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#1: Axie Infinity’s New Origin Story begins

The day we’ve been waiting for is mostly here. Axie Infinity: Origin has started Season 0 as of August 12th. The big deal is that this is the start of the brand new economy meant to fix one of web3’s flagship games. Many games over the last year have been modeled off of Axie Infinity: Classic, so there will be many eyes on Origin to see if the major changes help the game recover from its economic woes. Origin itself has been in beta through a Phase 1 and Phase 2 period with Season 0 starting the Phase 3 period. These testing periods have been used to help tweak and balance both the gameplay and the economy with many players testing, and hoping to gain early knowledge for a recovery of the game.

While you can still play Axie Infinity: Classic for the moment, seasonal AXS rewards and SLP earning are now turned off, making it essentially dead. But SLP earning is “turned on” for Season 0, though players won’t actually receive the SLP until Season 0 ends in 30 days as a measure to prevent any major economic problems.

A New Crafting System

The biggest change to how the economy works in comparison to Classic is the incorporation of a crafting system into the game. In Classic, players earned SLP originally from Adventure (removed later) and PvP battles, depending on their ranking. This system remains, but now instead of breeding being the only sink for SLP, there is also the ability to craft two brand new items - Runes and Charms:

• Up to two Runes are equipped to Axies to provide a passive bonus to stats, effects, etc.
• Charms are attached to an Axie’s cards to provide passive bonuses and on-play effects.

There is also a system for providing some limitations to charm equipping based on Axie body parts called Potential Points. This allows breeding to have some more mechanical overlap with charms besides just which cards you get.

Crafting also requires a new type of in-game currency called Moonshards that are gained from both PvE and PvP play as well as a timer-based system called the “Foraging Box”. The purpose of this system is to not only allow for more customization beyond breeding, but also to encourage spending SLP into a system that doesn’t inherently lead to more SLP being produced. Indirectly improving your Axie’s ability to compete will improve your potential to earn SLP by ranking up higher, but it’s far from guaranteed.

There is also a gating mechanism to crafting through the necessity of gaining crafting XP to level up and craft better Charms and Runes. The most important part of this system is that all of this has seasonal resets. At the beginning of each season a player’s crafting level is reset, Moonshards are removed, and Runes and Charms expire. To prevent the system from being too punishing, expired Runes and Charms can be disenchanted for half the value of non-expired. This will require constant reinvestment of SLP to remain competitive, especially further into a season when more players have items crafted.

The advantage of this system is, it provides a consistent seasonal demand arc for crafting so that demand isn’t dependent on new players. The big downside this has is the potential for burnout due to the random nature of crafting, thereby making it potentially expensive to replace your expired items. Players can potentially buy replacements from the marketplace, but disenchanting provides so little SLP in return that it may feel like a full reset and grind every season.

On- vs Off-Chain Economy

There are also important changes related to how the various economic elements are on- or off-chain. First, SLP, Runes, and Charms all have a 7-day delay before they can be minted to the Ronin blockchain. Second, only certain rarities of Runes and Charms are mintable, the key difference being that mintable recipes cost SLP and Moonshards whereas the off-chain recipes only require Moonshards. The other catch is that minting Runes or Charms to the blockchain costs a fee in AXS tokens ($3 worth) as a way to add friction to value extraction and provide a floor price.

This all adds up to needing Moonshards, SLP, and AXS in order to craft and sell any Runes or Charms. This should incentivize players to primarily keep lower rarity items to themselves for use. The actual item crafted, however, is random, so there is definitely a chance you may craft Runes or Charms you have no interest in using and can choose between disenchanting for a partial return or paying the AXS to mint and sell provided you chose a mintable recipe. AXS is also still being used as a reward for the top 20,000 players on the PvP leaderboard at the end of seasons, so it may not have to be paid out of pocket.

Having some delay to minting items on-chain does allow for keeping some elements of cheating in-check, but doesn’t necessarily address sell pressure. With the necessity for multiple currency types just to mint Charms and Runes to the blockchain, it’s like that floor pricing will be dependent on the value of SLP as the $3 in AXS is a fixed cost. Needing to buy AXS to mint does add some much needed non-breeding utility to AXS, but could also act as a deterrent to market activity, especially since taking the item into the game burns the NFT. Not being able to earn SLP during this 30-day Season 0 may also slow adoption of marketplace crafting as the SLP will need to be purchased instead of earned. We expect all but high rarity and meta defining items to quickly converge down to floor prices, resulting in less desirability to even mint. The problem may be exacerbated by scholars being unlikely to craft at all and dependent on guilds to provide purchased Charms and Runes as part of Axie ownership.

