The Biggest NFT Video Game's Economy Is Collapsing Because NFT Games Don't Work
Some NFT assets held their value during January's crypto crash, but not the video game monsters in Axie Infinity.
The biggest NFT game currently in the marketplace is Axie Infinity, a game—similar to Pokémon—in which players collect and battle monsters which resemble axolotl salamanders.
The business model for Axie Infinity and nearly all other nonfungible token (NFT) games is called "play to earn." In these games, all players must start by purchasing NFT characters on a marketplace. In-game assets and currencies are traded on crypto exchanges, so everything in the game is worth money. The often-high upfront cost of buying into the game is theoretically justified by the opportunity to earn money by playing.
Web3 investors are really excited about the prospects of games like this. Reddit co-founder Alexis Ohanian, who is an investor in Axie Infinity, believes play-to-earn games will be 90 percent of the gaming market in five years. And Sky Mavis, the developer that makes Axie Infinity, had the good fortune to be years ahead of the competition. Their NFT game launched in 2018, and they were live and operational when NFTs exploded in popularity and investors decided to bet that the blockchain was the future of gaming.
As a result of being first movers in the space, this once-tiny independent studio was able to raise $150 million in financing in October 2021 at a valuation of $3 billion. Around the same time, Sky Mavis trumpeted its game's tremendous subscriber growth, which exploded in the third quarter of 2021 to over two million daily active users. In December, Axie Infinity Shards (ASX), the game's governance token, had a market capitalization larger than that of the French games publisher Ubisoft, which makes the Assassin's Creed, Far Cry, and Watch Dogs games. In July, a single rare Axie monster sold for 369 ether, worth over $800,000 at time of sale. A rare plot of land in the game sold for 550 ether ($2.5 million) despite the fact that the gameplay features using in-game land are not yet available.
However, some big problems have emerged in Axie Infinity: The value of an in-game currency called Smooth Love Potions (SLP) crashed from last summer's high, above $0.40, to a value of around $0.01 in January 2022, lower than its price a year earlier when few people had heard of NFTs and the game itself had only about 50,000 active players. This is a big problem for Axie Infinity, because the object of the game is "playing to earn" and SLP is the currency you earn by playing. As a result of plunging values, the volume of transactions for Axie assets may have fallen as much as 70 percent from its peak in just a couple of months. The floor price of the cheapest Axie characters fell to around $30 in January 2022, which signals that users are dumping their assets, since it often costs more than that to mint one of the characters. AXS, the governance token, has lost over 40 percent of its value since Christmas, a paper loss of billions of dollars.
By looking at what's going wrong with Axie Infinity, we can see how the play-to-earn business model has major problems with no clear solutions.
Gaming NFTs Aren't Like Other NFTs
NFTs are unique tokens on a blockchain that are attached to digital assets, often images. In some cases, these images are works of art, and the holder of the token is considered the owner of the digital work. In other cases, the NFT serves as a key or a club membership. For example, the popular Bored Ape Yacht Club NFT collection has exclusive Discord chat groups where Ape owners can network with celebrities and crypto influencers. The Bored Ape team has airdropped new NFTs as free gifts to owners of its original NFT collection, and hosted a live Ape Fest event in New York in summer 2021 with parties only Bored Ape owners could attend.
Whether these perks justify the eye-popping prices these NFTs trade at is subject to dispute, but there is an argument that the prices of the most coveted NFTs are justified by the possibility of valuable airdrops or other benefits. These are speculative investments and the people buying them have theories about why they might be more valuable at some future date than they are today. The Apes were looking smart in January 2022, as the floor price for the cheapest assets in the collection continued to climb while the broader crypto sector hemorrhaged more than $1 trillion dollars.
But play-to-earn gaming NFTs are seeming a lot dumber. They're not works of art. They're not club memberships. They're not status symbols. They are items in a video game, and the video game is about money. The NFT characters are valuable because they can earn you money. So, the value of the NFT is based on its ability to produce video game resources that also have monetary value: How much can it earn you in the pay-to-earn game? How fast can your initial investment pay for itself and start earning you profits through gameplay? And what happens to your investment if your expectations about these things are wrong?
Here's how it's supposed to work.
The Axie Economy
The resources in Axie Infinity as it currently exists are: Axie monsters; AXS cryptocurrency, some of which is awarded as a prize to the top handful of competitive players, but which all other players can only acquire by purchasing it; and SLP, which is an in-game reward currency also traded on crypto exchanges. The way players are supposed to earn money in the game is by selling their extra SLP for cash.
