Inside Axie Infinity

Axie Infinity screenshot

Axie Infinity is hitting the headlines. This germ of an idea that emerged in 2017 has now reached a $30 billion valuation and sees activity on a par with mainstream games, according to Forbes. During the pandemic it became a lifeline for many people in the Philippines who earned enough from play to replace their lost incomes, and the global community is growing rapidly. In December 2020 I spoke to Axie co-founder Jeff Zirlin about the history and the vision of this extraordinary phenomenon.

This interview was first published in What’s Hot in Blockchain and Crypto – Volume 1 (Dec 2020).

The Play to Earn Revolution

Created in 2017 by Trung Nguyen and his childhood friend Tu Doan, Axie Infinity has evolved into the flagship of the play to earn revolution. Players are already being rewarded for their time and skills with in-game earnings, asset liquidity, and a share of the platform itself. I spoke to Growth Lead Jeffrey Zirlin (better known on Twitter as @Jihoz_Axie) to learn more about the Axie story.

Trung Nguyen was inspired by the concept of a blockchain game that he had stumbled across through Cryptokitties, which was an early proof of concept. Games have always led the adoption of complex new technologies, and Axie was created with the goal of introducing it to everyday people through approachable IP and addictive gameplay. Pokémon is probably the most powerful IP in the world, attaching blockchain to something with that kind of viral energy could help get it into every household.

Jeff joined the project in March of 2017. “The community was still very, very small,” he tells us. “I’ve always been interested in disruptive new technologies and I wanted to create a new market rather than improving an existing paradigm. Originally, I wasn’t really interested in blockchain because it was primarily financial stuff, but I met Trung (CEO) and Aleksander (COO) while playing Cryptokitties.”

Fun, beauty, and sound economics

The Cryptokitties game drew together a community of people who saw the revolution that blockchain could bring to gaming. As Jeff explains, Axie grew organically from the people within the community who said, “Hey, this is cool. What does the future look like? What is the evolution of this concept?” Axie evolved from the desire for a blockchain game with lots of fun baked into the assets and sound economics, a real understanding of supply and demand in the NFT (Non-Fungible Token) market, and ways to apply monetary principles.
“Axie needs to be fun and it needs to be beautiful,” says Jeff. “We have game design, art, but also elements of economics. At the beginning all you could do was just look at your Axies, so we built from that point with the community. I think one of the reasons that our community is so strong and so devoted to the game is because they’ve really seen it grow from just an idea and a concept into something that’s tangible and working and helping.”

Sound economics within a game is music to our ears. It is often a criticism of collectibles that supply and past sales history lack transparency and data availability. Because everything here is on the blockchain, that inherent transparency really adds to the game. With crypto collectibles, transparency increases the availability of public data. For example, with crypto art you can use the blockchain to figure out the average prices of sales for a particular artist. If you try to do that in the conventional art market, you’re going to have to pay a huge subscription fee to access that data.

Jeff has checked out the situation in the real world first-hand. “I pretended I wanted to buy a Picasso just so I could go through the steps to get the data,” he says. “I kept running into dead ends where I had to pay. Data availability in physical collectibles and the physical art market is very sparse and sporadic. Having price provenance and data is a real benefit to everyday users and collectors and a very basic benefit of blockchain.”

The importance of community

The Axie team started to tap into the more complex benefits of blockchain by sharing the value of the platform through a governance token, AXS. The first AXS were issued to players in the community in November 2020. This is a more complex and relatively unproven strategy, but Jeff thinks this is going to move the needle more.

“The idea is that the intersection of blockchain and games will lead to the development of these kinds of fully digital nations,” he says. “These nation states will be complete with real economies, money, complex social structures and even governments.” Jeff studied military and economic history at Yale and wrote his thesis on Alexander Hamilton. “I’ve always felt like I missed my chance to lay out the economic principles of a nation, but games will be kind of a Petri dish for these digital nations. There are already jobs developing, people hiring other people with contracts to play the game and earn tokens using their assets. Social structures are emerging with Guilds and governance. The last step is that we want Axie to be the first game that shares the entire value of the platform with the community that plays it. Until now we have basically been a rent-extracting middleman within this universe, taking marketplace fees and selling things directly like land and Axies. That was necessary at the beginning to kick start the engine, but over time we want to be core developers within the system owning a small slice of a huge pie, rather than a huge slice of a very small pie.”

