Axie Infinity rose to over 2 million daily players and a $10 billion valuation in 2021, but its economy proved unsustainable. Hyperinflation of its in-game token SLP, the $620 million Ronin hack, and a failed attempt to relaunch with new titles led to a collapse in both user base and token value
Axie Infinity is a blockchain-based gaming protocol launched in 2018 by Sky Mavis, co-founded by Jeffrey Zirlin and Trung Nguyen. Originally built on Ethereum, the game moved to its own L1 sidechain, Ronin, due to slow transaction speeds and high gas fees.
Compared to popular multiplayer games, Axie Infinity is fairly simple. Players control three digital, blob-like creatures—Axies—that battle against another team. Each Axie has a unique mix of interchangeable body parts. Fights are turn-based: Axies bounce in place until casting spells, and when a creature is defeated it becomes a ghost. A match usually lasts less than five minutes.
Many believed Axie Infinity could provide a real living through its “play-to-earn” model. Victorious players earned Smooth Love Potion (SLP) tokens and, in larger tournaments, Axie Infinity Shards (AXS). Axies themselves were NFTs that could be traded, and players could breed them by paying in SLP and AXS. New Axies inherited traits from their parents and could be resold for profit. At the height of the boom, the breed-to-sell model could deliver returns of up to 400% in less than a week, since new players needed Axies to participate.
The broader crypto market boom of 2021 amplified Axie’s rise. The platform drew over 2 million daily players, attracted funding from firms like Andreessen Horowitz, and reached a $10 billion valuation. Token prices followed suit: SLP peaked at $0.40 in July 2021, while AXS hit $165 in November.
Axie’s growth was also fueled by a digital labor model known as the scholarship system. Axie owners rented out their NFTs to players—often in lower-wage regions like Southeast Asia or Latin America—who treated the game as work. Scholars in the Philippines reportedly earned above minimum wage between May and October 2021.
But critics noted that Axie had simply transplanted an old, exploitative digital labor model into the blockchain era. While marketed as “freedom for gamers,” the system resembled a feudal structure: owners profited, while scholars bore the grind.
Axie’s economy depended on balance. Players earned SLP by winning, but burning tokens required in-game spending. When most players simply cashed out, supply ballooned and hyperinflation set in.
By early 2022, the system was buckling. The Ronin sidechain was hacked in March 2022, with attackers stealing $620 million in cryptocurrencies. Daily active users had already fallen by 40%. SLP, once $0.40, dropped to $0.018, and AXS fell from $165 to $56. By the time of writing, the decline was even steeper: SLP at $0.0037 and AXS just above $14.
Most players exited with tokens worth almost nothing. Sky Mavis tried to recover by launching Axie Infinity: Origin, but the new release failed to reignite demand. Meanwhile, the company promised to reimburse hack victims and repair its infrastructure, but progress stalled. Instead, founders gave motivational speeches about “forging stronger community” from shared trauma.
In a bid to shift the narrative, Sky Mavis hired Philip La (formerly at Niantic, developer of Pokémon Go) as head of product. La suggested the economy could only work if players stopped treating Axie primarily as an investment. The new whitepaper reframed Axie Infinity as “play-and-earn”, not “play-to-earn.”
Axie Infinity’s collapse highlighted the fragility of tokenized economies when speculation outweighs gameplay. Once heralded as a model for crypto gaming, Axie by mid-2022 looked more like a cautionary tale.
Other P2E projects, however, continued to gain attention. StepN, for instance, drew massive audiences with its move-to-earn model, though critics warned its economy might also prove unsustainable.
Earlier pioneers like CryptoKitties (2017) had already shown both the potential and limits of NFT gaming. CryptoKitties introduced “breedable” digital pets that sometimes sold for six-figure sums, and it was in those forums that the Sky Mavis founders first met.
Meanwhile, projects like Gods Unchained offered card-based battles using NFTs tradable on ImmutableX. At the time of writing, its native token $GODS traded around $0.50, down since January 2022, but still attracted players with weekly tournaments.
Whether Axie Infinity can reinvent itself remains uncertain. The project failed its players and its economy, but its story continues to shape the broader conversation about blockchain gaming. The question now is whether newcomers like StepN will avoid the same fate—or if P2E as a whole is destined for repeated boom-and-bust cycles.