An Axie monster is kind of like a Pokémon, and Axie battles are similar to Pokémon battles, but each monster is connected to a token and can be sold on crypto exchanges. To play the game, you need at least three of them, and you have to start by buying your monsters for real money from other players—there's no Pokémon professor to give you a starter monster, and you can't catch anything in the game.
New Axies are only produced by "breeding" existing Axies. When two Axies are bred, they produce an egg which will hatch after 5 days into a new NFT monster with a mix of characteristics inherited from the parents, and possibly some random mutations. Breeding Axies costs a fee that must be paid in AXS tokens as well as a variable amount of SLP depending on how many times the parent Axies have produced offspring previously.
So, in order to produce a new NFT character, you have to pay a fee that is usually between $30 and $80 in crypto, depending on the current price of AXS, as well an amount of SLP representing hours of time spent playing and worth what has, at certain points, been a significant amount of real money. Producing the offspring also depreciates the value of the parent Axies, because the SLP cost of breeding an Axie rises each time it is bred, and after breeding seven times, Axies can no longer produce offspring.
The most important things to know about Axie breeding is that it is a costly and risky activity, and it is the only activity in the game that removes SLP currency from circulation.
SLP is an "uncapped utility token," which means it is a cryptocurrency that is awarded for completing tasks in the game, and there is no limit on how much of it can be produced. Nearly all the game's rewards are paid in SLP. This is a fancy way of saying it's an in-game currency like gold in World of Warcraft or bells in Animal Crossing.
Players earn SLP from winning battles against other players in the game's arena mode and for clearing levels filled with computer-controlled enemies in adventure mode. Every player can earn 100 SLP each day from adventure mode and an additional 50 SLP for completing a daily quest which requires completing some adventure levels and winning some arena games. Above that threshold, more SLP can be earned from winning arena matches, and the amount of SLP awarded for an arena win varies depending on how highly-ranked the player is. Average to decent players will get 6 to 12 SLP per win, while the top players can earn as much as 24 for each victory.
The reward for collecting powerful (and therefore expensive) Axie monsters and being in the top few percent of players is that you get more SLP for winning arena matches. Everything in the game is rewarded with SLP and the benefit of progress (or spending lots of money) is the ability to get larger amounts of SLP for time spent playing. Getting as much SLP as you can is the object of the game. So, if SLP is worthless, then so are the NFT assets which are valued because of their SLP-earning ability.
A player with a basic team of monsters, getting modest rewards from arena wins with an average ranking can earn about 220 SLP per day, playing for about three hours. A highly ranked player can earn over 800 SLP if they play for six or eight hours. At a valuation of $0.35 per SLP, the 220 SLP the casual player can earn is worth about $75. If SLP is worth $0.01, 220 SLP is worth only $2.20.
Why Did SLP Crash?
Here's how "play to earn" works in the real world: Over 40 percent of all active Axie Infinity players are in the Philippines, where the per capita GDP is about $3,300 per year. The second highest concentration of Axie players is in Venezuela, where the economy has been in complete collapse since 2013 and the local currency has been rendered near-worthless by hyperinflation. Only about 6 percent of Axie Infinity players live in the United States. It has been difficult for games like Axie Infinity to acquire players in the developed world because many gamers despise NFTs and these games look and play like free-to-play phone or browser apps, but require players to buy hundreds of dollars worth of NFTs to get started.
Most players in the global south gain access to the game through "scholarships," arrangements in which a manager—sometimes a player in the developed world with a large stable of extra monsters, and sometimes a crypto investor who is speculating on Axie assets—loans a player a squad of Axie monsters to play with in exchange for a cut of their SLP earnings. "Scholars" aren't looking to amass large collections or climb the competitive ladder. They're not really approaching Axie Infinity as gamers or investors—they're being hired as laborers. They harvest the roughly 220 SLP a player with a relatively inexpensive team of NFT monsters can obtain each day for grinding out the daily 100 SLP from adventure mode, winning a few arena matches, and earning 50 SLP for completing the daily task. They never breed any new Axies; the currency they earn is always quickly sold off on crypto exchanges.
