Axie Infinity’s economy is built around three major resources: the in-game cryptocurrency SLP; the axies that live as in-game items as well as NFTs on Sky Mavis’ blockchain; and the “governance token” AXS. The game produces two of those resources in constantly increasing quantities. SLP is earned through player-versus-player battles, and, until recently it was also available by completing daily quests and grinding in single-player mode, the equivalent of printing money and handing it to players in large quantities. Axies can be bred several times to produce new creatures and are largely immortal, so the breeding mechanic increases the pool of NFTs.

Games often include economic “sinks” (like cosmetic items or in-game equipment maintenance costs) that burn resources without producing more. By contrast, Axie Infinity players had two main options: they could sell their SLP — which pumped it back into the ecosystem — or use it to breed axies whose main function is producing even more SLP. Either way, they were creating more resources and watering down the value of everything acquired in the game.

Immortal axolotls present a gameplay problem

“From a macro[economic] perspective, you’ve created a positive feedback loop,” explains Mihai Gheza, the cofounder and CEO of Machinations, a consultancy that tests game economies with large-scale software simulations. Players (especially scholars) would use axies to produce SLP, the SLP would produce more axies, and the axies would bring even more SLP-producing players into the game. “It’s a guaranteed means of creating inflation.”

Sky Mavis said it needed a growing axie pool to let new players join Axie Infinity because, unlike a traditional game, the studio wasn’t supposed to simply create more characters out of thin air. Eventually it planned to introduce more sinks and hoped people would acquire axies for “the intrinsic value they can provide to players in the form of competitive, social, and progression-based fun and achievements.” In the short term, their primary use was generating currency