Axie Infinity was the first web3-powered game to go mainstream. Peaking in 2021 with over 2.5 million daily active users, the decentralized game seemed unstoppable. But as the crypto markets cooled, so did its growth.
But the company isn’t scared of a bear market. Their response? Double down on their most important asset: the Axie community.
The game was founded on the principles of decentralization and community ownership. Becoming a DAO has always been on the roadmap, but despite writing a whitepaper on the subject, they’ve yet to pull the trigger.
I talked with co-founder JiHo Zerlin to find out why and to learn what’s next for Axie Infinity.
Origins of Axie Infinity
JiHo joined Sky Mavis, the creators of Axie Infinity, in 2018. But his fascination with games, communities, and companies started well before that.
As an entrepreneurial kid, JiHo sold whatever he could get his hands on, including shark teeth. When he started playing World of Warcraft at age 12, his life changed forever. JiHo loved the adventurous nature of the role-playing game (RPG). He quickly became a regular member of its online community.
But there were parts that frustrated and scared him, too. WoW members developed a “gray market” to buy and sell special items and powered-up accounts. These transactions were inconvenient at best and dangerous at worst. JiHo resorted to making sales in person because people didn’t trust online transactions that could be reversed.
The blockchain changed all of that. JiHo realized decentralization was the key to making online payments safe and secure. But how could you make it more convenient? When JiHo discovered the Axie Infinity project, it all clicked.
“I saw an opportunity to create a system that made sense for everyday people to earn cryptocurrency,” he told me.
A New Type of Game—A New Model for Finance
Axie was designed to introduce the world to decentralized finance and web3, but it wrapped the new technology in nostalgic memories from childhood. On the surface, it looks a lot like the games we grew up playing, such as Pokemon and Tamagotchi. There are cute potato-shaped creatures that you can battle, collect, and upgrade.
On the backend, Axie is nothing like those older games. It’s powered by the Ronan Network, an Ethereum Virtual Machine (EVM) side chain. It employs cryptonomics to incentive gameplay. One of JiHo’s first contributions was to rewrite and reformat the whitepaper that outlined how the community would govern the Axie universe.
At its peak in 2021, Axie had three million users, with around 2.5 million daily active users. There are still over two million people (or unique addresses) who own Axies to this day.
However, the number of active players has declined from three million to around 200,000 monthly active users.
“Axie Infinity's success is tied to people's interest in learning about crypto and blockchain technology,” said JiHo, citing the reason for the dip in players. “During bull markets, people in the ecosystem are more eager to introduce their friends or family to the world of crypto.”
Today’s economic conditions make people wary of spending money in unfamiliar ways.
Despite the drop in users, Axie has made a significant financial impact on the lives of its most active. Twenty-five percent of people in the Axie Infinity community do not have a bank account, which gives Axie an opportunity to introduce them not only to web3 but digital savings methods that don’t involve keeping money under their mattresses.
“At Axie, we see our game as providing more ownership to players than traditional gaming ecosystems,” said JiHo. “This extends to the assets, the game, and even the governance of the community.”
The next logical step in Axie’s mission of empowering its members is to restructure as a DAO. The journey has been slow, but deliberate.
Deliberate Steps Towards DAO
The transition to community-led governance is a gradual process, starting with steps like establishing a community treasury. Sky Mavis currently serves as the ship captain, setting the direction, but the ultimate goal is for many organizations to define the direction of the Axie protocol.
“Axie is like a protocol with a living, breathing hive mind, trained by the community to be almost like an AI,” said JiHo
The slow and deliberate pace is to ensure the game remains stable and that players are not negatively impacted. With so much time and money invested into the game by the community, maintaining the community experience is mission-critical.
Community involvement is also an essential part of the process. “Our vision is to eventually bring the community more into the governance process and allow them to help shape the direction of the game and the organization,” said JiHo. “As we decentralize the network, players will have access to a governance token that allows them to govern the community treasury.”
The idea for the treasury came from JiHo’s frustration with the traditional creator royalty model, where a middle-man takes a large cut of the proceeds. This model has been adopted by other web3 projects like CryptoKitties, where a 4.25% fee goes directly to the project creator, Dapper Labs.
“I was quite upset as a CryptoKitty community member, wondering where that 4.25% went. Why couldn't it be used to help the community?” said JiHo, “After all, we were co-owners of the game. Why was that 4.25% only going to Dapper Labs, when this seemed like our project as well?”
The Axie treasury was created to fund future projects in the community, including the funding of a DAO. As of this writing, he says, there were around 22 million AXS tokens in the treasury worth approximately 150 million USD. It remains untouched until a time when the community has a say in how the money is used.
Axie Infinity doesn’t have a set timeline for becoming a DAO. They are currently experimenting with governance through Season One of their contributor program, where 800 contributors have expressed interest in contributing to the project and shaping the path towards a more decentralized governance process.
But the pace doesn’t bother JiHo. In fact, it’s part of what he loves about DAOs.
“If it were meant to be fast, [we] could have done it alone.”
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