The appeal of this arrangement for both investors and "scholars" is clear when SLP is worth a lot of money: If playing the game generates $70 worth of SLP per day and the investor takes 30 percent of the proceeds and pays 70 percent to the "scholar," then the investor gets a $147 weekly return on about a team of NFT characters that might have cost around $800 when the assets were near their peak, and the "scholar" makes $343 per week in a country where the minimum wage is around $7 per day. Players in the Philippines who got into the game when it was booming over the summer of 2021 were able to buy houses with the proceeds of their gaming.
But game economies don't work like real economies where payments in currency come from a circulating, finite money supply. Instead, in-game currencies are created whenever someone earns a reward—in the case of Axie Infinity, clearing adventure levels, winning arena matches, or completing their daily quests, and game currency is deleted when it is spent on a "sink,"—some activity which induces players to pay the currency back to the game. In Axie's case, the sink for SLP is breeding new monsters.
Far more SLP is being generated than is being spent on breeding. Only 5 percent of players have ever bred Axies, and only 5 percent of players who have bred Axies do so again in consecutive months. A large percentage of the player base is creating SLP through their gameplay and then shoveling it into the marketplace, while a much smaller sliver of the player base is consuming SLP by breeding Axies. About 250 million SLP are produced each day, while only 50 million are used for breeding. This creates a monthly surplus of 6 billion SLP, a recipe for massive inflation. For a while, speculative investors were snapping up the currency, perceiving it as a cheap way to invest in the future of NFT gaming. But as workers in the developing world learned of the windfalls they could reap from the game and started farming for SLP, the volume of SLP being produced skyrocketed, these investors saw their holdings devalued by the flood of currency pouring into the marketplace.
Even though the game's player base seemed to boom last fall, the growth was driven almost entirely by new "scholars" in the developing world joining the game to grind SLP to sell on crypto marketplaces, and each of those players was contributing to the oversupply of the currency and driving down its price. Since these players weren't trying to build large collections, they weren't creating much demand for new Axies, so there wasn't incentive for players to breed them. Sky Mavis has attempted to regulate the game economy by increasing the SLP cost to breed while reducing the ASX fee, but it hasn't been enough to bring supply and demand into equilibrium.
The game's explosive user growth in 2021 was almost entirely driven by laborers in the developing world using borrowed NFT assets to grind for currency to sell to investors who were investing in the game because they were excited about the user growth. It was a house of cards. And, as the value of SLP produced from completing daily tasks has plunged below the minimum wage in the Philippines, many of those players have stopped logging in.
The Problem With 'Play To Earn'
For its part, Sky Mavis is touting a number of upcoming features the developers believe will continue to drive growth. They're preparing a major update to the battle system, a game mode designed around the in-game land assets, and a system for upgrading Axie monsters. All these features will likely provide new in-game uses for SLP currency, thereby increasing demand for it. Sky Mavis co-founder Jeff "JiHo" Zirlin said on Discord that an "experimental sink" for surplus resources will be coming sooner than the major update, and in January Sky Mavis announced a special event allowing players to "release" Axies—permanently deleting their NFT characters—in exchange for cosmetic items that are also tied to NFTs, which players will be able to place on their in-game land in the not-yet-released land gameplay mode. This only briefly propped up the floor price for the least desirable monsters. Statements from the developers have framed the volatility of Axie's markets as a function of the game's rapid growth and runaway success.
Additionally, Sky Mavis is planning a revamped experience for new players that lets them use non-blockchain "starter" Axie monsters so players can try the game without having to buy NFT characters, which the developers hope will help attract more new players. In other words, Sky Mavis is dealing with the fact that its current model is unsustainable by turning Axie Infinity into a substantially different game.
The developer's willingness to make big changes to their game to try to address structural problems has earned plaudits from crypto industry analysts, and Sky Mavis has an enormous war chest of cash from its stakers and investors. When transaction volume was high, Sky Mavis was earning millions of dollars each day from the 4.25 percent of each NFT transaction it collects, so it has the capacity to hire lots of experienced game designers, economists, and other experts to try to solve the problems with its game and build compelling new features.
