Why Axie Infinity is no Ponzi scheme

Blockchain-based game Axie Infinity has become a global phenomenon in a short span of time (this story goes into how it works and the details of its rise).

Since the game’s launch, many Filipinos have begun depending on their earnings from Axie Infinity to make ends meet. While it’s great that the game can be a source of income for so many who need it, this also comes with huge responsibilities.

In fact, many are worried that SkyMavis, the team behind Axie Infinity, may not be up to the task.

The dreaded ‘P’ word

Progress is always a double-edged sword, and Axie Infinity’s play-to-earn model is not without its issues.

For one, some camps have asked if the game is a Ponzi scheme that exploits the economic troubles of developing countries like the Philippines.

They are worried that if their suspicions prove to be true, the scheme – as with others before it – will eventually unravel and take its players down with it.

Ponzi schemes, by definition, lack real products or assets.

Since many of Axie Infinity’s players simply cannot afford to lose, the question needs to be addressed.

So is it a Ponzi scheme? “This is a game that will constantly need new people streaming in by the droves,” an independent game developer from Singapore tells Tech in Asia. “The early settlers will earn the most, and those who are just coming in are the ones helping them to do so. This is exactly how a Ponzi scheme works, and I am very worried that those at the bottom will get burned,” adds the source, who declined to be named.

Ponzi schemes, by definition, lack real products or assets and simply pay existing investors using the money it gets from new investors.

Your view on Axie Infinity, therefore, hinges on whether you consider the game a real product, what you think of its future potential, and whether you think the intangible enjoyment that people derive from playing the game is of value.

One crucial question in this puzzle is what makes Smooth Love Potions (SLPs) – the in-game currency of Axie Infinity – valuable? To recap, SLPs are generated when existing players win a battle. They then use these tokens to breed new axies, the digital creatures that players battle with in the game.

Users will only have an incentive to breed axies, which are non-fungible tokens (NFTs), if more and more players want to buy and sell these creatures on the Axie Marketplace. This gives SLPs their value. As such, existing players are “paid,” and the tokens gain value through the money flowing in from new players.

NFTs have inherent value

SLPs could become more useful

Final thoughts