Conclusion

The big question we have for all of these economy changes is, how it will affect the player base, especially the dynamic between guilds and scholars, as scholars are not the type to invest their earnings into their NFTs. Luckily, the game can at least be tried with free to play Axies, and floor prices for Axie NFTs are likely to remain relatively low for the moment, and so it’s a good time to explore for yourself. While the game now provides more overall utility for SLP and AXS than just breeding, it will still be focused on guilds and highly competitive players to engage with these systems. Unless some heavy whales drive a lot of buy pressure, the price of SLP is unlikely to recover much of its lost value despite the seasonal refresh necessary.

The necessity of meta-dominant Axies, Runes, and Charms may quickly drive the game from P2E to P2W as it will be potentially a very hard grind to earn the competitive items before a season even ends. The overall economy will be in a very delicate balance while trying to retain and grow a player base that has largely moved on. We expect there to still be some love from the die hard fans, but the gameplay will need to be a lot more compelling to grow in what will become a more crowded marketplace over the next year.

#2: Gabriel Leydon Declares F2P Dead

While there has been growing interest from F2P mobile developers in the green pastures of web3 gaming, none have been as loud or impactful as Gabriel Leydon recently. He’s best known as the CEO of Machine Zone (now acquired by AppLovin) and the design brains behind top-grossing titles Game of War: Fire Age, Mobile Strike, and Final Fantasy XV: A New Empire.

On announcing his new web3 game company — Limit Break — in early August, those who recognized the name immediately took notice. Gabriel has a reputation for going big and going hard when it comes to building what he believes in, and he going all-in on web3 is a major signal for the industry. Limit Break has been working on its game for about a year now and already has around 40 employees with many ex-Machine Zone folks, including his previous co-founder Halbert Nakagawa. Since making the announcement, he’s really turned up the volume and hyperbole, literally declaring F2P dead.

He also made a big splash with the first NFTs out of Limit Break, known as Digidaigaku, and referred to it as a metaverse in one tweet. The NFTs were a free mint, with 2,022 available, which sold out very quickly and have done $2.35M in secondary market transactions already, with the majority happening in the first 5 days. Although demand has since died down due to no specific utility revealed, the OpenSea floor price sits at 2.5 Eth, or ~$4K. These won’t be the only NFTs from the new brand, especially given the small quantity, so initial demand on future NFTs should be even higher. It’s unclear at the moment what place these NFTs will have in Limit Break’s game plans, but Gabriel has made very clear his intentions to be the #1 web3 game and these are simply one piece of a much larger unannounced project.

Gabe has since done a Twitter Space where he elaborated on a lot of his thinking about web3. In the Space, he revealed that he had essentially retired from games after Machine Zone, but excitement at seeing projects like Axie Infinity and Wolf Game inspired him back into the game. One of the interesting things he mentioned was a much higher potential for revenues due to the uncapped nature of spending on NFTs versus Apple capping individual purchases at $100. When it comes to the asymmetric nature of whales and free players, the spend depth for whales can be a big factor in keeping metrics like ARPU high enough to continue growing a game. This is not to say that NFTs are about milking users for more profit, but the idea of asset ownership goes a long way towards justifying much higher spend into a system. He even stated that he believes web3 revenues compared to F2P will be 10x what F2P was compared to console games.

Another interesting element of working in web3 he mentioned is the concept of player alignment. In F2P, there’s a sense of an adversarial behavior towards players in attempting to trap value in the game. Web3, on the other hand, is much more open and community-focused, with a focus on building value alongside the players that has personally left him much more motivated to expand the game in favor of the players. At the end of the day, game developers still need to make profit, but the Kickstarter-like focus on building up a passionate player base and having open economies has created healthier incentives for both players and developers despite the fears of traditional gamers.

Finally, he stated the big advantage that F2P developers coming into the space have, particularly he and his team, is knowing how to create real demand. Much of the demand in web3 to date has been artificially fueled by scarcity, FOMO, and an investment mindset. Sustainable games instead require genuine demand for fun and positive emotional engagement. F2P developers have spent over a decade honing their deep understanding of player psychology in a way that the game creators with financial backgrounds simply don’t. Gabriel’s ability to create multiple top-grossing games when F2P was brand new has proven his ability to innovate in a way that web3 can benefit from as it matures and looks for better models to copy. He even revealed a deeper understanding of the motivation of whale players that is different than the way they are typically perceived. High-spending players are often seen as doing so as a way to pay to win, and he corrects this misconception by saying that they are actually motivated to play to judge. He clarifies further that the big spenders want to be kings and the ones others come to for help and support. This aligns with some of the innovations in web3 like DAO governance and even aspects of land ownership.

