A Case Study on Axie Infinity

Just as the surge of NFTs and decentralised platforms in 2021 reshaped traditional finance, another evolution emerged at the intersection of gaming and blockchain: play-to-earn (P2E). And no project conveyed what this phenomenon is better than Axie Infinity.

Axie Infinity was produced by Vietnamese studio Sky Mavis, and it introduced a new paradigm.

Players could earn real income just by participating in a digital pet battling game powered by blockchain technology. This idea wasn't just revolutionary; it was disruptive. For many players, particularly in emerging economies, Axie Infinity was more than entertainment. It was a livelihood.

But just like many rapid rises In Web3, Axie Infinity's journey has been nothing but linear.

Its sudden growth in 2021 gave way to concerns about sustainability, tokenomics and player retention in the following years.

In this case study, I have explored Axie Infinity's journey as an evolution from grassroots gaming to a multi-billion-dollar ecosystem. And the lessons it taught the gaming industry about the future of Web3 gaming.

The beginning: Axie's origins and early vision.

Axie Infinity is a game that was inspired by cartoons like Pokémon and Tamagotchi. It was launched in 2018 and introduced players to a world where they could breed, train and battle creatures called “Axies”, each one a unique NFT with traits and attributes.

At its core, Axie Infinity wasn't just a game; it was a digital economy powered by player ownership and decentralised incentives.

Sky Mavis envisioned a future where each player had their own in-game assets, where they could trade freely and earn for their value, time and efforts. This was in contrast to traditional gaming, where publishers had everything and players paid to participate. In Axie Infinity, players paid to participate but with the promise of financial return.

How Axie Infinity Works.

Axies: NFT creatures that can battle, breed, and be traded.

SLP (Smooth Love Potion): An in-game token earned through battles and used for breeding.

AXS (Axie Infinity Shards): The governance token, used for staking, governance, and breeding costs.

Battles: Players compete in PvE and PvP modes to earn rewards.

Breeding: Players can breed Axies to create new ones and potentially profit from their rarity or traits.

This gaming economic model introduced a compelling value loop: play > earn tokens > reinvest or cash out > repeat.

When Axie Infinity became a movement

Several factors contributed to the rise and fame of Axie Infinity.

1. Covid-19: The rise of economic instability and unemployment during the covid period made people turn to Axie Infinity as a source of income. For many, it paid more than local jobs.

2. Word-of-mouth virality: Early adopters started forming scholarship programmes where wealthy players lent Axies to struggling players in exchange for a cut of their earnings.

3. Simple UX (relatively): With its Ronin sidechain and wallet, Sky Mavis offered faster, cheaper transactions. Making Axie more accessible than other Ethereum-based games.

4. Speculations and media hype: a media explosion happened when players started earning hundreds or thousands from the game. Everyone wanted in.

By late 2021, Axie Infinity had over 2.7 million daily active users.

It generated over $4 billion in all-time NFT sales.

AXS reached an all-time high of $160+, giving the project a market cap over $10 billion.

The rise of gaming DAOs

The emergence of scholarship guilds was a unique element that pushed Axie's success; these were player-led organisations that provided to new players who couldn't afford the upfront costs of playing. In exchange, these players shared a portion of their in-game earnings with the guides.

Guilds become Key players, raising millions from VCs to expand P2E gaming. The guild model created opportunities for thousands especially low-income countries and transformed gaming into an economic driving engine.

Axie’s Impact: A Socioeconomic Force

Axie wasn't considered just a game; it was a move in the Philippines alone.

Families paid rent, bought groceries, and funded education through Axie earnings.

Entire communities coordinated playing schedules.

Local businesses accepted SLP as a form of payment.

Government officials even considered regulating or taxing Axie-based income.

Axie Infinity showed the world a glimpse of how blockchain gaming could improve the undeserved and decentralise wealth creation for a country.

Cracks in Axie's Gaming System

The problem with fast growth has always been its maintenance, and Axie growth was not left out.

As millions of people flooded the game, SLP inflation turbocharged, and the token's value, once valued at $0.03, plummeted below $0.01 by mid-2022. The core issue was simple: too many players were cashing out, and not enough value was being generated.

Key challenges included:

1. Over-supply of tokens: With no cap and constant emission, SLP became abundant and less valuable.

2. Weak game mechanics: Players were grinding for rewards, not for fun.

3. Speculative bubbles: Players treated Axies like investments, not characters.

4. Unsustainable breeding: New Axies flooded the market with little demand.

5. Lack of sinks: There weren’t enough token-burning mechanics to manage supply.

The economy that once was an attraction to millions started pushing them away due to the crash of token prices.

