The Decline of Axie Infinity

Axie Infinity was the poster child for last year’s blockchain gaming boom. In October 2021, Sky Mavis, the creator of Axie, raised $152 million in a Series B funding round led by Andreessen Horowitz (a16z), valuing the project near $3 billion.

However, it is looking gloomy for the once darling of the P2E world as Axie has been on a steady decline since November 2021.

• According to Dune Analytics, new monthly users have fallen from 48,000 unique users to around 5,000 per month, approximately a 90% decrease between August 2021 and May 2022.
• Understandably, the daily sales volume has followed the same trajectory as new users. According to CryptoSlam, total sales volume in US dollars ($) peaked at $754 million in November 2021 compared to $7.09 million in May 2022.
• This has meant that Axie Infinity’s revenue generation has begun to slow down. For the first time since February 2021, Axie Infinity has generated less than $1 million in revenue.

Axie Infinity generates most of its revenue from trading and breeding fees. So naturally, as user traction has slowed down, these actions have reduced.

Why has Axie struggled to continue its growth trajectory? 

• Flawed tokenomics of both Axies in-game tokens AXS and SLP have made it near impossible for Sky Marvin to continue the game’s rapid growth.
• In particular, the infinite supply of the SLP utility token caused high inflation levels, causing the token to lose almost 99% of its value since July 2021.

This reduced the economic incentive for players to continue using the game, which was the main driver to users due to the simple gameplay mechanics.