Axie Infinity Economic System Deep Analysis

There have been a lot of articles discussing the popularity of Axie Infinity, but few people have dig deeper in a scientific way. Therefore, I wrote a report on Axie from a data-driven perspective, covering its in-game economic system.

1. Axie’s economic flywheel is currently driven by two core gameplays: combat and reproduction. The value chain forms a closed loop from inflow to outflow.


Axie Core Economic System

  • Axie’s economic system consists of two core game modes: combat and reproduction.
  • Combat: Players can use their Axie team (3 axies) to choose adventure mode (PvE) or arena (PvP) mode to fight in order to win SLP (Small Love Portion token) as a reward. The player who ranks first on the leaderboard will win the AXS rewards every season.
  • Reproduction: Axies can produce new offspring through reproduction. The new offspring can be sold on the market for income. Reproduction will cost SLP and AXS tokens as fees.

As shown in the figure, Axie’s flywheel perfectly forms a closed loop composed of three aspects: players, Axies (NFTs), and AXS/SLP (Native Tokens).

Outer loop (green line) : Value flows from one to the other in a counterclockwise direction. After players enter the game, they must purchase at least 3 axies to form a team, and spend SLP and AXS to breed offspring. When the pledge function is online, pledge AXS will receive pledge rewards.

Inner loop (orange line) : represents the flow of value in a clockwise direction. Players get the proceeds from selling axies on the market and win SLP/AXS through battle. AXS and SLP can also be purchased on exchanges and AMM DEX.

Finally, the inner ring represents the value creation process, while the outer ring represents value consumption. The final value inflow is the purchase of axies and SLP, and the final value outflow is the liquidation of assets.

2. Considering the combat system alone, at the current SLP price level, ordinary players can earn more than $2,000 per month. The following is how to achieve the process:


Static Economic Analysis (1): Fight

Reasonable assumption

In the battle system, players can get SLP rewards (10 adventure victories, 5 arena victories) by completing daily tasks, and each battle victory will receive additional SLP rewards

  • Daily mission: 50SLP; after the mission is completed, there will be a fixed amount of reward.
  • PvE Adventure Mode: Players can get 1 to 20 SLPs based on the level they pass. The higher the level, the more SLP rewards you get. The daily limit is 100 SLP. Considering that the adventure mode is relatively easy, we assume that the player will get 100 SLPs per day.
  • PvP Arena Mode: Players will get different SLPs, from 1 to 12. According to their rating (related to game experience), high-level players will get more SLPs. To be conservative, we assume that the player will win 8 SLPs in each game and 10 games per day. Therefore, the daily reward from PvP mode is 80 SLP.


For simplicity, we assume that players will buy the cheapest axies to enter the game.

  • The cost of an axie, calculated in US dollars: Axie base price * ETH price = 421.3 US dollars

To form a team, at least 3 axies must be purchased, so the threshold cost is:

  • Team cost=3*cost of an axie=3*421=1263 USD

3. The reproduction system is the core of Axie’s economic design, which produces new axies and consumes SLP. We have chosen a popular breeding strategy, and the annualized return rate has reached more than 3000%, which is quite amazing.


Static economic analysis (2): reproduction

Breeding rules

The reproduction system is the core of Axie’s economic design. In this system, new axies are produced and SLP is consumed.

Each breeding process requires two axies, and each axie can breed up to 7 times.

  • Cost: The cost of reproduction will increase as the number of reproduction increases. (Shown in the table below)

          After the Ronin mainnet is launched, 4AXS will be charged for each breeding.

  • Time: It takes 5 days for Axie to mature. We assume that only mature axie will be sold in the market.
  • Siblings cannot reproduce together, and parents cannot reproduce with their offspring.
  • Note: For the sake of simplicity, we ignore the genetic combination and assume that all axies are not initialized.

Cost and strategy

Strategy: Since the cost of reproduction increases exponentially as the population increases, we choose the reproduction tree on the right, where:

  • The population size of each axie will not be greater than 2
  • Breed 6 times to produce 6 offspring
  • The breeding period will take 30 days, because each only takes 5 days


Static economic analysis (3)

Reproductive analysis

  • To follow the reproduction diagram in the previous slide, we named the original axie A, B, and C. Siblings share the same letters, but different serial numbers.
  • The reproduction process can be simulated as follows:
  • Suppose we sell the 6 axies produced at the current reserve price

Results: According to the assumptions we made, within 30 days, the total profit was almost twice the initial cost, and the annualized rate of return was as high as 3000%.