Scaling and growing

AXS is the vehicle to share the value of the network with players, content creators, and community developers. The Axie core team retains roughly 20% of the tokens so that they are still incentivised to add value and take a long-term approach but sharing more and being more generous with the community is the way to scale. This may feel counter-intuitive, as it turns traditional financing models on its head.
Jeff goes on to explain, “The likes of PayPal and Uber effectively handed over massive amounts of money to scale their networks. They were bleeding money because they understood that in order to build something of huge value you need to build a huge network and harness that network effect. Games are becoming networks now.”

If the game can create value and share that value with users for playing, in a way that makes sense, the network and the game can scale in the same way. Until now, games have tried to scale by being really fun and having massive funding for marketing and other tricks and treats, but blockchain provides a new way for games to scale. Rather than spending money on traditional marketing, you’re sharing value with players when they play the game. It’s all about harnessing the value of the community.

AXS tokens were initially distributed to existing players in the community, and it can be bought on the open market (“An underrated distribution mechanism,” says Jeff). They will also be distributed through players, for example as prizes on the leaderboard in competitive PvP tournaments. There will be an ecosystem fund so people can make grant proposals, for example for community marketing or for content creators. Players can also farm it from land by building structures or harvesting different resources.

Axie is not just one game, one application. Axie group battles are just one mini game, whereas the team is looking to build many different types of experiences on top of these assets, either themselves or through an SDK (Software Development Kit) for community builds, as you see with Pokémon and others.

“The power of AXS coupled with the power of blockchain, allows all of those experiences to be woven together through a common thread of shared ownership. Everyone who’s building on top of Axie uses AXS as a common denominator, so everyone is adding value to the ecosystem. In cases where they’re really helping the ecosystem, we can provide funding.”
A lot of the group come from the open source community. Open source projects have never really found a way to incentivise full time contributions from developers. Now, blockchain and cryptocurrencies can solve that problem. If you create something that represents part of an open source project, people can hold that asset and add value to it through their own voluntary contributions.

Crypto pets and new experiences

Ownership of assets is a key aspect of blockchain games, something that is specifically enabled by the technology. This leads Axie down a new and unexpected path – disrupting the pet industry.

Jeff explains, “Once you give people real true digital property rights over their Axie, over their digital pet, it really becomes more like a real pet.” As he knows from experience, people can find it difficult to have physical pets when living in urban societies with restrictions on animals in properties or moving around the world with work commitments. “I think the next evolution of pet ownership is having them on your phone,” he says, “and then if you have a pet you should be able to monetise it if you want. If people start to see Axies as real pets, then they’re willing to spend some money to make their Axies look cute and beautiful. A lot of people see us like Pokémon, but we see Axies like Tamagotchi too. We want to take pet ownership to the next level, doing things other than just buying and selling.”

Life will find a way

We talk a lot about the future of work in every society. One thing that really interests us is how Axie Infinity is already making a difference to people’s lives and providing income in this difficult year. We’re seeing the nature of work changing fundamentally and irreversibly. We’re spending more time indoors and in front of screens. When you’re looking into a screen it becomes your universe. Naturally, new types of work and new opportunities will arise. We’re seeing the rise of digital nations, digital economies, and digital work that’s accessible to anyone anywhere in the world. Axie is a very early example of this, which is really exciting.

There are a few missing pieces in the jigsaw, though. Identity is one – how do you know there’s one person for one account? The Axie team also has to manage the communities – it’s very easy to have a tight knit small community, but it’s very hard to have a tight knit large community. There are some questions around scaling. AXS will help but they still need to focus a lot on more fun and more accessible gameplay. However, one of the fascinating issues here is that simple gameplay opens up abuse from bots. Exploitation by AIs is a new dimension to consider in the play-to-earn economy. If you’re building a mechanism for people to earn their living, then you don’t want to be fleeced by a machine.

“One of the secrets about Axie is that it’s a little bit complex,” says Jeff, “but that complexity is a defence against AI. Everyone always talks about onboarding barriers, but we created even more steps than the usual. We’ve been able to grow because we have a concrete benefit. We’ve always believed in benefits-driven messaging, benefits-driven product development, so as long as the benefit is strong enough then people will find away – like in Jurassic Park: life will find a way.”

A vision for society

Jeff’s vision goes further. “I believe that in the future, non-profits will use games as a way to distribute basic incomes, because then you create some dignity of work. Governments may also seek to use them for UBI (Universal Basic Income), making people feel like they are accomplishing something even if it’s just going through a game to earn. We’re calling this revolution play to earn, but I think it offers a market-based solution to the concept of UBI. I believe that we will need to find ways to replace income for many people over the next century, creating new ways to earn money just by being a human. Adding value to platforms that require users for network effect means every human should be able to earn a living.”

Enabling every human to earn a living. This is an extraordinary message of hope for the future, and it’s exciting to be part of an evolving society.

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