SLP's daily production exceeds 250 million, while its burn is barely 34 million. Will this be the end of Axie Infinity's profitability?

Axie Infinity has been the most stable play to earn video game between 2020 and 2022. Its cute little characters, known as Axies, fight in epic battles in a sophisticated and entertaining gameplay system to collect the Smooth Love Potion (SLP).

However, the SLP price is in a very steep decline, putting the economic aspect of the project at risk. Want to know if the SLP is dying, what measures are being taken, and more detailed analysis? Check out the following.

Current situation of SLP

SLP is being produced at a rate that exceeds current demand, without a supply limit, causing hyperinflation.

As can be seen in the graph, the red is the amount of SLP " minted", i.e., produced, and the orange is the SLP that is burned. To illustrate, on any given day, January 16, 2022, 253,086,303 SLP were mined, while 34,306,650 SLP were burned.

In other words, there is an increase in the market of 218,779,653 SLP. In a nutshell, this means that the production exceeds the burned SLP by almost 10 times. As there is such a large supply and little demand, this is the result.

The token burn has only one activity: Axies breeding process.

The SLP is anchored to a cryptocurrency: **Ethereum** and the situation of this are not the best at the moment.

But this is clear, because of the whole picture around cryptocurrencies today: downtrend, pandemic, countries that have wanted to eliminate cryptocurrencies in general and represent a significant volume of transactions.

This is also not favorable for the game's governance token: AXS.

Has its production decreased? On the contrary. There are more and more minted SLP as well as axies on the market, which is currently around 11 million cute little creatures and growing.

So how to burn the SLP if the only way to do so is to create more of these token farmers in an increasingly unequal cycle between supply and demand?

The limit for each Axie is 7 breeds! Otherwise, we would have many, many more. Taking all this into account, the developers have announced what would be the preview of Axie Infinity's metaverse: land lots.

With these lots of land, which are not cheap at all (one of them, the central lot, cost 2.5 million dollars) they promise rewards in AXS by using them to hunt, fish, and collect various resources, as well as fight against other territories with rewards in AXS and a new token: RON.

Commissions will be paid in SLP to carry out all these activities, which will involve a progressive burn.

At the moment of writing this article, the price of the SLP is 1 cent on the dollar, after 8 months of great profitability, and a lot of players who are scholarship players and investors who have bought Axies or hold the token are worried because they bought accounts in September or October 2021 when the SLP was above 10 cents on the dollar. They have been "trapped" inside the bearish economy.

Temporary solutions

Sky Mavis, the team behind this project has released a statement to reassure their community, which if you're interested you can check out at this link: https://axie.substack.com/p/dev-journal-economic-balancing

To sum it up a bit, they have listened to the ideas of the community and these are some of the ones they are going to implement:

1.Remove the penalty below 800MMR or Match Making Rate but eliminate the PVE or adventure mode.

2.Split the individual rewards load between SLP and AXS, SLP in the low rankings while the best in the higher MMR, above 2000 or 2500 replace the SLP with an equivalent in AXS. in addition to the conventional seasonal reward in this same governance token.

3.Eliminate the daily reward of the 25 SLP.

4.Use energy to generate SLP in PVE mode.

Here you can see some drastic options. Eliminate PVE mode would be subtracting 50 SLP from the overall production of all accounts. This would ultimately cease to be attractive to bot farms, which are only looking for these "easy" SLP by completing quests without doing arenas or meeting the daily goal. And this activity supports 70% of the overall SLP production.

So we are talking about more than 360,000 active players per day - that's a lot of SLP mining.

An interesting fact: statistics reveal that about 70% of these players and axies are bots - that's 252,000 bots!

Let's hope that their production will go down with the new mechanism incorporated on January 11, which is no longer clicking in order from 1 to 5, but ordering an axie to the correct position.

As for the mining figure I mentioned earlier: 253,086,303 SLP 70% of which is 177,160,412 SLP, and the remaining 30% is the one made in the arenas and the 25 SLP reward for the daily goal.

However, some human players are at this 800-900 MMR threshold. In that case, the gain would be almost eliminated. This would affect scholarship players whose academies bought the cheapest axies on the market and barely make the daily goal without falling to the underworld under 800. and bellow that line you can´t mint any SLP either on adventure or arena until you reach above 800 again.

This being said a few weeks ago when there was a supply of 29.5 billion SLP it is now at 46.4 billion and rising. Meaning that the only activity that burned SLP, breeding, has stopped or declined further.

There are good and bad news: when governance token Ronin (RON) came out in one day this number decreased from 46.4 billion to 30 billions. 16 billions SLP burned in one day. Awesome!

But the troubles keep on: Why spend AXS and SLP on a family tree breeding new axies when you can find an axie for $20 or $30 on the Marketplace?

There's just one little problem: axies are born with characteristics that make them unique, and you can't change their parts (which in turn become the cards you see in the game) by incorporating the two additional parts. Will this come with improvements in energy or the number of cards? It is not yet known for sure.

There is some talk of merging axies to get better versions. So we will see improved V3s where whoever invests in burning axies will be the one with the tactical advantage generating higher gains.

This will greatly help to burn axies in the Marketplace. Which could lower their price even more since the demand trend would be for these upgraded axies for the V3s.

My proposals

With all this on the table, is there any salvation for the SLP? I think so. By making the right decisions in time for the economic aspect of the game to be sustainable and all these new projects: origins, v3, and lands.

I also throw in some ideas that could work:

SLP burning could be done by removing the 25 from the daily goal first. Then progressively decreasing the SLP you get in PVE and replacing it with rewards in other currencies like RON or resources that combine with the land to finally eliminate it.

Also on these resources: food, wood, stone, whatever. Create a smart contract to buy and sell instead of SLP and leave it for production in the arena.

