Axie Infinity has an inflation problem — and without more players, it’s going to be a tough fix

Axie Infinity has an inflation problem — and without more players, it’s going to be a tough fix
Axie Infinity has an inflation problemBI India
  • The crypto game, Axie Infinity, was all the rage in 2021, but its returns are slowly diminishing.
  • According to analytics firm Naavik, Axie Infinity has an inflation problem on its hands with players cashing out rather than putting their money back into the game.
  • Most of the players are earning less than minimum wage and the game’s own revenue is dependent on new players joining in on a daily basis.
Blockchain-based games have seen exponential growth over the past year. And, most of it has been led by one major name, Axie Infinity — a digital universe where players can battle, breed, and upgrade their Pokemon-like pets.

However, a new report by gaming consultancy firm Naavik suggests that Axie Infinity may not be as lucrative as previously thought. Most of its players may not even be earning the minimum wage.

Moreover, with new user growth slowing down, it’s possible that Axie Infinity may be sent into a recession.

The current game could continue to grow for a while, but its current economic policies are fundamentally unstable.

Naavik report

Axie Infinity is selling the dream of earning ‘real money’ to poorer countries

Most of the game’s players come from low-wage economies, according to the COO and co-founder of Sky Mavis — the gaming studio, which developed the Axie Infinity game — Aleksander Larsen.


More than half are from the Philippines alone, where the minimum daily wage comes up to around $7 and the average daily wage is around $40, as per the country’s Department of Labour and Employment. In rupee terms, that comes to around ₹520 and ₹3,000, respectively.

Axie Infinity has an inflation problem — and without more players, it’s going to be a tough fix
Surge in May and July made it briefly possible for players to earn even more than the average daily wage. The lower level players (with fewer Axies and 20 energy) are making less than the daily minimum wage and rest are slowly trending towards it.Naavik

In stark contrast, the minimum cost to enter the game is around $350 or ₹26,000. For those of you who aren’t familiar with Axie Infinity, one has to buy three pets in order to be eligible to participate. These ‘pets’ are bought using the cryptocurrency called RONIN. And, each pet costs around $100.

So, not only is the barrier to entry high — the return on investment (ROI) isn’t remarkable until you’re a significantly powerful player, and even then, earnings are below the average wage.

Axie Infinity has an inflation problem — and without more players, it’s going to be a tough fix
Even players with more energy (assuming they have 20 Axies, which very few do) and higher stats are earning less than the average wage rate


Here’s why Naavik believes Axie Infinity may be in trouble

One of the main ways that Axie Infinity players make money is by lending out their pets to other players. As a ‘scholar’ they normally ask for 60% to 70% of the cut from earnings.

However, this also means that the underlying objective is monetary. According to Naavik, since most scholars cash out their earnings as a daily wage, the tokens aren’t being used productively within the game. That is, most scholars aren’t using their gains to breed new pets.

Just as inflation can creep into a normal economy when cash is hoarded and there isn’t enough economic activity, Axie Infinity is facing a similar threat.

Moreover, as the population of Axies increases over time with more players joining in, the need to breed new Axies is also in for a dip adding to the inflationary concerns.

Axie Infinity has an inflation problem — and without more players, it’s going to be a tough fix
The growth of new players is slowing downSky Mavis


Axie Infinity is running on new players

Since old players are either cashing out and don’t have the need to breed new pets, it’s only the addition of new users that’s generating revenue for Axie Infinity. And, as things stand, the addition of users per day is decelerating.

We project that even if DAUs steadily grow, if the pace of new monthly DAU declines then total monthly revenues may also decline.

Report by Naavik

However, Sky Mavis is well aware of this problem. They’re currently in the process of building a larger universe that will create more ways to earn and spend tokens, and thus, generate more revenue from more than one source.

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