Axie infinity reduces SLP emissions to prevent “collapse”

The developers behind play-to-earn protocol Axie Infinity have introduced important changes to the rewards system in an effort to create a more sustainable product for users.

The popular battle game allows players to collect, breed, battle and trade creatures called "axies.” New players need at least three axies – costing over $1,000 to acquire – to begin playing. Players earn Smooth Love Potion (SLP) tokens as rewards, which can then be redeemed for in-game features such as breeding new axies.

The lucrative earnings from SLP have created a so-called “economy” over the past two years and has even become the main source of income for some communities in the Philippines.

However, unlike AXS – a governance token that allows holders to take part in decisions for Axie Infinity’s future – SLP has an uncapped token supply, meaning there is no limit to how many SLP tokens could exist in the future.

This created an unsustainable environment for new players, one that even resulted in user numbers dropping. "The Axie economy requires drastic and decisive action now or we risk total and permanent economic collapse," acknowledged Axie developers in a post.

The ‘Season 20’ update addresses these concerns. Emission rates associated with several game features, such as “adventure mode” and “daily quest,” have been reduced to zero from over 130 million SLP earlier. This reduces the daily SLP token supply by 56%.

Players can earn SLP tokens through “area combat,” a turn-based card minigame on Axie Infinity. SLP used to breed or update axies will be burned, or destroyed permanently, which would additionally lower the token’s circulating supply.

SLP prices fell 93% from all-time highs

SLP emissions earlier caused a drastic plunge in the token’s prices. Earlier this month, prices fell 94% to $0.01 from July’s highs of $0.39. The market capitalization, however, increased to $312 million from $166 million in the same period as supply continued to increase.

SLP prices have surged 100% in the past week following the update, data from analytics tool CoinGecko showed.

SLP prices surged following a changed emission schedule. (TradingView)

AXS prices fell alongside. The governance tokens traded at $48 last week after falling nearly 60% from the November highs of $157. However, the Season 20 update revived AXS as prices bounced over the weekend, reaching $66 at the time of writing.

AXS hit resistance after a surge over the weekend. (TradingView)

Meanwhile, some in crypto circles said Axie’s decision showcased the impact of token-based games.

“Axie's SLP token is based on a unique combination between game economy and token economy,” said Asaf Naim, CEO of blockchain technology firm Kirobo in an email to Coindesk. “Finding a sweet spot between inflation and deflation of this asset in this multi-layered structure is a very complex task, and Axie seems to have found it (for now).”

They are obligated to do so to protect SLP holders and to ensure that the platform maintains its lucrative nature. But as this synergy between gaming and crypto grows, token economists will have to constantly be vigilant and react to the changing landscape,” Naim added.