Dynamic economic analysis

In the above static model, there are two key variables that determine the final rate of return: SLP price and Axie reserve price.

When one variable remains constant and another variable can rise or fall, there are four situations:

1. SLP price rises, Axie reserve price remains unchanged

2. SLP price drops, Axie reserve price remains unchanged

3. The reserve price of Axie rises, and the price of SLP remains unchanged

4. The reserve price of Axie drops, and the price of SLP remains unchanged

Result: From the figure below, we can clearly see that the cheap axie (option 4) and the high SLP price (option 1) have the highest rate of return. In this case, players can accumulate axie with less cost, which is more profitable.

4. Analyze the Axie life cycle, including theoretical modeling and historical data verification. The model is very similar to the famous Merrill Lynch investment clock in the TradFi industry


Life cycle analysis

Axie game life cycle dynamic analysis

  • If the two variables, SLP price and Axie reserve price, change at the same time, there will be four situations. The dynamic changes between different states represent the life cycle of the game itself.
  • The picture below is very similar to the famous Merrill Lynch investment clock in the TradFi industry. The economic cycle of the game has also undergone a similar state transition.

State transition

  • State 1->State 2: State 1 is the starting point of the game. When there are not many players entering the game, the price of the asset remains at a low level. As new players join, everyone needs to buy axie, and the price of axie will rise first.
  • State 2->State 3: The profitability of the battle farm will attract more players to join the game, leading to increased SLP demand, because early players will buy more SLP to breed to meet the needs of new axies.
  • State 3->State 4: State 3 symbolizes the climax of the game. At this time, the demand for SLP and axie has reached the highest level, which means the influx of newcomers. But this may lead to “over-reproduction”, which is a chain reaction. When the high price of axie hurts the demand of new players, so that the supply of axie cannot be offset by the demand, the price of axie drops.
  • State 4->State 1: As stated in State 3, due to the decline in demand for axie, its attractiveness for players to continue to multiply decreases. The demand for SLP will fall, resulting in a fall in the price of SLP. If this cycle continues without a rebound, the entire game economy will stagnate.


Historical data verification

  • May 2021, State 4 (blue circle): The period from mid-May to the end of May can be classified as State 4. At this time, the SLP price is at a high level, and the price of axie is still not expensive compared to the current price.
  • June 2021, State 1 (grey circle): Affected by the low ebb in the cryptocurrency market, the prices of SLP and axies are at a relatively low level, in line with State 1.
  • From the end of June to the beginning of July 2021, State 2 (green circle): With the hype of the “play and earn” game mode, Axie Infinity has experienced unprecedented growth in the cryptocurrency market, with thousands of new players every day Join the game. As a result, the reserve price of Axie was pulled up, and SLP prices remained stable in the early stages of growth. This mode is in full compliance with state 2.
  • From the beginning of July 2021 to the present-State 3 (outbreak, red circle). : At the same time as the huge demand for axie, the reproductive output increased. For this reason, the SLP price was pulled up to a record high, and the reserve price of axie broke the record. It symbolizes entering state 3.

5. If Axie Infinity is a country, the average monthly income of its players will rank 25th among all countries. However, in the long run, it is essential to decouple the needs of new entrants from the economic system.


Point 1: The growth rate of new entrants is the decisive key variable in the axie economic system. The growth trend will continue in the short to medium term.

It can be seen from the above analysis that the main driving force of the flywheel comes from the needs of new entrants. At present, the monthly profit of an Axie player is more than $2,000. If Axie Infinity were a country, its average monthly salary would rank 25th among all countries.

Point 2: The current economic model should decouple the needs of Axies from the influx of new players to enhance its long-term resistance to fragility.

Axie Infinity’s economic system faces external challenges, such as the macro-cryptocurrency market environment, which is beyond the control of in-game manipulation strategies. The team has realized this and has been continuing to add scenes for players to maximize the use of axie instead of purely dumping in the market.

Point 3: For conservative players, the best strategy is to enter the game in state 3. For more active players, it is better to accumulate cheap axies in state 1 or state 4.

Original link:

Research report link:

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