Axie Infinity, the play-to-earn monster battling game developed by Sky Mavis, is currently undergoing significant adjustments to its ecosystem, particularly focusing on its reward token, Smooth Love Potion (SLP). The primary objective of these changes is to stabilize the game’s earning model, and a key element of this strategy involves the implementation of a supply cap for SLP, limiting the total tokens to 44 billion.
Axie Infinity announces a cap on its SLP token
Unlike a technical cap enforced by a new smart contract, this cap is referred to as a “social contract” and will be enforced partly through in-game reward metering. Presently, there are approximately 41.4 billion SLP tokens in circulation. SLP holds a crucial role within Axie Infinity as the game’s primary in-game currency, earned through various gameplay activities. In addition to SLP, Axie Infinity features two other associated crypto tokens: AXS, the governance token, and RON, the gas (transaction fee) token of Axie’s Ronin blockchain, which serves as an Ethereum sidechain specifically designed for gaming.
To achieve the desired stabilization, the Axie Infinity team aims to reduce SLP’s deflation rate to 2%. A pivotal component of this strategy is the introduction of a stability fund. For every 10 SLPs burned, the team commits to adding 2 SLPs to the fund. To kickstart this initiative, a substantial contribution of 60,000 USDC has already been made to the stability fund. The functionality of the stability fund is outlined in a blog post by the Axie Infinity team. It operates by programmatically buying SLP when inflation surpasses the target and selling SLP when inflation falls below the specified target.
Building stability and the role of growth fund
This mechanism is carefully designed to create a steady demand for SLP, ensuring a balance between supply and demand within the game’s economy. In response to these developments, the price of SLP has experienced an approximately 8% increase in the past day. However, it’s worth noting that SLP’s value remains down nearly 2% over the week, and it has undergone a staggering decline of over 99% from its peak in 2021 when Axie Infinity garnered widespread attention and millions of active players. Axie Infinity players have traditionally earned SLP by winning games within the platform.
Additionally, a new game mode, Premium Cursed Coliseum, has been introduced. In this mode, players pay a one-time fee of 150 SLP to enter, with the opportunity to earn varying amounts of SLP based on the number of wins achieved. The entry fees will undergo a 20% burn, and the remainder will contribute to a growth fund. However, the percentage allocated to the growth fund may fluctuate every month. It is crucial to note that SLP earned from this new Coliseum mode is currently non-withdrawable, but the team has assured users that this key feature will become available “within the next month or two.”
Initially launched in 2018, Axie Infinity experienced substantial growth in 2021 and early 2022, emerging as a pioneer in the play-to-earn crypto games space. The game generated billions of dollars in NFT trades. However, the value of SLP faced a significant decline after reaching all-time highs in the spring and summer of 2021, failing to return to its previous price levels. In early 2022, Sky Mavis identified SLP inflation as a critical issue affecting the play-to-earn economy, with daily SLP distribution exceeding the amount burned through the Axie monster breeding process.
