How Axie Infinity $SLP can find price stability
How Axie Infinity $SLP can find price stability

How Axie Infinity $SLP can find price stability

Date
April 15, 2022
Author
🎒TwoBags
Blog Category
Axie Infinity

15 April 2022, @ItsTwoBags

Introduction

We’ve talked a lot about Play 2 Earn recently and many have come to the logical conclusion that fundamentally, for games with earning potential to be sustainable, they must be fun to play.

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If you want to understand more about the thinking behind this conclusion, refer to the Twitter thread by @TwoBags, and the article by @Guru below:

For this reason, this article is going to focus on this principle, but it’s not the only point that needs to be considered when it comes to improve the economy behind Axie Infinity.

Let’s dive in!

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Make sure to catch the end of this article if you want my take on a “burning mechanism”!

Economics 101

Price is a function of supply and demand. To change the price, you have these two levers. You can increase or reduce the supply, and increase or reduce the demand.

To increase the price, you need to either, or both:

  • Reduce the supply
  • Increase the demand
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Just change the cost of breeding... maybe?

Most of the discussion about SLP in the past has honed in on these two things in a very simplistic way:

  • ⬇️ Reduce the supply: reduce how much SLP you earn from winning in arena
  • ⬆️ Increase the demand: increase how much SLP it costs to breed

Whilst this is important, it’s an adjustment/temporary economy balancing mechanic that can have a quick, but short term effect.

Like interest, the lever can only be moved so far. Ray Dalio explains this in his video “How the economic machine works”. I’ve linked a relevant moment in the video below, but recommend everyone watch the whole video when they have time.

Watch 10 seconds below about interest rates:

It’s not that simple

The point of sharing this snippet of “How the economic machine works, is to demonstrate that changing the SLP costs/reward has a limit:

  • Arena rewards can’t get lower than 0
  • If you raise the cost of breeding too high, there is less demand to breed at all

Desire to spend

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To stimulate the economy beyond this simple mechanic, there needs to be more verticals and values to SLP itself. The core of all of these additional verticals and values is entertainment.

For there to be real, sustainable demand for any in-game currency like SLP, the game has to be perceived by the majority as competitive and fun to play. When people spend money on games, they are buying entertainment (or put more fundamentally, “dopamine”).

Ability to spend

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However, the desire to buy entertainment, or dopamine, is not enough by itself. There also needs to be the ability to spend money. This partly comes down to player-base demographics.

Today, a large proportion of the Axie Infinity player base do not have the ability to spend money on entertainment. Actually, in many cases it’s the opposite. A large proportion of the player base were incentivised to play Axie Infinity as they could earn more money playing it than they could earn in a real-world job!

This is fine if there’s enough of a player base to balance out how much value is extracted from the game to pay for life.

So, how do we find this balance?

Finding the balance

Summarizing so far, a game economy depends on the following characteristics to be stable and sustainable:

  • Economy stability mechanics/monetary policy
  • The perception of the game, how entertaining it is to play and how good it feels to be rewarded for progression and achievement
  • The balance of demographics between those who inject money vs those who extract
  • The options players have to show off that they achieved something great

Throughout this article, I’ll go into some examples of how each of these can be enhanced.

Economy stability and monetary policy

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As explained earlier, controlling the cost of breeding and the rewards for playing is limited but important. This is something that should happen in small but frequent changes, and based upon a common formula that is agreed by humans and controlled automatically.

Currently this happens infrequently which requires fairly large changes to the breeding costs. This results in supply/demand shocks to the market, along with spikes in price due to short term speculation on what the change means.

This process could be automated on a regular and frequent interval (daily/hourly) based upon a formula or metric to optimise for.

The. Game. Must. Be. Fun.

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This is the most important aspect of any game. Period.

When you add earning capabilities to a game, the tokens behind the game become a reflection of how fun the players find the game. For the token price to hold value in a scenario where players are able to extract earnings from the game, there must be an equal force of players who inject funds into the game.

This force is driven by entertainment. Players will exchange money for entertainment.

In this section, I’m going to focus on small changes that can be applied to Axie Infinity to make the game more exciting without changing the game itself.

One way this can be achieved is to increase the amount of excitement players feel from progressing in the game with exciting animations and uncertain rewards.

The science behind uncertain rewards

Uncertainty increases motivation en route to a goal

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There are studies behind rewards and how this impacts human behaviour to keep seeking these rewards vs losing interest. Studies have been conducted against both humans and other animals like monkeys.

