The Potion That Lost 99%: Inside Axie Infinity's Economic Collapse

Every game designer knows the rule, even if players never hear it: for every coin you pour into a game, you need a way to drain one out. Break that rule in a normal game and you get inflation, cheap gold and grumbling on the forums. Break it in a game where the coins can be sold for real money, and you get something else entirely.

That is what happened to Axie Infinity in 2021 and 2022. Its in-game token, Smooth Love Potion (SLP), hit its all-time high on 13 July 2021. By February 2022, it had lost more than 99% of that peak value. Millions of players, many in the Philippines and elsewhere in Southeast Asia, had been counting on it.

Token prices are extremely volatile. All figures below are historical snapshots, not guidance.

Faucets and sinks: the 60-second economics lesson

Game economists talk about faucets (ways new currency enters the game, like quest rewards) and sinks (ways it leaves, like repair costs or crafting fees). A healthy economy keeps the two roughly balanced.

In Axie, the faucet was gameplay. Players earned SLP by winning battles and completing daily tasks. The main sink was breeding: making a new Axie cost SLP plus the governance token AXS. New Axies were then sold, mostly to new players who needed a team of three to start.

Read that again and you can see the loop. SLP only held its value if people kept breeding, and breeding only made sense if new players kept arriving to buy the babies. The economy didn't run on fun. It ran on growth.

The boom that flooded the market

In April 2021, Axie moved to Ronin, a sidechain built by its developer Sky Mavis to make transactions cheap and fast. It worked too well. Fees fell to almost nothing, a rush of new players arrived, and SLP issuance soared.

For a few months, the burn from breeding kept pace. Then it didn't. Analysts at The Block later described the problem as an unbalanced mint-burn ratio: far more SLP was being created through play than was being destroyed through breeding. Research firm Naavik pointed to the same root cause: too few players were spending SLP to breed new Axies.

Meanwhile, money was gushing in. Axie's treasury took in about $1.3 billion in revenue in 2021. On the day SLP peaked, players sent about $2.8 million to the treasury. The best day of all, 6 August 2021, brought in $17.5 million.

The slide, month by month

The decline started in late summer 2021 and never really stopped.

• September 2021: Filipino players' earnings fell below the national minimum wage.
• Early December 2021: Profits to the treasury dropped sharply and did not recover.
• February 2022: SLP crashed, losing more than 99% from its peak.
• March 2022: The cheapest Axie cost about $20, against roughly $307 in August 2020.
• April 2022: Daily revenue to the community treasury was just over $40,000.

By the numbers

• $494.15 to $37.38: the average Axie NFT price, July 2021 versus April 2022, a fall of about 92%.
• $848 million to $19.4 million: monthly NFT sales, August 2021 versus April 2022, down 98%.
• 2.5 million to 1.2 million: daily active users, November 2021 versus April 2022.
• $17.5 million to $40,000: best daily revenue versus a typical day in April 2022.
• About 250,000: average daily players by April 2023, from a peak of 2.7 million.

The death spiral, explained

Economists call what happened next a death spiral, and it is worth walking through because almost every play-to-earn game since has faced it.

1. SLP falls in price, so a day's play earns less. 2. Players who joined for income quit, or sell their SLP faster. 3. Fewer new players arrive, so demand for newly bred Axies drops. 4. With less reason to breed, less SLP is burned. 5. More unsold SLP pushes the price down further. Back to step 1.

Notice that nothing in that loop is about whether the game is fun. A player who loves the card battles still feels the pay cut, and a player who only came for the money has no reason to stay at all. In a normal game, a currency crash is an annoyance. Here it was a layoff.

The scholarship system amplified it. When owners lent Axies to "scholars" and took commissions that could reach 75%, a falling token squeezed the people at the bottom first. A player who had been earning a meaningful daily wage in mid-2021 could find, a few months later, that the same hours earned a fraction of that.

What Sky Mavis tried

Sky Mavis did not stand still. It cut emissions, removing daily quests and Adventure mode battles that had paid out SLP, and it encouraged players to stake tokens rather than sell them. These were reasonable fixes for a game economy. They were also, for players who relied on the income, a pay cut.

The team's bigger answer was to rebuild the game itself. A new version, Axie Infinity: Origins, put more emphasis on card strategy and less on grinding for tokens. Over time the studio also dropped "play-to-earn" from its marketing.

Then came the worst possible timing. In March 2022, attackers drained around $625 million from the Ronin bridge, one of the largest crypto thefts ever recorded. Sky Mavis reimbursed affected users, but the hack hit just as confidence was at its lowest. We tell that story in full in our piece on the Ronin bridge hack.

The critics who saw it coming

Not everyone was surprised. In December 2021, at the top of the hype, Bloomberg reporter Jason Schreier compared the play-to-earn model to a pyramid scheme. Other critics pointed out that the game relied on a supply of players in lower-income countries whose labour fed the economy.

Defenders argued that Axie gave real income to people during a pandemic when little else did. Both things can be true. Many players did earn money in 2021. Many who joined later, often after buying into a team with borrowed money, did not.

WGC's take

The SLP crash is not just a crypto story. It is a game design story, and it should be taught as one. Every game with a player-driven economy, from EVE Online to World of Warcraft's auction house, lives with faucets and sinks. What Axie showed is what happens when you attach those faucets directly to people's rent.

The lesson most studios have taken is simple: a game has to be worth playing even if the tokens are worth nothing. If players only stay for the money, the economy will eventually run out of new players to pay them. Our editorial on the lessons of blockchain gaming's crashes looks at how far the industry has actually moved on.

What to watch

Axie is still running, with a much smaller and more committed community, and Sky Mavis is working on an MMO, Atia's Legacy, with a Steam page named as its next milestone as of November 2026. The question for Atia's Legacy is not whether its rewards will hold their value. It is whether people will play it when they forget the rewards exist. For the story of how Axie got so big in the first place, read part one of our Axie history.