It’s Saturday morning cryptofam and I’m thinking clearly for the first time in months. The biggest news of the week was the one we’ve been dreading for months now: SkyMavis is permanently removing all Adventure and Daily Quest rewards from the game. (Read the entire update here.) What does this mean for the average player and what kind of impact can we expect over the next few weeks and months? In order to answer that clearly, we need to lay down some context first. As of last week, there were about 2.2M people playing the game globally on a daily basis (DAU). The DAU has been dropping steadily for the last three weeks from its all-time high of 2.47M (see the weekly numbers here), so the data is indicating something that we all know as members of the community: people are starting to leave the game. Not in huge numbers yet, but certainly enough to reduce the DAU by over 10% in January. The biggest reason for this exodus is because SLP price is so low.
Exactly one year ago today, SLP was at $0.02. It began to spike over the next few months as more and more people became interested in the game and breeders began to start professional farms to sell axies to the newcomers. We saw the ultimate result of that from May to July: the price of SLP mooned to $0.30 (15x), and the prices of regular axie teams skyrocketed to over $1500. Things were good, for a time, because the breeders' demand for SLP kept matching the supply being sold by the players. But we knew that this was not sustainable even from basic math. The breeders only consume SLP to create a new axie ONCE, but that one axie can generate SLP income FOREVER. The imbalance was obvious (it was my primary criticism back in July when I first started writing heavily about the game), but the thing about economic theory is that reality often takes a bit of time to catch up to the predictions.
So here we are now, with SLP at $0.01, and the daily supply of SLP outstripping the demand by a ratio of 4:1. In case you aren't quite sure what that means, for every 4 SLP being offered, only 1 SLP is actually wanted or needed by the market. If you say it that way, there's no wonder why the price is so low. So what is the biggest reason for the over-supply of SLP? It's the SLP awarded to players who play in Adventure mode and earn the Daily Quest reward. According to SkyMavis, this accounts for 56% of all the SLP out there, sometimes more. For the people who don't actually play Axie Infinity, "Adventure mode" is what we call it when the players battle enemies generated by the game itself. When you're in Adventure mode, you are not competing against another human, and you can play the same level over and over again until you beat it. You can play that same level again tomorrow and earn the same SLP reward from it even if you've already beaten it many times in the past. Essentially, it's a personal SLP farm. If you're wondering why they even have Adventure Mode rewards in the first place, it's because crypto is all about incentives and SkyMavis needed a way to encourage people to try their game. The Daily Quest reward is the same idea, all you have to do to earn it is to login every day. And it totally worked. Now there are 2M people doing just that, and there's way too much SLP flooding the market as a result.
So what effect can we expect the changes to have? In the short term, we will see a massive exodus of players, as casual players and bot operators alike all quit the game. We'll see market consolidation: smaller guilds will disband, and some guilds will merge with bigger ones. I expect that we'll see the DAU numbers drop by as much as 25%. It will take new players much longer to become profitable from the game, since they will now need to know enough about the gameplay rules to pick competitive axies first. This will cause the value of coaches and mentors to go up, and cause the value of sub-par axies to sink even further. (There are some new features down the road that will allow players to use their uncompetitive axies though, like increased daily Energy.)
Even if the changes were implemented next week, the over-supply of SLP will only be reduced from 4:1 to 2:1, because there are quite a few Arena players out there. They will also be getting a paycut, with SLP rewards across the entire competitive bracket being reduced by as much as 30%. Eventually this will bring the over-supply ratio down to 1.5:1, but it should be noted that there's about 9B SLP out there in the hands of the community. We only consume about 50M SLP a day, so the price of SLP is therefore not going to immediately jump up overnight when Season 20 begins. We will hopefully hit 1:1 parity as new game features come online, all of which will require some amount of SLP payment.
The next few months are going to be very choppy for the Axie community, but overall I think this is the correct move. It's a super tough decision though, and it'll be intensely unpopular amongst the players who can't afford competitive axies and have come to rely on the game for basic income. All of the naysayers will come out stronger than ever, as they use this situation to signal the "death of the Axie ponzi scheme." Let me be absolutely clear here: these changes are quite literally proof that this isn't a ponzi scheme, because they are actively trying to improve the platform for the long term. It would have been far simpler for them to have just rugged us all at the ATH in 2021. The bottom line is that the current economic model was a great way to get to Axie's first million players, but it needed some very critical adjustments in order to get to the first billion. This will be painful, but necessary.
The Ronin chain has also drastically reduced its $RON rewards, and I regrettably didn't write about this coming reduction the other week when I first started covering these new yield farms. The annual percentage return (APR) is now at a relatively low 24% for AXS/WETH, 44% for RON/WETH, and 111% for SLP/WETH, which is a massive difference from my previous essay about this. Is it still worth it? That's up to you. My personal adjustment was to retire my AXS/WETH farm and shift it back to AXS staking, but I've maintained both my RON/WETH and SLP/WETH farms just because I don't currently have a more profitable farm elsewhere.
Yesterday I mentioned that I was going to write about the $Pi token listing. For those who have forgotten, this is the long-awaited "cryptocurrency for everyday people" that I wrote about back in August. I hesitate when people ask me if I think it's a scam, because I actually think that it's just a below-average project. (In other words, they're not trying to steal your money, they just aren't worth investing in.) But yesterday we spotted an actual Pi-related scam that I thought was worth writing about. The Twitter account @MinePiCore announced that $Pi token was finally listing on PancakeSwap, and with over 1000 RTs and 30K followers, it looked kinda legit. There were a couple of dead giveaways that this was fake though: (1) the amount of BNB and BUSD being offered (2) the fact that the account was only a few weeks old and (3) they had turned off commenting on the tweet so that people couldn't QRT them saying that it was fake. The official Pi Network account @PiCoreTeam was also completely silent on the listing. So be vigilant, cryptofam! We could argue all day whether or not @PiCoreTeam is a scam, but @MinePiCore definitely is.
See you all next Saturday, and have a great weekend!
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