened in June 2022 with more validators.
Criticism and risks
Economists and journalists described Axie's model as dependent on constant inflows of new players, likening it to a scheme in which early participants are paid by later ones. Scholarship arrangements were criticised for leaving players with a small share of earnings, and tax authorities in the Philippines looked at how game income should be treated. The Ronin hack showed how much risk sat in a small set of bridge keys. AXS and SLP both lost most of their value after their 2021 peaks.