The Ronin Hack: A Wake-Up Call for Web3 Security

In March 2022, Axie's side chain, Ronin, was hacked, and over $625 million was drained. This is one of the largest exploits in crypto history.

Although Sky Mavis later reimbursed users and partnered with Binance for support, the damage was significant. It highlighted:

1. The risks of centralised validator systems.

2. The need for robust auditing and security in custom chains.

3. How trust, once broken, takes time to rebuild.

The hack didn’t just hurt Axie; it dented the credibility of the entire play-to-earn model.

The Shift to "Play-and-Earn"

Sky Mavis pivoted the gaming message from Play-to-Earn to Play and Earn; this was in response to criticisms and backlash he got.

Key updates included:

Axie Infinity Origin: A new free-to-play version with upgraded graphics, storylines, and turn-based mechanics.

Tokenomics redesign: Reduced SLP emissions, better burning mechanisms, and new staking incentives for AXS.

Land gameplay: Introduced more depth and economic layers.

Builder’s Program: Encouraged developers to build mini-games, tools, and community apps using Axie IP.

Axie's transition marked a philosophical shift: sustainable Web3 gaming must prioritise player enjoyment, not just earning.

Community Stories: Beyond the Hype

Regardless of setbacks, there are players who remained loyal to Axie Infinity, not for profit but for community.

Take Miguel, a guild leader in the Philippines. “Even when SLP dropped, I stayed. I saw value in the community, in helping my scholars. We started local meetups, even charity drives.”

Or Jessica, a single mom from Brazil. “Axie gave me an entry into crypto. I learnt how wallets worked and what DeFi was. Now I help others onboard safely.”

These stories highlight something spectacular: Web3 gaming isn't just financial; it's educational and empowering.

Through a comparative lens: Axie vs. traditional games

Unlike traditional games like World of Warcraft or Fortnite, Axie gave players economic rights. They could:

1. Trade assets freely.

2. Earn tokens with real-world value.

3. Participate in governance (via AXS).

But it also revealed key challenges like:

1. Speculative behaviour often overpowered gameplay.

2. Barriers to entry (e.g., cost of Axies) excluded new players.

3. Economic fragility due to token dependency.

Lesson learnt? Web3 gaming needs robust game loops and sustainable tokenomics.

Financial Milestones and Market Fluctuations

At its peak:

Axie Infinity had a $10B+ valuation.Ronin handled more daily transactions than Ethereum.

NFT trading volume surpassed OpenSea.

But by 2023:

Daily active users fell below 400,000.

AXS dropped over 90% from ATH.

Many players left due to declining ROI.

Yet, Axie’s treasury remained strong. Sky Mavis continued to build during the bear market. Something many projects failed to do.

Lessons Learnt and Industry Influence

Axie Infinity wasn't just the pioneer of P2E gaming; it mapped out and defined the rules of what not to do moving forward.

Lessons:

1. Token rewards must be tied to real in-game value.

2. Fun gameplay is the foundation, not an afterthought.

3. Economic models need balancing mechanisms (burns, sinks, player tiers).

4. Guilds are powerful. But they need better tools and governance.

With Axie's story, newer games like Illuvium, Pixels, and Shrapnel have taken notes and are prioritising quality gameplay over earning and sustainable design from day one.

Looking Forward: The Future of Axie

Sky Mavis has bold plans to expand the Ronin ecosystem with third-party games.

Deepen Axie lore and IP through comics and animation.

Grow Axie: Homeland, a land-based strategy game.

Support builder communities through grants and SDKs.

Onboard millions more through free-to-play mechanics.

Whether or not Axie regains its past glory, it continues to be a force in shaping what Web3 gaming can become.

Conclusion

Axie Infinity didn't end up a perfect Web3 game, but undoubtedly, it was historic.It paved the way for a new economic model, empowered marginalised communities and introduced millions to Web3. It also taught the industry hard truths about sustainability, speculation, and game design.

Axie's legacy has remained even with how fast blockchain has evolved; it showed the world what was possible with Web3 and also what to avoid.

For creators, developers, and gamers alike, Axie Infinity is both a case study in innovation and a cautionary tale of unchecked hype.

But very importantly, it proved one thing: when people are given ownership, they show up not just as users but as educators, builders and believers.