About

Smooth Love Potion is the utility token used by the play-to-earn blockchain game Axie Infinity. Founded in 2017 by Sky Mavis, Axie Infinity is a leading GameFi offering with Pokemon-inspired mechanics. Axies, player-owned NFTs representing pet creatures (and items, etc.), are engaged by their owners in battles with monsters in this metaverse. Smooth Love Potion, trading under ticker $SLP, is the in-game currency behind player rewards and is charged for certain interactions with one's Axie (i.e., breeding).

History

Axie Infinity is a leading blockchain-powered game, with a player base numbering in the millions and significant revenues being generated every month. Founded in November 2017 by Trung Nguyen, later joined by peers and established as Sky Mavis. Axie gameplay is inspired by Pokemon with unique visual art and novel blockchain mechanics that form a one-of-a-kind metaverse. This metaverse is filled with pet creatures known as Axies, represented as non-fungible ERC-721 tokens (NFTs) owned by players themselves. Behind the project is the belief that Web2.0 gaming models are fundamentally unfair and need changing. Nguyen's mission in building Axie Infinity was to remedy a fundamental flaw in the legacy model of gaming, where value created is only earned by platform owners (rather than players). This misalignment of incentives is problematic for many reasons (e.g., assets lost if account is deleted or game is shutdown).

Instead, Axie Infinity provides the keys to these assets to players themselves, which they own as portable, standardized non-fungible tokens. Axie Infinity's solution is a model of putting players in control, conceptually a simple premise though technologically groundbreaking at the time. This concept really does flip the traditional gaming model on its head: player-owned gaming assets become investments that yield monetary benefits in the real world. Aside from high costs of entry (a few hundred US dollars), which are partially addressed by "scholarship" programs, gameplay is seen as economically-empowering. Given the economic opportunities and high barriers to entry, a banking layer by Yield Guild has emerged as an "NFT bank" which rents Axies to scholars beginning their journey. Players with sufficient time and resources are able to invest in their own income streams by gaming more and breeding Axies. The majority of players remain in the Philippines. Though the game is an international hit its economic utility is mainly being recognized in developing markets (esp. Asia). Smooth Love Potion (SLP) is paid by the game to players for battle wins, participation in promotions, and more, with the token trading publicly on multiple decentralized exchanges. Notably, SLP is also required when breeding Axies. Since SLP is uncapped in its supply, wealth generation is made possible for new players. Being a highly liquid asset in itself, SLP is often liquidated by gamers for cash-on-hand which is used to fund everyday living expenses. Axie Infinity has served as the on-ramp for tens of thousands of new crypto users in the past few years.

However, Axie Infinity and its developers have faced mounting challenges in 2022 raising questions about the project's viability and the competence of Sky Mavis which tightly controls most aspects of Axie Infinity. At the time of publication (April 2022) Axie Infinity has grown to over one million daily active users, an impressive feat largely built on the back of massive SLP supply growth. The circulating supply of the token has exploded in recent months, raising questions about the financial mechanisms underpinning this economy. Sky Mavis addressed the issue in a statement to Markets Insider on February 7, 2022. "We know that this is painful medicine. The Axie economy requires drastic and decisive action now or we risk total and permanent economic collapse. That would be far more painful," it said. Specifically, the emissions of Smooth Love Potion were cut significantly by removing SLP rewards for daily quests and adventure-mode battles. It is hoped that these measures will work to stabilize the token supply as token burning continues for breeding of Axies as per usual.

The second negative development this year pertains to a hack in March 2022 which saw the Ronin infrastructure drained of ETH and USDC. The scale of the breach is virtually unprecedented, a breach which itself saw the hackers siphon away over six hundred million US dollars in total. Specifically, malicious actors breached the private keys of four Sky Mavis and one Axie DAO validator to execute transactions on behalf of Sky Mavis that shouldn't have been allowed. While SLP (and AXS) themselves were unaffected by the exploit, confidence in the developers and ecosystem eroded rapidly with both tokens experiencing massive volatility in the days that followed, and transactional restrictions were announced by major trading houses on AXS and SLP. What's worse, the breach reportedly went unnoticed by Sky Mavis for nearly a week and was only noticed when a user couldn't withdraw their funds, a claim published in Mashable's damning post-mortem article. Given North Korean-state involvement (as attributed by the FBI) it is highly unlikely any funds will be recovered, though US sanctions have been announced and the majority of funds remain in the hackers' wallet. Sky Mavis thus tapped the markets, conducting a private fundraise worth $150M (lead by Binance) to augment its balance sheet for compensatory purposes. Sky Mavis has claimed that all affected user balances will be rectified in time, apparently using the funds raised plus Sky Mavis' capital stock.

Axie Infinity is a prototypical game that mainstreamed the play-to-earn model in crypto circles and presented a new income stream for those lacking opportunities in the physical world. Its growth has been impressive though largely built on the back of unsound tokenomic principles. The game has swelled to a massive scale and has many notable backers including Binance, Delphi Digital, and Mark Cuban, which support its ability to continue as a going concern. Therefore, the history of Axie Infinity is mixed and the project sits in a state of flux presently. Many investors are piling into SLP and AXS in recent weeks looking for deals, while many others sell in the face of long-term concerns and massive volatility.