But with SLP selling below $0.01 and the new game features months away, players are looking at other NFT games in hopes of finding a better return on investment. Some players have been shifting to a horse racing game called PegaXY, which has an economy similar to Axie Infinity's, with an uncapped in-game currency used to mint new NFT characters. Its main innovation is that it formalizes the "scholarship" arrangements between investors and developing-world players and supports them with "safe" or "trustless" systems that make it easier for players to rent out their extra NFT characters. Since investors' return under this system is not contingent on the workers being trustworthy or reliable, the terms of "scholarship" arrangements in this game are more favorable to investors. Instead of trying to realign the incentives of the game economy to discourage such behavior, newer NFT games seem to accept that this is how play-to-earn will work, and are trying to make it more lucrative for investors at the expense of laborers.
As the sector evolves toward supporting this kind of play, the optimum strategy for these games is not "playing to earn" and does not even involve playing the games at all. Rather, investors in rich countries will speculate on in-game currencies and assets while outsourcing the actual playing of the game to workers in the developing world who are paid less than $1 per hour to grind for currency until massive inflation caused by oversupply renders the currency worthless, at which point everybody migrates to another game to repeat the cycle and people who are overinvested in the old game's NFT assets lose a lot of money.
No NFT game developer has yet presented anything that seems likely to solve the fundamental problem of the play-to-earn model: Any time the currency in a video game rises in price so that it has substantial real-money value—whether because of hype surrounding a new game, or investor interest in a title, or because of new features in an existing game like the ones Sky Mavis hopes will reverse the fortunes of Axie Infinity—the demand for the resource creates an incentive for laborers in developing countries to surge into the game in large numbers to farm the currency until the available supply swamps demand and the price tanks again. The market for any currency that is generated as a function of players' time spent grinding in a game will only reach equilibrium when the price of the currency is valued based on the price of time for the players whose labor is the cheapest, and for players in the developing world, that's pennies per hour.
And developers can't control the supply of currency by taking measures to punish the gameplay patterns typical of players in the developing world, because the bulk of the game's user base would instantly disappear if the developers got rid of them. Such measures would also deter new players from joining the game, because cutting off rewards for people who play like "scholars" would make it difficult or impossible for any player joining the game with a modest collection to earn back their initial investment or expand their collections through playing.
Further, play-to-earn models require constant user growth. The real money economy of a game like Axie Infinity is zero sum—no money is produced inside the game, so the only money anyone can take out of the game is money somebody else has put into it. Everybody's goal in the game is to make money; they're all "playing to earn," but the only players investing more money into the game than they expect to take out of it are new players who have to buy stuff to get started. When there are not enough people buying more than they're selling, the game economy collapses.
It may be possible to devise a play-to-earn model that rewards casual or less-invested players without creating economic incentives for people to play in ways that inevitably tank the value of the reward currency. But the biggest publishers in gaming have previously tried and failed to figure out sustainable ways to introduce real money into the player-to-player economies of video games, and blockchain technology does nothing to address the reasons previous efforts have failed. NFT game developers and their investors may be underestimating the problems inherent to this business model. The entire "play-to-earn" concept is built on the premise that video game currencies can be stores of real-money value, so if developers like Sky Mavis can't figure out how to prevent what happened to SLP from continuing to happen to reward currencies, then "play to earn" isn't going to work.
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I think NFTs are an example of stupid money. When bitcoin is going up the individuals with the most feel rich. Hence the stupid money. Same thing always happens with "new money". Dot com investment boom spending, lottery winners, bitcoin billionaires.
When bitcoin value tanks it stops being as stupid. I think governments and regulations still remain the biggest threat to bitcoin value.
It's a classic pyramid scheme. Early investors are paid off by the money later investors put into the system, but there is no mechanism to keep the system stable if it stops growing or shrinks.
NFTs were always hyped by people who didn't understand crypto in the slightest. About the only actual use for NFTs that I can see is for a famous picture or artwork, so that you can sue those who use it without your permission. The idea that your reason NFT would increase in value just because was always stupid.
You mean no matter how many comments I post as 'CHUCK P.', the screenname is not infused with the value of my intelligence and experience?
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An NFT could function very well as a receipt or deed for something that has intrinsic value. However, the NFT itself if meaningless.
As for this article, the people involved were gold-farming on a game that everyone admitted wasn't very fun. Gold farming crashes in-game economies, as has been known for decades, and it only works when players actually want to play the game and need gold.
The word "NFT" doesn't change any of these dynamics, which are the exact same now as they were for World of Warcraft or Eve Online. Except those games had actual players playing for fun.
This sounds like every other game with currency, except this one is trying to co-opt the cash transactions rather than ban them.
