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Inside the Data Driving Axie Infinity’s Torrid Growth

On-Chain Markets Update by Juan Pellicer, IntoTheBlock

Axie Infinity has recorded unprecedented growth in the crypto space. This week the data confirmed that it surpassed more than $1 billion in sales and the equally spectacular achievement of one million daily users. Where is the limit for Axie Infinity? Will play-to-earn help to expand crypto adoption to the young generations? Can traders benefit as well from this growth?

Up until last week, OpenSea was the sole platform to break the threshold of $1B in cumulative traded volume in the NFT space. To put this performance in perspective, other popular NFT projects like NBA Top Shot or Cryptopunks are approaching $700M in accumulated total volume.

Accumulated volume of Axie Infinity and OpenSea, data by Axieworld and Etherscan.

It is worth considering that the August data is only accounting for less than half this month so far. This exponential growth in the future could still see even bigger numbers. Such is not off the table considering that both Axie Infinity and Open Sea marketplaces are trading between $50 and $30 million.

Daily volume of Axie Infinity and OpenSea, data by Axieworld and Etherscan (log. scale)

OpenSea actually sells some Axies, which were not ported into the Ronin Network (Axie Infinity’s Ethereum Sidechain) and their volume is negligible. Another impressive metric to look into is the revenue that these two protocols are making. Their exponential growth cannot be appreciated without a logarithmic chart. At this pace they are adding a zero to their monthly revenue figures every couple of months. If you have ever seen growth remotely similar to this in crypto, please let us know: 

The main driver behind  this revenue growth is the Axie Infinity governance token $AXS, not to mention the popularity of the game. On Aug. 10, $AXS increased 35% to hit  $60 . This jump extends the insane rally that $AXS started two months ago with a gain of more than a 900%. 

$AXS price evolution, by IntoTheBlock app.

The token mechanics have been designed and adjusted during the last two years. The design aligns the game developers and game players with a model that increases the community treasury due to in-game revenue while fairly rewarding  active players. 

$AXS use cases and economic flow, from the Axie Infinity documentation.

Axie Infinity’s community treasury revenues come from two main sources: creature breeding (costing some $AXS); and a 4.25% fee on marketplace transactions. Player rewards are paid in $AXS tokens when playing and outperforming the average. These token rewards could lead to incremental selling pressure. 

This is minimized with incentives for the players to hold the token, allowing holders to participate on the DAO’s governance proposals and earn staking rewards, which should be activated by the end of Q2 2021. They will be variable depending on player scores and games played per week. It is likely that players and guilds will start to accumulate even more $AXS as soon as the DAO is set up and staking is activated given the additional revenue it can provide. 

The decentralization of Axie Infinity is in the works and will gradually translate the game and economic decisions from the Sky Mavis team to a community-driven decentralized organization. This is a complete paradigm shift where a game with a monthly revenue of more than $100M soon will become completely governed and owned by the community that plays it. The Top revenue generating application in Crypto will be governed under a permissionless regime.

Up until August 11, the breeding fees were 4 $AXS that were directly sent to the community treasury. Recently, it was announced that the number of $AXS tokens for in-game creature breeding would be reduced to two tokens from four. Initially, this reduction could lead to increasing selling pressure of $AXS due to a demand contraction. But if breeding is cheaper, more Axies can be created. That would reduce current Axie prices and could make the game more accessible since it would be cheaper to start playing. The game can grow at a greater rate if it becomes more accessible to new players. 

But what do on-chain analytics say today about AXS? A good measure of interest in a token is the address data:

Total Addresses analytics, data by IntoTheBlock app.

Growth of addresses with balance is a sign that there is an inflow of new holders interested in holding or trading the token. “Total Zero Balance” addresses are  a bearish metric that indicates the amount of traders that have sold all of their tokens. It is a signal of holding sentiment that the growth of “total with balance” addresses overcomes the increase of “Total Zero Balance” addresses. 

This means that there are way more traders loading up than cashing out. A predominant sentiment of holding is important but so is how much time the traders of a token are willing to hold their asset. In the case of $AXS, the token has usually been held for about 80% of their lifespan. $AXS holders have long term faith.

As we depicted previously, $AXS is designed to increase in value when more people start playing the game. Sentiment analysis is a helpful metric to gauge the level of interest in the game from a wider audience not covered by already crypto enthusiasts. Since Axie Infinity went viral this summer especially in the Philippines, the interest on it has been holding remarkably high.

Search trends data of $AXS, by IntoTheBlock app.

At the moment the on-chain analytics point to a favourable long-term perspective for $AXS. The current volume and revenue figures put them on the tops of the crypto markets and there is an enormous expectation to see how the decentralization process pans out. It is also worth keeping attention on the retain rate of current players as well as how the game adapts and evolves to the inflow of new players.

Juan Pellicer is a research analyst at IntoTheBlock, a blockchain analytics company.