Axie Infinity’s in-game currency (Smooth Love Potions, or SLP) has a market cap of over $187 million. Players earn SLP, for free, by playing the game. How can a P2E currency that is handed out for free be collectively worth $187 million? Where does the value of SLP, or any play-to-earn in-game currency, come from?
Generating Value
SLP is used to breed new axies - cute virtual creatures that fight in Pokémon-like battles. So the value of SLP derives entirely from the value of axies. There are two fundamental reasons to buy axies:
First, axies have intrinsic value to people for a variety of reasons. Competitive players want a meta team to win PvP battles and top the leaderboards. Casual players want to own cute or cool axies and go on PvE adventures. Collectors want to acquire the rarest axies and show them off. Social players may want axies they can loan to their friends to get them into the game.
Second, Axies have extrinsic, monetary value. Breeders want to cross axies to create valuable offspring. Managers want to rent out axies to “scholars” who kick back ~40% of their earnings to the manager. Pro players and streamers want to make money by winning tournaments or placing at the top of the leaderboards. Investors want to buy and hold underpriced axies so they can resell them for a profit.
Preserving Value
Players rely on the developer to maintain these two sources of value.
In Axie Infinity, that means that all players need to trust Sky Mavis to preserve intrinsic value by continuing to build a good game. If people stopped wanting to own axies because the game became boring to play or it became too easy to collect them, demand for axies because of their intrinsic value would start to decrease. This would in turn cause the players buying axies in order to make a profit to sell their assets and move on, triggering a market crash.
Additionally, people buying axies primarily to make a profit are trusting Sky Mavis to keep the extrinsic value of axies high. SLP inflation and corresponding axie depreciation could be caused directly by the developers if they increased SLP gains/battle or reduced SLP needed to breed axies. SLP prices could also fall if supply exceeds demand due to too many players selling SLP relative to breeders buying SLP. This is why Sky Mavis has been cracking down on multi-account players, who are almost exclusively extrinsically-motivated SLP farmers.
Real Value
SLP, or other cryptocurrencies, get value from the same two places as the US dollar. A dollar is a piece of paper with no inherent value. But you can use dollars to directly get things that you want for their intrinsic value, or get things that can make you more dollars. And the world trusts the US government to maintain the value of those dollars. Sky Mavis may not have the resources to invade countries who try to sell oil in a competing currency. But they have been effective in creating a game and game economy that gives their assets value.
Originally posted on Playing2Earn.com.
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