The value of the currency is driven entirely by rich kids who want to buy a good team/player/whatever.
If you look at a game like Madden the prices of player cards drop predictably over the course of a year until the game resets with every season.
In the absence of compelling game play and real world fandom (e.g. NFL) this is clearly just a scam to recreate the most lucrative but least appealing aspects of real games.
Perfect for a Reddit founder.
O/T I put BunsenLabs on an old laptop, and nothing else will do anymore. A new release is imminent, but I like the old one so much, I'm reluctant to switch. It made computers fun again. My old laptop is now fun, secure, private, efficient, and encrypted--I want to put BunsenLabs on everything. I'm happy with Manjaro on my desktop and my new laptop has that new car smell, but it's like I'm married and in love with another woman. If BunsenLabs were a woman, I'd be thinking about what to get her for Valentine's Day.
If BunsenLabs were the perfect woman you describe, she wouldn't want anything for Valentine's Day.
And wouldn't that make you want to get her something even more?
If BunsenLabs were the perfect woman you describe, she wouldn't want anything for Valentine's Day.
You're not fooling me. Sure, the operating system says I don't have to get her anything for Valentine's Day, but if I fail to install SP2 by Feb. 14th, suddenly routine tasks will generate panicked crashes and I'll get threats every three months or every reboot, whichever comes first.
That's why the perfect woman is straight off the boat from some exotic location, where Valentines day, Millennials and #MeToo don't exist in the cultural DNA.
Mind a little more detail than just "I'm in love!"? I've got laptops and desktops running everything from Arch to Debian to Ubuntu to Mint. I've got my own personal favorites and loves and am more than willing to try something new. However, you'd be wrong to assert that my kids choice to run Win10 on their desktops (much to my chagrin) was the wrong choice for their purposes.
BunsenLabs is Debian + OpenBox, which is a window manager rather than a desktop. On an old laptop, maybe with only 4 MB of RAM, running on OpenBox means you're using fraction of the system's resources, especially memory. Using BunsenLabs (OpenBox), I've found that I'm using half as much RAM--just sitting still.
In addition to that, Debian by itself can be a little rigid when it comes to things like proprietary drivers. From Intel's wireless card drivers to Intel's graphics drivers, I've had problems with the Debian installer noticing them--even when I provided them when asked by the installer. You can put them in afterwards, but there were always issues.
The people at BunsenLabs seem to wait and iron out their live editions. Debian 11 has been out for a while now, and they're still testing. Also, the configuration BunsenLabs give you seems to be ideal. It's not like with OpenBox, where you don't even have a wallpaper to begin with. They set you up with a really nice greeting package with a conky and tint2 bar. Everything works and looks great right out of the box--much better than my experiences with pure Debian.
Meanwhile, flatpak means I don't need to depend on Debian updating their repositories for my applications anymore. I don't like Canonical and don't want to use anything based on Ubuntu. I don't like depending on the Arch hackers to respect my privacy and security either. BunsenLabs gives me all the upsides of using Debian (stability and security) without any of the headaches. And the OpenBox implementation is fun.
I thought the BunsenLabs default configuration looked drab and boring when I saw the screenshots. In reality, it works and looks great. I thought OpenBox was all about conserving limited RAM, but it's more like a user preference. Having all of your start menu, applications, settings, etc. available by a simlpe right click (rather than having to deal with a desktop) is liberating. I can do what I want without having to conform to someone else's design philosophy. I thought I'd be sacrificing aesthetics for RAM. I was wrong about that, too.
The version based on Debian 11 "bullseye" will be called "Beryllium" and the release is imminent, but I'm sticking with the Lithium version on Debian 10 for now--because it does everything I want better than anything else I've seen.
An old laptop with 4GB of RAM not 4MB!
You say that like I didn't read the above and instantly picture my iBook G4, with 512 *M*B of RAM (running Kubuntu) and think, "Challenge accepted!"
I don't think you can make your swap partition big enough to make up for only having 512 MB of RAM. Motherboards aren't supposed to last that long in laptops. Is that thing 20 years old?!
Swap partition isn't the issue. Technically, assuming the CPU is adequately cooled or not being hammered beyond belief, the HDDs are supposed to break down first. Running without a swap, IMO, saves the HDDs from spinning needlessly to fail to support the RAM deficit. I haven't tried anything yet but I'm almost dead certain the PowerPC architecture is going to be the hurdle that can't be reasonably/easily cleared.
