Thread by @EconsDesign

Recession in @AxieInfinity : how and why.

NOTE: This is not a big problem! This is normal. We have economic cycles IRL. of course we have it in the metaverse land too.

Difference: we can better anticipate and change

Here are 7 ways Axie can manage inflation and recover 🧵

Economics is the most important aspect to get right in your economy. It builds the backbone of the entire market, but it is complicated to get right.

We wrote a highly valued research report on P2E Economics to help with the economics design. And this time, I want to apply it to Axie Infinity, and talk about how their economic policy led to economic recession that we see right now.

Report: econteric.com/markets/p2e-re…

Key takeaway:

#1 Markets exist they add value to the users in the market by reducing transaction cost.

#2 The value creation cycle consists of 3 components, creation (inflation), distribution and sinks (deflation).

That means
a) increase the pie
b) slice the pie
c) eat the pie

When new value is created, the new resources can be:
a) Deployed for a specific persona for new economic activities like cashing out
b) Other personas, entering the game and interacting with other assets like NFT or tokens

***HIGHLIGHT***
This is where blockchain and traditional games differ. Otherwise, the rest = the same.

#3 Axie’s economy creates value by having a fun gameplay, to retain users and put SLP or AXS for other value creation. Whilst the project sound like ponzis, that is not true when there is real long-term value generation.

Ponzi focuses on short-term user growth to sustain development. When the value creation shifts towards the long-run, this will be mitigated. In Axie’s case, focusing on UGC and rules for governing assets is KEY!

Solutions: tune parameters of SLP, Axie, AXS

After all, SLP is a function of user-base. Either new user growth or existing users playing the game.

cc: @Jihoz_Axie @AxieInfinity @ZyoriTV

TLDR: There is no equilibrium. An economy is a live system. Economics is the internal regulation mechanism to balance between the various forces. Like the resources (currency, assets) and value creation (utility of these resources).
You need to grow them together, proportionally

Resources

1. Intro to report:

2. This session:

3. PDF report: econteric.com/markets/p2e-re…

#AxieInfinity $AXS #P2E #Tokenomics #tokeneconomics #gameeconomics #gamedesign