Overall, the Twitter Space is worth a listen and conveys a very strong sense of faith in web3 being the definitive future of gaming, both designwise and financially. Declaring that F2P is effectively dead may be a bit of hyperbole given that older forms of gaming never completely die, as arcades, board games, consoles, and browser gaming all live on. We continue to see constant erosion to the idea that game developers are resistant to web3 gaming, and Gabriel will be far from the last to scream it from the rooftops.

Game Announcements

• The Sandbox released info and an August 24th release date for its Alpha Season 3. Link
• Castle Crush enabled play with NFTs on its live game. Link
• MetaBeasts announced a free NFT mint on August 22nd. Link
• Mobland announced the release of upgradable digital weed farms. Link
• Neopets Metaverse launched a treasure hunt with $10K in NFT prizes. Link
• Life Beyond added new content to its playable alpha version. Link
• Wizardia launched alpha tournaments with NFT and token prizes. Link
• Pegaxy released the beta version of its iOS app via TestFlight. Link
• Fancy Birds started its 3rd season with $10K in USDC for top-placing season 2 players. Link
• Blocklords opened up its early access pre-registration. Link
• Metashooter is live with playtest access on Steam. Link
• Pulsar, an MMO RTS, released a litepaper and launch schedule. Link
• Crazy Defense Heroes is running an Atari-branded event. Link
• Chainmonsters released more updates and information on the upcoming demo. Link
• Mobox launched an open alpha test for its new MMO, Clash of Moland. Link
• Blockchain Brawlers launched a “Summer Block Party” event. Link
• Nine Chronicles released info on its upcoming NFTs. Link
• Soccerverse launched its 4th beta on Polygon. Link
• Upland released an economy update and new neighborhood in Rio. Link
• Sweatcoin announced a web3 partnership with Kryptomon. Link

Funding Announcements

• Microsoft awarded a grant and access to Azure PlayFab to blockchain game StarHeroes. Link
• DeFi.org and DappRadar launched a $100K grant program for The Open DeFi Notification Protocol developers. Link
• MatchboxDAO raised $7.5M in a seed round to help improve StarkNet games. Link
• Regression Games raised $4.2M in a seed round led by New Enterprise Associates. Link
• Murasaki raised €1.5M in a seed round led by Incubate Fund. Link

Ecosystem Updates

• Yuga Labs announced full licensing rights for CryptoPunks holders. Link
• OpenSea launched a new policy targeting NFT theft. Link
• WeMade showcased its new on-chain DAO platform called NFT Is Life Evolution (NILE). Link
• ZepetoX announced it will be launching its metaverse platform to Solana. Link
• The Sandbox and Com2us announced a joint metaverse venture called MetaWorld Entertainment. Link
• Neowiz announced a partnership with Polygon for a new blockchain gaming platform called Intella X. Link

Notable Market Moves

• Despite some continued excitement over the future Ethereum merge, most crypto started trending down around the 14th, with the majority of the tokens following suit.
• StepN managed to fight off most of the downward movement with a burst-up thanks to an update to v0.8.5 that added some new features such as attribute point re-distribution, fusion, and success rate improvements.
• Gala also saw some strong performance thanks to the announcement of the launch of Gala Film. Part of the announcement was also a partnership with Stick Figure Productions among other partnerships.
• Wax was able to hold mostly steady off the back of Blockchain Brawlers events launching.
• As usual, keep the longer-term context in mind when looking at weekly value. In general though, crypto seems to be doing decently amidst what could still be considered a “crypto winter”.