It's 18 and my cars' engines aren't supposed to last more than 10 yrs. either. Hilariously, the most troublesome issue has been power cord frays/breakage.
Looking at the specs, I rescind some of my prior statements. PowerPC compiling is an issue but the minimum 1GB RAM requirement does the whole thing in. I thought it was running kubuntu, but I was wrong, it's lubuntu (though not current version), which has a 128 MB min. requirement.
My old... old... old boss was a total Linux nerd. The shortest distance between two points was never a straight line with him.
Add in Android, ChromeOS, and all the world's servers out there, and it is the most popular operating system in the world--for a reason. It as the shortest distance between two points for an awful lot of people.
I think a lot of libertarians get caught up on the idea that if it isn't proprietary, it isn't worth owning. It's actually liberating. If you want a computer that respects your privacy as much as you want and lets you do what you want with it without having to ask for permission from anybody, that choice is available to you--and it doesn't require you to spend the weekend trying to figure out what to do for drivers like it used to.
I've got elderly people in my life that prefer ElementaryOS to Windows.
all the world's servers
Web servers, maybe. Infrastructure, not so much. And then there's virtualization to complicate the whole calculation.
I wish I could get into Linux, but I use computers to bang out spreadsheets and play video games. MS has me locked up pretty much for life.
I hear what you're saying and that wasn't really the point I was making. The point I was making is he liked to install and run linux on servers-- he wasn't using a commercially canned version of it (Android) that's a closed black box. I'm merely coupling that with his general personality trait that he liked to do everything the hard way.
It as the shortest distance between two points for an awful lot of people.
My issue has never been with the shortest distance. My issue has always been with the "Ours is the shortest distance, has a $29-$several hundred toll and you're responsible for any flat tires incurred while driving along our path."
If the yunguns want to ignore my warnings, the only way I could be more impactful is to charge them a higher toll and flatten their tires for them. Otherwise, MS will (continue) to do a decent job selling linux and other systems for me.
Plato warned us about pixelated euphoria.
currencies are traded on crypto exchanges, so everything in the game is worth money
That might require a long, extended discussion of its own.
The hype around NFTs is the result of a failure to teach the history of speculation in tulips.
As generations of kids that dreamed of playing in the NFL, MBA, NBA, NHL, etc., can tell you, the time and money you invest to play a game is sunk cost. It is not worth anything except the pleasure you get and the friendships you create.
NFT games should look at the short lived experiment of GAIA Online hiring an economist to try and fix their online economy. Unless you tie earnings to the number of players joining, this system can't work.
Even at that, as Diane Reynolds alludes to above, the assertion that "everything in the game is worth money" rather than "the more people who play the more things are worth" makes it almost definitively a Ponzi Scheme.
Oh yeah, it's definitely a possibility scheme. Money has to be coming in for some other reason than people trying to make money for it not to be.
I have to give credit for a very thorough article
But with all the liberty issues facing people today, it seems odd so much effort was put into this...something that realistically won't affect anyone (as you said, most the players are in 3rd world countries, who seems to make up the bulk of players in dodgy online games anyway)
You are completely making fun of me saying the currency in video games is worth millions of dollars.
I never even heard of NFT before it appeared in this article.
I have heard of bitcoin, The idea is extremely interesting but I’m going to stick to currency, land, and gold. And guns and ammo.
These are hard assets that will survive even in a societal collapse.
I’m also in the stock market in broad-based stock market indexes for my retirement fund.
With my employer adding some funds on top of what I put in, these have done very well over the years.
The idea that someone would pay someone in a Third World country to play video games to earn currency in the game sounds like an idea doomed to fail.
You are completely making fun of me saying the currency in video games is worth millions of dollars.
IDK if it's mocking you as much as acknowledging reality.
Cryptobros, an NFT group, spent $3M on a physical copy of Jodorosky's Dune at auction and tried to claim rights to the franchise. They were soundly mocked for their efforts but they paid, effectively, $3M nonetheless.
I should also note that Cryptobros weren't the first or only to be so stupid. NFT groups have tried to get ahold of The Constitution/BOR and similar historical works.
How people don't instantly recognize this as the digital equivalent of the International Star Registry or the Franklin Mint, I'll never understand.
No one has yet explained the purpose of introducing blockchains to centralized, trusted systems such as multiplayer video games. I guess it gets irrationally exuberant investors excited?
