Arca has been very involved in the $AXS Ecosystem.
Recently, KPIs (Revenues, DAUs, overall activity) have slipped, largely due to very fixable problems related to $SLP. With $RON pricing soon, we believe Axie now has many levers to pull to right the ship.
A thread 👇
Recently, KPIs (Revenues, DAUs, overall activity) have slipped, largely due to very fixable problems related to $SLP. With $RON pricing soon, we believe Axie now has many levers to pull to right the ship.
A thread 👇
2/ The problem:
The net issuance of $SLP since the announcement of Katana on 11/3 (and inception of $RON incentivized pools) has been a detriment to the price of SLP.
10.9 bn net SLP minted since 11/3, which is 54% of total SLP mkt cap, with avg mint/burn ratio of 4.75
The net issuance of $SLP since the announcement of Katana on 11/3 (and inception of $RON incentivized pools) has been a detriment to the price of SLP.
10.9 bn net SLP minted since 11/3, which is 54% of total SLP mkt cap, with avg mint/burn ratio of 4.75
3/ Why this matters?
For better/worse, $SLP acts as the keystone species for the Axie ecosystem. When SLP is healthy -> Increased demand:
- to breed (burn SLP & generate revenue)
- to purchase/trade Axies (marketplace revenue)
- increases DAU growth (scholar programs).
For better/worse, $SLP acts as the keystone species for the Axie ecosystem. When SLP is healthy -> Increased demand:
- to breed (burn SLP & generate revenue)
- to purchase/trade Axies (marketplace revenue)
- increases DAU growth (scholar programs).
4/ With $SLP weighed down since the RON announcement, metrics across the board have suffered. Since 11/1:
- Daily revenues are down ~85%
- Marketplace volumes are down 75%
- P/E rose from 16x to 30x
- Daily revenues are down ~85%
- Marketplace volumes are down 75%
- P/E rose from 16x to 30x
5/ It’s clear $SLP is a problem. What’s the fix?
Multiple ways to both dampen supply side curve while reigniting the utility of (& demand for) $SLP
Since SLP is a utility token, the goal isn’t for value accretion per unit, but rather sustainable value in an efficient market.
Multiple ways to both dampen supply side curve while reigniting the utility of (& demand for) $SLP
Since SLP is a utility token, the goal isn’t for value accretion per unit, but rather sustainable value in an efficient market.
6/ Short term fixes:
- Extend & adjust $RON incentives in Katana
- Implement a variable issuance rate of $SLP based on previous period’s net mint/burn
- Adjust rewards from $SLP to $AXS (using mAXS)
- Remove $SLP rewards from PvE and Daily Missions
- Extend & adjust $RON incentives in Katana
- Implement a variable issuance rate of $SLP based on previous period’s net mint/burn
- Adjust rewards from $SLP to $AXS (using mAXS)
- Remove $SLP rewards from PvE and Daily Missions
7/ Medium term fixes:
- Make $SLP the base asset of Katana for in-game assets
- Introduce in-game cosmetics that can be purchased with SLP
- Issue a Treasury buyback as a function of marketplace fees, with a triggered on/off switch
- Offer a mechanism to “Rainbow Bridge” Axies
- Make $SLP the base asset of Katana for in-game assets
- Introduce in-game cosmetics that can be purchased with SLP
- Issue a Treasury buyback as a function of marketplace fees, with a triggered on/off switch
- Offer a mechanism to “Rainbow Bridge” Axies
8/ Long term fixes:
- Release of v3 battle play as well as Land gameplay
- Increase utility of $SLP in game (upgrading/transacting/in-game utilities)
- Introduction of other in game P2E assets to spread out the supply side issuance
- Release of v3 battle play as well as Land gameplay
- Increase utility of $SLP in game (upgrading/transacting/in-game utilities)
- Introduction of other in game P2E assets to spread out the supply side issuance
9/ Short term (ST) fixes are most pertinent to this discussion today; now that it has been made clear that $SLP is the keystone species in this ecosystem, steps must be taken to ensure the health of the asset.
10) ST Fix #1: Extend RON incentives. Assuming there is a Pool 2 that goes live once RON prices, we propose a 60/20/20 split in incentives (at 100M RON/90D) between $SLP, $AXS, and $RON pools.
11) With a 100M initial circ supply, $RON = ~$12.50 at 1x mktcap/TVL ratio. With a 60/20/20 split in incentives for an extended period and a 25% participation rate in Pool 2, you have the following outcomes.
The disparity in APR should lead to LP allocation into $SLP-ETH
The disparity in APR should lead to LP allocation into $SLP-ETH
12/ ST Fix #2: Implement variable issuance rate of $SLP. To maintain homeostasis, the ecosystem needs to be malleable with issuance, using net mint/burn of the last period as a barometer for future issuance. Flat issuance methods can no longer sustain an ecosystem of this size.
13/ ST Fix #3: Adjust $SLP rewards towards $AXS. This will further dampen sell pressure. SLP should not be used solely in a distributive sense. Using AXS would put governance tokens in the hands of players, giving them a claim towards governance of the game they love. Win-win.
14/ ST Fix #4: Remove $SLP rewards from PvE (48% of daily $SLP issuance comes from PvE per @maxbrand99); PvE should be treated as a mechanism to gain experience for your Axies. Daily quests account for 22% of daily SLP issuance; SLP issuance should be directed only towards PvP.
