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[Metaverse Masterclass] Axie Infinity Dev Journal: Economic Balancing

“Metaverse Masterclass” is a series of reports, articles and interviews from experts around different topics in Metaverse. This is an article by Axie Infinity here.

We should collectively work to improve the economic balance of our community assets. We’d like to provide a framework to start this conversation.

One of the most common topics of conversation within the Axie Infinity ecosystem recently is around the Smooth Love Potion (SLP). We’ve been amazed by the level of thoughtful input you all have shared with us, and we also empathize with many of your concerns. That said, we wanted to write to you all in the new year with the hope of sharing some history, some statistics, and some of our current thinking as we further develop the economic models around SLP.

We released SLP in December 2019 as a utility token which enabled Axie breeding. While its core purpose was humble, the community’s response to SLP’s release made it clear quite early on that something very special in game economy history was occurring. These evolutions in SLP’s use in tandem with the explosive growth of 2021, has driven both incredible growth in the liquidity as well as some fundamental inflation in the token over time.

To put things in perspective, the average amount of SLP burned per day has grown over 500x (50,000%) through 2021! However, that must be contrasted with breakneck SLP creation, which historically has consistently outpaced its use, and has additionally grown over 160x (16,000%) over the last 12 months. Today’s data shows a growing chasm between SLP minted vs. SLP burned (Figure 1). This inflation in the token is not sustainable.

Figure 1: Daily SLP burn, mint and net emissions 

The primary complexity in economic balancing of SLP comes from the difficulty in predicting future player growth alongside timing further releases of products within our gaming ecosystem.  As hopefully you all know, we are working on a number of new gaming experiences, including the next generation of our battles experience (Origins) and a new land-based gaming experience (Project K).   Each of these games will include a number of new features that will affect the economy balance.  We’ve also invested significant time and effort over the past year into scaling our systems to accommodate the growth and build out the foundational blockchain components needed for our ecosystem (e.g. Ronin, Katana, Staking).  All of these efforts often have come at the sacrifice of improving our existing gameplay systems.  However, we want to reassure you that we are looking to prioritize experimenting with short-term approaches towards managing SLP’s inflation in the new year. 

Please know that we are listening to all of you. You all have given us a number of ideas to consider in the short term while the Sky Mavis team has come up with some as well. In short, SLP economics evolve with changes to its supply and demand. We wanted to review a few of the more popular shorter term supply / demand ideas emerging within the community:

Decrease supply:

  • Iteratively balance all in-game SLP rewards: The current alpha gaming experience continues to be refined on multiple fronts while player activity has evolved in surprising ways. As such, with the continuous balancing process, we may need to manually reduce SLP emission rates for daily quests, PvP, and PvE. Over the longer run, we’re hoping this can be adjusted more dynamically.
  • Change ratios of in-game incentives: SLP is not the only token within our ecosystem.  In fact, our long term vision is for a more equitable distribution of AXS rewards through gameplay.  We want top players to gain influence within our community.  We are evaluating ways to do this without inadvertently creating inflation problems for AXS as well. Unfortunately, we currently do not have the functionality to distribute AXS as a battle reward and so would need to spin off engineering effort from other projects to work on this. In the meantime, we are considering increasing AXS in Leaderboard rewards and reducing SLP rewards to high MMR players as one option.
  • Reduce SLP produced through non-skilled / automated / botting techniques: We received a number of recommendations from the community focused around reducing SLP rewards for parts of the game most vulnerable to automation or botting techniques.  Specifically, SLP won during PvE battles. This could occur in a few ways, including overall reductions in PvE emissions, or by updating the Daily Quest requirement splits to be more Arena focused over Adventure to make it easier for real players to earn.  This unfortunately isn’t a precise science, and it’s likely that some real people will earn less SLP because of this change. Another idea would be to require energy to earn SLP in PVE. This is currently not the case in that players can still hit the 50 SLP cap when they’re out of energy.

Increase demand:

  • Axie releasing / burning / consumption: This is a very significant feature that we have to be very careful around, and takes significant engineering effort to build. However, we plan on releasing some smaller tests this year to be able to validate the mechanic iteratively. Since the primary utility of SLP is to create new Axies, having this burning mechanism for Axies would increase demand for SLP (and AXS).
  • Community SLP buy back: We may allocate some of the Marketplace fee for a limited time to buy back SLP in the market into the Treasury. This would only be done in unique circumstances as maintaining the fee is important to sustainability of the Community Treasury. 

Needless to say, there are many factors we have to consider for each of these ideas, so ultimately we cannot make any promises as to which will be implemented. However, know that we are spending a lot of time and effort across our teams figuring out how we can make positive adjustments. It’s also worth noting that this above list doesn’t include all of the longer term ideas you’ve shared, including introducing Axie cosmetics and tournaments.

We’d like to hear from you.  Which of these approaches do you like best and why?  Are there others not mentioned here you think we should consider? Feel free to share your thoughts on Twitter using the #AxieEconBalance hashtag.

As a final note, we want to speak a bit about the MMR reset that happened earlier today for the Season 19 Off-season. First, we want to say that we originally planned to announce it with this blog post and made a mistake to reset it beforehand. We will learn from that misstep. 

We had looked into doing more granular MMR reset adjustments for different levels of MMR, but it wasn’t feasible given numerous factors and trade-offs (especially technical limitations). That said, this MMR reset will help make sure that SLP supply and demand are closer to balance. We observed that over time, MMR inflation was happening as the player-base grew, meaning more and more SLP was being produced each offseason. In addition, off-seasons have been increasing in time and length, especially now that we would like to release balancing updates in the middle of off-season rather than at the beginning of the season.

We saw that average SLP per PVP battle increased by ~40% over the course of Season 19 (from Day 1 to last day of the season). We believe that resetting off-season MMR reduces unnecessary supply, and ultimately leads to a more balanced SLP economy.

We want to reiterate that we care deeply about the economy and the Axie Infinity community. We spend considerable time thinking deeply about the tradeoffs between short and long term economic balancing. While we will continue to lean strongly towards the long term growth and sustainability of our ecosystem, we want you to know that we plan to shift some of our focus towards certain short-term issues that have emerged. We know it’s important.

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