This about sums up where I'm at with crypto, etc. Though I'm sure there's plenty of sour grapes here, since I used to work with a guy that jumped hard into crypto ~5 years ago and made more money than I'll earn in the next 40.
say what you want about NFTs, but your kids won't have to spend an entire weekend hauling them from your garage to the dumpster after you die
Is pretty damned funny.
He ain't wrong. People really like the idea of if they just hold onto something it will grow in value exponentially.
In your penultimate paragraph you described a Ponzi scheme, didn't you?
A couple weeks ago, I started receiving advertisements for a bizarre app. The idea is that you spend real money to buy NFTs that are alleged ownership of the virtual rights to real property around the world. You can then trade them later as the price goes up and make a huge profit! Despite using the buzz words of blockchain, meta universe, and NFTs, there was no evidence that anything was even based on blockchain.
Quite literally, a zero sum game. Nothing is created...Just reallocating the same piece of pie.
So, a casino combined with a Ponzi scheme. Whoopee.
Years ago I was solicited to join this supposed revolutionary pro-creative online community. It looked like a good platform to post my writings, so I joined, no cost, and posted a little. But they kept soliciting me to get bigger, be more active, promote, and cash in — or out. I forgot the name, but they've changed it twice since then, and adopted a creepy looking logo that looked like a tiny attempted smiley who was snarling in profile instead. After a while I saw what they were operating was a Ponzi scheme whose idea was to pay for promotion that then provided the revenue to cash out by some complicated means. You were to develop a following that theoretically consisted of those interested in your postings but actually was a tree of those under you in the pyramid.
All these people need to read up on Tulip mania in the Netherlands. This is stupid. It’s just this generation’s Beanie Baby. They are worth a fortune - until they aren’t. There is no there there.
"There is no there there."
The scarcity is entirely artificial. Unlike beanie babies or tulips, they are not of the material world.
Digital tulips!
Imagine I wrote an article with the headline, "White men are sociopaths" - then wrote the whole article on Donald Trump.
Why do you bash all NFT games then write about nothing but Axie Infinity?
I don't know the future, but I do remember when free-to-play/microtransactions/in-game-purchases first came to games (mostly starting in South Korea) about 15 years ago. Everyone said no one is going to be stupid enough to pay huge amounts of money for these in-game purchases - when they currently can get entire games for the cost of a dozen microtransactions. Fast forward... no one is going to be stupid enough to buy NFTs...
Daniel, this is a well thought article with details and references. It's great. However, the analysis has an important flaw, where the volatility of the entire crypto market is not taken into consideration. You cannot evaluate correctly the performance of Axie, in a short time frame, by comparing it directly to USD. In the time window you mention the entire crypto market has dipped. The definition of money in the study is flawed in this regard. I am not saying the conclusions are wrong, because eyeballing the numbers gives the impression that Axie is underperforming the market, so I agree with your argument.
Another issue I take is with the argument that it is a zero-sum game. It is not. "No new money is created in the game" is false. The tokens are all new money. Yes, there is an inflation and fluctuating exchange rate. It would only be a zero-sum game if the only way to get Axie tokens were to deposit $ direction to Sky Mavis and the only way to get $ out was to withdraw in reverse order. The reality is that the crypto ecosystem is incredibly complex, with assets, loans and other financial systems interconnected. If you take the crypto market as a whole, it's impossible to imagine that every $ were to be taken out-- it doesn't work that way. The $ are not locked into a magic box awaiting the reverse exchange. They are going from person to person, bank to bank, magically creating (and destroying) crypto money in the process. All money is imaginary in the end. The value comes from the storage of wealth, accounting, etc. which is truly provided by these assets.
Oh, I have heard many times about this game and I believed that it will grow in the future. So sad news, but it is just a market and it means that this NFT is not so progressive. To be honest, I am surprised how deeply you researched the reason for falling down this project and that is great work. Now I am reading the NFT Blog https://topnftcollections.com/category/blog/ and there I am looking for some new projects that are reliable to invest my free money.
I'm already taking advantage of the opportunity to play and earn money from it. Most often I manage to do this by selling skins for weapons in CS GO. If anyone is interested, I sold my AK-47 here https://dmarket.com/ingame-items/item-list/csgo-skins/rifle/ak-47 . In addition, you can buy skins and participate in sweepstakes on this site.