All of these studies show that animals, including humans, seek rewards more often when the reward is uncertain. One study is quoted below:

The Motivating-Uncertainty Effect: Uncertainty Increases Resource Investment in the Process of Reward Pursuit

Professors Ayelet Fishbach and Christopher K. Hsee of the University of Chicago Booth School of Business and Luxi Shen of the University of Hong Kong compared the time, money and effort that people put into winning a certain reward versus an uncertain reward, and found that the uncertain reward was more motivating. The researchers ran several experiments that established this motivation. For example, in one study they asked college students to drink a large amount of water in two minutes. Some were told they would receive $2 for completing the task, while others were told they would receive either $1 or $2. They found that more people finished the water to receive the uncertain amount of money. The team calls this phenomenon the motivating-uncertainty effect.

Axie Infinity has already implemented uncertain rewards through two mechanics:

  • Breeding - where the new Axie has uncertainty to which parts it gets
  • Crafting - where there is uncertainty as to which rune/charm you will receive

However there’s a bunch of missed opportunities here to make this process much more exciting...

Make reward reveals much more exciting

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In the Motivating-Uncertainty Effect study, the Professors go on to explain:

Fishbach, Hsee and Shen explain this effect by positing that making the unknown known -- i.e., figuring out what is in a wrapped package or finding out which reward one has earned -- is a positive experience. Because people are excited to find out what they can actually get, working for an uncertain reward makes the whole situation more like a game and less like work.

Unwrapping and revealing the reward is an exciting process. Currently in Origin, Moonshard rewards are given but to find them you have to click Play → Arena → Present icon to find the rewards.

Additionally, when Charms and Runes are crafted, they are immediately revealed without anything exciting to create the tension and suspense behind a positive experience of unwrapping the package.

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This is an opportunity to make being rewarded much more exciting and a feeling that players will want to grind for to experience time and time again.

See how this is implemented in an extremely popular FPS game Apex Legends:

Or FIFA TOTY:

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These experiences are so exciting, that people are even willing to watch long YouTube videos of other people opening their packs. The two videos above have a combined view count of 2 million.

Make progression to higher leagues feel great

The same applies to in-game progression. Origin has made a great step in adding leagues/ranks to the leader board. However, when ranking up to a new league there’s no indication that you’ve achieved something. The first you know is when you see that your league has changed on the game select screen:

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When you achieve a new rank after playing a match, it would feel much more exciting and rewarding if there is a popup with an animated screen to show that you have ranked up and to demonstrate that there are new rewards to open. This works hand-in-hand with the reward revealing process.

See League of Legends rank up animations as an example:

Also see Halo Infinite rank up animation (less exciting, but still something):

Use breeding as another opportunity for excitement

When breeding, revealing the new Axie should be just as fun. For example, each part could be revealed one at a time with a moment of suspense, mystery and excitement.

Introduce opportunities for players to show-off

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What good is all this progression in a skill-based game if you’re not able to show-off your progression to others?

The following excerpt from John Joseph Fennimore’s university thesis “Are They Really Just Cosmetic? The Impact of Cosmetic Items on Fortnite's Gameplay and Game Design” says it best:

As is with any competitive game, winning is immensely satisfying thanks to the social function it provides. Huizinga writes that winning a game is tied to showing oneself superior to the others in the game not just in the context of the game but in general. Not only do the winners earn superiority, but honor and esteem that can be applied to the group to which the victors belong. As Huizinga says, “The primary thing is the desire to excel others, to be the first and to be honored for that.” Raptis et al. says that performing difficult tasks must appear trivial and effortless to look cool. Thus, playing well is associated with looking good. It’s another way of looking cool: showing off highly skilled gameplay while making it look effortless. While cosmetic items are mostly associated with gameplay of fantasy, design and socialization, they can help facilitate the competitive aspect of multiplayer games.

This is an important part of the cycle. It’s an end-goal of the grind and what drives people to earn rewards, which drives the desire to win, which drives progression, which drives spending.

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Here are two simple types of cosmetic rewards that could be implemented to Axie Infinity to give players a chance to show off their achievements and time in the game:

  • Season based - “I was here in Season 1!”
  • Achievement based - “I’m a top 100 player!”

Summary

I’ve spent a lot of time talking about making the game more exciting to progress and be rewarded, and for good reason - it’s the most important aspect of any game to be successful. More so in a game with earning capabilities - where people are looking at the economy which is a reflection of how enjoyable spending time (and money) in the game really is.

