Patching SLP Till Battles v2
This is a long formed version of a Twitter thread that proposed using 2 levers to reduce SLP inflation until Battles v2. A lot will be repeated and additional data will be provided for the two levers and their impact to SLP. The original thread can be found here.
We always have to start with the numbers
The number of SLP and AXS holders are underestimated here. When you Stake AXS or provide liquidity for AXS/SLP/WETH, the tokens leave your wallet and weren’t counted. Below is additional data by Maxbrand for AXS staking from Nov 12th.
Even if you add this additional 60K AXS Stakers to the total wallet holders (an over estimation now) you get ~7% of 3 Million DAU actually own AXS.
It’s also very clear SLP is sold by a large portion of the 3 Million DAUs.
Now to the large issue of SLP inflation/emissions
With ~250 Million SLP being minted and only 50 Million being burned for breeding, there’s an excess of 200 Million SLP being minted PER DAY. I do my own data collection on breeding so I know we’re a little under 20K new Axies a day and have been trending down for some time.
At the current inflation of 200 Million SLP/day we would have to consistently breed ~100K Axies/day just to balance inflation! I marked the above graph to show how this compares to historical breeding rates. There’s no breeding event that will sustainably get us to this point…but that’s OK.
From all the recent Interviews, Twitter Spaces, and talks with the Axie team I’ve listened to, trying to balance the current economy is not the goal since Battle v2 is going to be a game changer. With all six Axie parts being used and new mechanics(bubble??) the game is going to change drastically.
Encouraging massive breeding now will only compound the problem when v2 launches with guilds having to completely redo teams. At this point every major guild should be thinking about this.
Battle v2 is going to open the door to more SLP burn mechanisms along with a clearer vision of what Axie gameplay will be like long term. Battle v1 was an Alpha version of the game, we shouldn’t be encouraging massive breeding or balancing an economy around gameplay that’s going to be outdated soon.
So what do we do till than?
The answer is complex, and really depends on how long till Battles V2 is released. With 22.8 Billion SLP circulating and 200 Million excess SLP/day being generated that puts us at 0.9% inflation/day. This is going to add up quickly. Over one month that’s 6 Billion additional SLP…
I’ve come to the conclusion that the only way to meaningfully reduce this number is to reduce SLP issuance. This will impact everyone.
I’ve seen just about every idea out there to burn SLP. However most ideas require certain parties to bare the economic burden, assume user behavior will stay the same after a tax/microtransaction is added, require complex coordination, or are blockchain solutions that require heavy developer time. While there are many great ideas, the Axie team should be spending time on Battles v2/Land/Governance instead of creating +10 Burning mechanisms (Yes, I’d think you’d need that many).
Marketplace Fee Burn Example
We’ll take one popular SLP burn example of using a fraction of market fees(4.25% of Marketplace Sales) and it’s effects on current inflation.
Looking at the Axie Marketplace on 12/24, $391.4 Million was the 30 day volume generating $16.6 Million in fees. Using 25% of that to buy and burn SLP we’d get about $138K of SLP/day.
If we’re inflating 200 Million SLP/day…that’s ~$6 Million of inflation value PER DAY.
$138K/day is a drop in the bucket and has hardly any impact…even using 100% of the fee doesn’t do much. Even worse it takes away from being able to fund growth projects down the road. You should now see why creating +10 SLP Burn mechanisms is not the solution, and a waste of developer resources that should be allocated elsewhere.
So how do we reduce SLP issuance?
I propose 2 levers that are reducing SLP earned mostly at the higher MMR ratings and using AXS as an arena award at the higher MMR.
Using AXS as a reward at high MMR will lessen the load on SLP, but also distributed AXS to a broader user base which is necessary for governance and decentralization. AXS staking rewards could be reallocated to help this distribution effort.
It’s very important that these levers be used based on when Battle v2 will be ready. If Battle v2 is 1 month away we’ll need minimal changes, but it’s 3 months away these levers should be pulled harder(maybe beyond my proposals.
Lever 1: Reduce total SLP earned by 10–15% more focused at the higher MMR. This would be through adventure and arena SLP reductions. Players below 1300 MMR would see minimal impact
Lever 2: Replace 10–15% total SLP earned by higher MMR players with AXS rewards. Combined the goal would be to reduce SLP issuance by 50–75Million/day using these levers.
THE PROPOSAL
Current System:
New System Proposal v1:
Impact on SLP Emission and Increased AXS Allocation to Arena:
Above is a proposal that would reduce SLP Emissions by 66 Million/Day or ~2 Billion/Month. AXS would be used as an Arena award for Wins above 1300MMR, and as of 12/24/21 this would get AXS into the hands of nearly 1 Million Axie users.
I pulled data from a scholarship for MMR and Ranking to produce the graph below. This is how I estimated player pools for each MMR bracket.
Considerations
A large portion of the player base is using Axie to supplement income. By earning AXS per win, and adding it to be claimed(or airdropped?) every 2 weeks it’ll continue to get to scholars that need it a timely manner. An alternative solution would be to broaden the AXS reward to players at the end of a season. This would mean 1 big payout every +1.5 Months and could lead to a large sell off.
Let’s not kid ourselves, this will add sell pressure to AXS. However the scholars playing the game should be given this choice. Even if 75% of the users decided to sell, the 25% that would be holding it would over DOUBLE the current AXS holder count. For a game that is is community first, they should be given this opportunity.
The largest SLP emission sources, by far, are the daily reward and quest. I only adjusted these down 5 SLP because of the impact these have for lower MMR scholars to P2E. As an example, if you reduced SLP from quests from 50 to 25 SLP, it would have only a ~5% impact on earnings for a +2200 MMR player, but for an ~800MMR scholar it would have a ~30% impact on their earnings. I wanted to have as minimal impact on lower MMR Scholars as possible.
I can’t stress enough that this should be adjusted depending on how long till Battles v2 is out. If it’s going to take the whole of 2022 Q1, then this may not be enough. Either more AXS may be needed to be rewarded instead of SLP or adventure/quests may need to be reduced further.
I don’t have any insight about how Battles v2 will work, but in doing this work, some strong adjustments may need to be made to SLP when we transition to v2.
For Axie to grow to 10 Million DAUs what does the economy need to look like?
- **All of this data is for informational purpose only and not financial advice**
- Twitter: https://twitter.com/JDHyper