This would add importance to the land and ecosystem even if you don't own any you can sell it on the marketplace without problems.

Establish the burning of axies in land territory wars. Where the defeated axies are released but the group rewards for these activities are worth the effort and investment.

Axies that are part of the active population of the lands should not participate in V2 or V3 battles, as they are getting resources from this offline mode.

Create Skins: hats, glasses, necklaces, or any additional decorative item with some improvement in stats. 5 attack points for a specific class, 10 additional shield points on a card, or 10 additional health points.

These would be minimal changes but ones that could **change the balance of any battle** and that players would pay for in SLP to differentiate themselves from others in aesthetics and for the additional statistical benefits.

The game as an economical project is not dead per se, but it is at a point where it has to adjust itself to stay afloat and not lose the trust of its players. the announcement of v3 is promising. And the burn they prospect is 50% of the total token at that date.

Will SLP production increase? It will continue as long as there are players. But the structure is currently unbalanced.

Most players will upgrade their axies for v3 and start playing axies. Leaving the v2s, the current battles obsolete, will these v3s be rewarded in SLP? Perhaps. It would be more useful if not, or a minimal amount to further amortize SLP production.

On burning axies, this is not unlimited. Will sufficient axies be burned to reduce the amount of these in the market? Yes, but I estimate no more than 30% of the current total of 11 million.

Improving the antibot system should be the priority for the game to avoid this automated overproduction in addition to further incentivizing the arena system, both in v2 and v3.

Whatever the ideas proposed here, if they do something different, let their goal not stray from what was proposed: decrease the amount of minted SLP, produce a gradual and massive burn while surviving this cryptocurrency winter and even obtain a deflation of SLP.

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This has been my analysis and opinion, what is yours? Comment below, share it with your friends if you found it interesting.

A river cuts through rock, not because of its power, but because of its persistence, so take courage! The downtrend won't last forever.

My predictions 

This is not financial advisory, I am talking about my experience and analysis on this and I am not responsible for decisions made based on this. You are free to draw your conclusions. 

What is the future for these two - now three - cryptocurrencies? 

Future of SLP

The SLP is a currency with no maximum supply. So its trend is 100% inflationary. This problem began 5 months ago or more and is not going to end in the short term. I estimate that the currency will drop by 50% or even 60% more than its current value until the origins system, v3 battles, and the land system appear.

Once they remove SLP mining from the PVE mode and replace it with other equally profitable assets. The coin will still fall due to the number of holders who will wait until the last minute for recovery, in addition, there is the FUD factor of fear, uncertainty, and doubt about this token, which many will be able to sell before not obtaining any profitability.

But after that critical moment passes, there will be an important upturn. At the end of the day, SLP is still the most important transaction currency in this game. It will be important for upgrades, land items, breeding, and more new options. So it would be a good idea to hold off a bit while this deflation hits. 

"Winters and downturns don't last forever. Neither are upswings." 

For the people that go around complaining that this is a scam or a rug pull, let's remember that Samsung, Activision, and other heavyweights are investors and contributors. 

Have any of them pulled out? No. Why? Because they know it is still a significant and lucrative project. 

Katana and RON: new opportunities

When they created Katana, a specialized DEX for Axie Infinity, it moved more than $1.6 billion in a week! This just uses AXS and SLP in buy, sell and transfer of funds transactions. 

I have explained what is going on with AXS and SLP, but I have not mentioned their latest economic project: RON. 

This will have many more utilities. 

- It will be used as a gas for transactions within the Ronin DEX staking system.

- It has been rumored to be the replacement of the SLP for arena and PVE rewards. 

But more is on the way! With the creation of Katana and now carrying a governance token. Look further into the future: any project or crypto game will be able to use Katana just like Binance's BEP20 or Polygon's network is used. 

So instead of buying MATIC or BNB, you would be buying RON to make payments and bridges. Awesome!

Accounts that have axies in their inventory will be able to use this network a few times a day for free. This is an incentive for both axie infinity players and those who have a lot of transactions within the same network. 

Although its price has dropped, it has contributed a lot to SLP economics, keeping it stable at 30 billion tokens despite its continued production as I have mentioned above. 

This is a very young coin, with a great potential that could reach a price of up to 10 times its current value as more companies join the ronin network for their transactions. They could even replace AXS for buying and selling axies with RON and use AXS as an in-game reward. But this would be in the longer term. 

AXS predictions: fall and rebound

The AXS has lost more than 40% of its value and continues to fall. Remember that this coin depends a lot on public confidence, and precisely at the moment, this confidence is broken. It should be made clear that this currency depends a lot on Ethereum, so if Ethereum were to launch the long-awaited 2.0, it will have a very important rebound that could take AXS with it back to its historical maximum. 

Perhaps this is why I get the idea that Axie Infinity will replace AXS as a governance token with RON. However, it still has utility and if you believe in Axie Infinity project the best time to capitalize and build teams is now.

Whether you have to change them later for the V3 battles the cost will be lower because the supply is so abundant. After the release of the V3s, there will come a significant increase in demand which will increase the price of this asset significantly. 

Final thoughts

Overall there are a lot of expectations around these three coins. Personally, I have considered holding.  Wait and see what results will come, what those v3 will look like, what rewards will be the SLP replacement in PVE, and how they will adjust the arena. 

All those factors matter in the economic part of the game and directly influence the development of these currencies. It is still a game supported by many major companies and it is estimated that they have moved over $10 billion since its boom back in May 2021 until now. I really doubt they want to let their project die in the economic aspect.

Thanks to Publish0x for this opportunity and I hope my expectations are met even further. Only 2% of the world's population has access to these platforms and generates income with cryptocurrencies. Let's consider ourselves lucky.