Content Worth Consuming

Digital Co-Ops (Meandering Musings) - “The role of long-term oriented, scaled web2 consumer platforms in driving mass adoption of web3 is being underestimated. They are generally ignored because crypto natives tend to overvalue decentralization as an ‘end’ in itself. But, as with privacy, I do not believe decentralization should be considered a goal in its own right; rather, it should be valued as a ‘means’ to the real ends: self-expression, community formation, and financial opportunity. Experienced IP creators have a critical role to play in bootstrapping communities and IP that consumers care about. Those bold enough to take a long-term perspective and give value to get value are going to do well, with economies that have exponential potential relative to their closed counterparts.” Link

NFT Interoperability for reals this time (Devin Becker) - “This weekend after having some more debates on NFT interop and ownership, as well as discussing it on the FOGDAO podcast, I decided to actually prove what interoperability took. First, I wanted to use the data from one of my actual raider characters, but also make it so that the game would work with anyone’s character NFT. Rather than waste time on the wallet communication protocol stuff (the Alchemy API is supposedly a bit error prone lately) I simply took the data from the NFT as a starting point.” Link

A Tale of Two Sports (Ran Mo) - “Compared to the roller coaster ride of Top Shot, Sorare seemed almost boring. It did not advertise the sales of its most valuable cards to draw attention, and in its low-profile avoided the worst of the speculative behaviors. Sorare also sold new cards individually to the highest bidder rather than in supply-limited packs— which meant supply met with demand efficiently for each primary card sale, and no arbitrage existed. When arbitrageurs looked for easy money, they turned elsewhere. These decisions may seem like strokes of good luck, but I’d reason otherwise. As we continue to dive into the Sorare model, it becomes more clear that Sorare’s decisions come from a place of quiet confidence: a deep understanding of what they’re building, why, and who their real customers are.” Link

Designing Governance Tokens (Variant.fund) - “Broadening the scope of control has its own downsides. Consensus by committee can be time consuming and laborious, which may not square well for projects that need to optimize for agility within crypto’s fast-paced environment. There are, of course, ways to mitigate this: time limits on voting implements necessary deadlines, dynamic delegation improves the spectrum of choices governors can select from, and many mechanisms exist to resolve gridlock. But for those areas that do require speed and adaption, ultimately the best choice may be for founders to retain authority over those decisions.” Link

Twitch founder Justin Kan: Web3 games don’t need to lure players with profit (TechCrunch) - “The vision of interoperability has yet to be realized in the traditional gaming world because many incumbent studios have been loathe to encourage third-parties to build on top of their APIs, Kan said. He attributed their reticence to an ‘innovator’s dilemma,’ wherein large gaming companies with business models that already work are hesitant to take new risks. Gamers, though, seem to value the openness and economic participation afforded by blockchain-based startups, Kan said. Still, he added, the appeal of an open gaming ecosystem is more about the principle of the matter than it is about making a living.” Link

Analyzing a blockchain gaming community: Is it all about the money? (Future of Gaming) - “For example, as an observer of several blockchain gaming communities, I have seen community members express concern about the entrance of new players, especially how new players will impact the price of assets. If the game needs to generate new assets to onboard new players (to increase growth) it may devalue the existing assets thus upsetting existing players and impacting player retention. For the community manager, these concerns cannot be ignored. Players are owners and financial stakeholders. They have an expectation of being able to influence the direction of game development - a process they likely don't fully understand.” Link

How do Ownership and Copyright Work for NFTs? (DappRadar) - “The BAYC collection is an edition of 10,000 bored-looking ape PFP avatar NFTs launched by Yuga Labs in April 2021 to a relatively lowkey reception, becoming one of the most revered collections of all time. In many ways, the collection is very similar to CryptoPunks, as the original creator makes a template and produces variations by mixing and matching traits. Bored Ape Yacht Club took a unique approach to NFT rights from the outset, giving the purchaser of each Bored Ape NFT license to use the digital art in various capacities. Including developing and exploiting the properties commercially in line with the terms and conditions.” Link

Community drives lasting games, not financial incentives (sequel) - “Crypto games should focus on one of two approaches: (i) creating new experiences enabled by moving assets and/or game mechanics on chain (long term approach) or (ii) modding an existing game with an existing community (short term approach). By refocusing on community, blockchain gaming can emphasize the experiences of games rather than corresponding token price action. And by minimizing the focus on token price action, new agents in blockchain gaming (e.g., speculators, investors, guilds, scholars) can peel back the hood on whether these games offer lasting experiences that communities want to continue engaging with.” Link

A Deep Dive into Web3 Publishing, Growth and UA (The Metacast by Naavik) - “On this week’s Crypto Corner, we take a deep dive into Web3 Publishing and Growth. Quinn Campbell, VP of Growth at Sky Mavis, and Jon Hook, CMO at PlayEmber, join your host Nico Vereecke for a conversation about Differences between Web2 and Web3 Game Publishing, How Web3 will change the Publishing Model, Growth for Blockchain Games, and Lessons learned from getting millions of players into the Axie Ecosystem.” Link