But in isolation this is not enough. It’s no good having a high desire to spend on the game if the player base don’t have the ability to spend, so onto the next topic.

Player base demographic and ability to spend

There needs to be a balance between people extracting value from Axie and using it to improve their real life (those with a shortage of money) and those injecting value into to Axie using their real life money (those with a surplus of money) to improve their in-game progression.

Right now, this means balancing the major demographic of Axie Players. A large proportion of Axie players were attracted by the opportunity to earn more money playing Axie than they were able to working a job in real life and they need the money outside of Axie, so they extract.

To balance this proportion, new players must be encouraged to play the game from other demographics where they earn more in real life than via Axie and actually inject cash into the game.

This likely needs a marketing campaign to spread the word, however to realise the true potential of this marketing the fun and entertainment aspect of the game must be mastered first.

First impressions matter!

But what about all the SLP and Axies?

I haven’t really talked about the current supply of SLP and Axies so far. This is because I believe the economy reflects the quality of the game, rather than the other way around.

The supply of Axies and SLP comes hand-in hand. The more Axies there are vs the number of players, the less demand for Axies there are, which drives down the demand and the price of SLP.

There’s a lot of discussions already about SLP and Axie “burning mechanisms”, but not so much around ensuring that the game is fun - which I reinforce is the most important thing to get right. The purpose of this article is to give suggestions around how to increase the good feeling players get when playing this game, but I want to share a few interesting ideas regarding all the Axies that are competitively useless in PvP and PvE.

Moon Missions

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Moonshards are a new currency in Origin that allows the crafting of Runes and Charms. They are earned by playing Arena games and ranking up. The current perception is that collecting the Runes and Charms you need requires a lot of grinding in the game.

In all games, there’s a population of players who don’t have as much time to grind as others, but still want to have the same competitive edge as those who do, so people can fight more evenly and find their edge in player skill rather than just time spent playing.

My suggestion is to be able to assign non-competitive Axies to Moon Missions - where they travel to the moon and collect Moonshards for you all the time, even when you are not playing. The bigger your army of Axies on Moon Missions, the more Moonshards you earn.

Crafting recipes

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Occasionally, but less frequently, they might also find crafting recipes. Maybe different classes of Axies are better at finding different types of recipes.

This can be compared to mechanics in other games where resources are generated whilst you’re not playing - like the Bitcoin mining in Escape from Tarkov. You could also leverage this mechanic to encourage players to return to the game daily to collect their Moonshards and re-send their Axies on another mission.

It could also open up the idea of different types of missions. Maybe certain crafting recipes can only be found on certain planets or places, and you get to choose how many Axies to assign to Moonshards vs specific crafting recipes depending on what Runes/Charms you need for your team.

Result

This does two things to the current supply of Axies without the need to “burn” (a sad term to use when talking about our beloved Axies let’s be honest!).

  1. Reduces how many non-competitive Axies hits the marketplace in the first place
  2. Increases demand for the non-competitive Axies that do hit the marketplace

In turn, this also increases the demand for SLP, and gives players who have less time to play an option to keep up with the grind required to get their hands on the important Runes/Charms they need.

Also, by keeping the Axies in collections, maybe a future balancing patch will make them competitive again! In this event you can reassign your Axies from Moon Missions back into a team in your roster for competitive gameplay.

Alternatively, maybe it’s decided that for the economy it’s best that the Axies sent on Moon Missions can’t return to gameplay.

Axie Metamorphosis

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Another excellent idea shared recently by @Guru is to combine the reduction of Axie supply with the introduction of new Mech, Dusk and Dawn class cards.

I won’t spoil it, check out his thread below, and retweet if you like it! 👇

Conclusion

Managing an economy in a game with earning mechanics is a very difficult task, but it shouldn’t be the primary focus.

The purpose of games is to be enjoyed by the players. When people spend money on games, they are primarily buying entertainment. If a game has no entertainment value people won’t spend money on it. This is a big problem when the ability to extract value from the game exists! It has to be balanced with the same value injection.

Get the game right and a good economy will follow. From there, it’s a matter of implementing the right economic mechanics to keep balance.

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Thank you for taking the time to read all the way through! If you enjoyed the article feel free to share it publicly but do us a favour and credit either myself and/or MTTM by using the links to our Twitter profiles below.

Author(s) & Contact Info

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TwoBags | MTTM Core Team

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