15/ By implementing these 4 ST changes, we accomplish:
- Deeper SLP/ETH pools
- Incentive to own SLP (to LP for $RON)
- Reduce amount of SLP issued using variable rates & pivoting towards AXS distribution
- Removing 70% of daily issuance via PvE/daily quests
- Deeper SLP/ETH pools
- Incentive to own SLP (to LP for $RON)
- Reduce amount of SLP issued using variable rates & pivoting towards AXS distribution
- Removing 70% of daily issuance via PvE/daily quests
16/ Now that we have put pressure on the wound (mostly via supply side contraction), we look towards the medium term (MT); the goal is to create value in the demand side of the equation.
17/ The value prop of each asset is now clear:
$AXS = governance token with a claim on treasury
$RON = protocol token (full tokenomics not yet known, but expect valuation to center around TVL and fee generation)
$SLP = utility token required throughout the ecosystem
$AXS = governance token with a claim on treasury
$RON = protocol token (full tokenomics not yet known, but expect valuation to center around TVL and fee generation)
$SLP = utility token required throughout the ecosystem
18/ MT Fix #1: Make $SLP the base asset within the ecosystem.
This gives SLP secondary value (currently the only value is for breeding). With 10.5m Axies & ~3M DAUs, there hasn’t been anywhere for $SLP to go. Future in-game assets will need a liq pool for px discovery/liquidity.
This gives SLP secondary value (currently the only value is for breeding). With 10.5m Axies & ~3M DAUs, there hasn’t been anywhere for $SLP to go. Future in-game assets will need a liq pool for px discovery/liquidity.
19/ MT Fix #2: Create secondary demand for $SLP via purchasing power to buy primary sale NFTs w/in the ecosystem. Examples:
- In-game wearables
- Animations/backgrounds/audio to personalize
- Land themes
- Stadiums/Apartments/subway system/etc
- Clan Banners
- In-game wearables
- Animations/backgrounds/audio to personalize
- Land themes
- Stadiums/Apartments/subway system/etc
- Clan Banners
20/ MT Fix #3: Buyback $SLP
A Metaverse QE plan using a portion of Marketplace revenues to buy back SLP with a trigger switch - acts as a stimulant to help balance disparities in net issuance. In conjunction with ST Fix #2, this gives $SLP a “floor price”, dampening volatility.
A Metaverse QE plan using a portion of Marketplace revenues to buy back SLP with a trigger switch - acts as a stimulant to help balance disparities in net issuance. In conjunction with ST Fix #2, this gives $SLP a “floor price”, dampening volatility.
21/ For instance, in the last 30D there has been 76,400 $ETH ($282.5M) of marketplace volume, of which $12.7M is revenue (4.5%). In the last 30D, 5.8B $SLP ($174M) was net issued to the market. Using 50% of Marketplace revenues to buyback $SLP would remove 3.6% of issued supply.
22/ While 3.6% doesn’t seem like much, it will likely grow. If these proposals are implemented, net issuance in $SLP units should decrease, & marketplace volumes should pick back up as the effects trickle down.
Higher revenue + lower SLP issuance --> a higher % buyback.
Higher revenue + lower SLP issuance --> a higher % buyback.
23/ MT Fix #4: Rainbow Bridge
The lack of “breeder arbitrage”. The market has been diluted with Axies. With RNG-type events, some are “duds” (Axies that don’t carry desirable traits, lowering the floor price). Breeders are disincentivized from breeding because 2+2 now equals 3.
The lack of “breeder arbitrage”. The market has been diluted with Axies. With RNG-type events, some are “duds” (Axies that don’t carry desirable traits, lowering the floor price). Breeders are disincentivized from breeding because 2+2 now equals 3.
24/ Offering a way out for these Axies (Rainbow Bridge) and incentivizing it with either in-game assets or $AXS will help cull the excess from the ecosystem, allowing for the floodgates to re-open for breeding Axies (v3 battle upgrade should be symbiotic in effect).
25/ At this point, numerous ideas have been put in place (both ST & MT) to curtail issuance & bolster demand for $SLP. Similar to training wheels on a bike, these can’t last forever; at some point, SLP has to ride the bike by itself.
So here come the Long-term (LT) fixes:
So here come the Long-term (LT) fixes:
26/ LT Fix #1: The release of both v3 battling & land play introduces new demand to acquire in-game assets & interact w/ the ecosystem. New types of gameplay also come w/ new assets to progress in game, which act as a buffer towards $SLP importance in the health of the network.
27/ LT Fix #2: Once gameplay is live and functioning, $SLP should continue to see added utility in requirements to upgrade, transact between in-game assets, and post as collateral for things like Clan battles and tournaments.
28/ Conclusion: Axie is a gaming ecosystem. Economic incentives aside, the primary goal is for the game itself to be fun. These steps help the ecosystem reach that point in a smooth fashion.
Stability is key in maintaining both the interest & trust of all parties involved.
Stability is key in maintaining both the interest & trust of all parties involved.
29/ Axie was a clear winner in 2021. Sky Mavis raised equity at $3B, the Axie ecosystem is worth $10B+, over 2.5M users & projects like $YGG depend on its health, & investors (like @arca ) are motivated to help.
You'd be crazy to think these fixable problems won't be addressed.
You'd be crazy to think these fixable problems won't be addressed.
30/ We are very confident @Jihoz_Axie & the surrounding @SkyMavisHQ and @AxieInfinity team/stakeholders are aware of these fixable issues, and will work towards solving them.
As a seed investor in $AXS, Arca will continue to offer our suggestions and support the project.
As a seed investor in $AXS, Arca will continue to offer our suggestions and support the project.
As always... reach out to the braintrust @arca for more thoughts
@ArcaChemist @HassanBassiri @KatieTalati
@ArcaChemist @HassanBassiri @KatieTalati
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