Custom Axie DEX shows signs of life after a tough first quarter of the year
In the context of falling crypto prices leading play-to-earn game Axie Infinity’s customized DEX Katana displayed a severe drop in both TVL and activity after the all-time highs seen in January and early February 2022. Now, as calm washes over the space and falling prices sort the wheat from the chaff, Katana is showing a solid comeback amidst a slew of inbound development upgrades and token utility from Axie Infinity.
Gaming and, more specifically, the play-to-earn sector led the blockchain industry as 2021 came to a close. Many new players and investors gravitated toward the industry phenomenon Axie Infinity to invest or play and earn.
Katana is a custom decentralized exchange launched by Sky Mavis, the team behind Axie Infinity, and It operates from a custom blockchain solution, also built by Sky Mavis, Ronin. The Ronin blockchain also has its own token RON, released at the end of January 2022.
Katana facilitates the swapping of tokens from the Axie ecosystem into redeemable tickets for profits. It also lets users provide liquidity and yield farm assets to earn rewards. The primary motivation for setting it up was to avoid Ethereum blockchain gas fees and allow players to move in and out of positions quickly and for a low cost. Moreover, the core audience is those engaged with Axie Infinity and not random users.
It is also worth mentioning that while TVL is a metric used widely throughout the blockchain and dapp industry, a fall in this metric reflects a drop in the dollar value of the tokens locked inside the smart contracts. Therefore, as prices fall, so does TVL.
The DEX was flying in Q4 2021, peaking on December 3 as TVL climbed to more than $1.4 billion. For context, at writing, TVL is $335 million, less than a third. As mentioned, falling token prices are at play here as the cost of AXS fell from $134 on December 3 to around $50 until recently, when prices started to pick up. Still, the price drop doesn’t reflect the entire fall in TVL for Katana, which means players began to withdraw funds and exit the game as earning became harder—paving the way for the real Axie Infinity community and team to step in and innovate.
What about users?
When wallets connect to Katana, they swap tokens, stake tokens, or provide liquidity. The latter two actions are responsible for the TVL figure. As mentioned, TVL dropped significantly, but as assessed, not wholly due to the fall in the price of Axie tokens. People started to move funds out of Katana entirely as markets began to show bearish signals.
This idea aligns with the number of unique active wallets connected to Katana during that time frame. We see a surge in users and transactions caused by a rush to remove funds and a rush by other, more bullish investors to deposit funds in the Katana DEX potentially. Then we see activity dropping until more recently, coinciding with a more positive outlook for the games leading token AXS.
Axie sorts the wheat from the chaff
The hardcore players and more bullish investors remained while more erratic and perhaps uneducated users jumped out. Moreover, many people played Axie to make money, not to play a game. Newbies appeared to have jumped out when the good times ended, and rewards became insignificant due to an abundance of players. At the same time, the hardcore community stuck around to build the next stage of the Axie Infinity adventure.
Looking at 24-hour trading volume, we can see that Katana has enjoyed a good week as the core community invests time and energy into making sure Axie Infinity remains the leading play-to-earn game. More importantly, maintaining and bringing more liquidity into the ecosystem. On March 22, trading volume was $12.1 million, and two days later, on March 24, it increased to over $65 million.
Breeding Fee Adjustments
On December 8, we reported that Axie Infinity was adjusting breeding fees under enormous pressure from its core community. Sky Mavis announced changes to the SLP breeding fees meaning players needed to pay three times as much SLP and half the amount of AXS to create one new NFT game character.
SLP is a crypto token, meaning that players can sell the token on the market. Other gamers can then buy the tokens and use these to create – or breed – new Axie game characters. Every Axie has a limited amount of ‘breeds’, and the costs for breeding increase every time they are being used. Before the announcement, the native SLP token was $0.041. After the change, the price shot up more than $0.05. As a result, breeding one Axie now costs roughly $85 in SLP and $55 in AXS. That brought the total costs to $140 to create one Axie game character. However, every player needs 3 of those.
Three months prior, SLP had been in the $0.10 range, way down from its all-time high of almost $0.40 in July 2021. Because of Axie’s play-to-earn mechanics, people In developing countries worst hit by the COVID pandemic turned to Axie as a safety net. As the token price dropped, people’s incomes dwindled. As a result, the game’s economy took a real-life toll, making people vocal about token price changes.
The elephant in the room here is that there’s only demand for SLP when new players are influx. As the token price stumbles, the potential to make a living from the game disappears. It’s a vicious cycle. Suddenly monthly SLP earnings fall below the minimum wage levels, which becomes an issue when families rely on that income.
The road to recovery
Sky Mavis recognized this and started working on various new products and adjustments to add to the Axie Infinity ecosystem and promising to overhaul the battle system and introduce land gameplay. In addition, introduce resources, and allow part upgrades. Moreover, SLP would be at the heart of these new products.
On January 20, we reported that Axie Infinity had launched a Builders Program, which would allow community members to contribute to the development side of the game ecosystem. The Builders Program offers funding and access to the Sky Mavis team of experts, with eligible teams receiving a minimum $5000 grant in AXS to go towards their project. The overall budget for the Builders Program is 5000 AXS, or about $400.000.
The program focuses more on expanding the Axie Infinity ecosystem than building upon the original game. Sky Mavis wants to push the community to create additional games and tools using the Axie brand. Examples of such tools include Axie-themed mini-games like tower defense and chess and data tracking tools. Importantly, these games will need to use either AXS or SLP, and in addition, they need to burn SLP or send AXS to the community treasury. A mechanic that reduces the number of tokens in circulation helps inflate the price.
To complement the Builder Program, Axie also introduced an NFT burning event. Players had the opportunity to release their Axies to live independently in Lunacia. On a technical level, gamers had to destroy their Axie creatures.
In return, their Axies will send back exclusive gifts. These gifts will come in the form of Lunar New Year exclusive Land items. Moreover, these are cosmetic items that players can show off on their Land. Aside from a guaranteed exclusive gift, releasing an Axie into the wild also enters the owner’s wallet into a raffle to win prizes. Including 5 Axie Origin Coin (AOC) tokens, 10 Kitsune Mystic Land items, and 100 CoinGecko or Ganbaru CrypTon Epic Land items.
In the aftermath of these announcements, Axie Infinity attracted almost 20% more user wallets, while Katana user activity leaped nearly 40%. Moreover, the burning of NFTs had the desired effect as Axie jumped to the first position in the DappRadar game ranking once again.
Katana processed over 82,000 transactions in the 24 hours afterward and only permits swaps between the native tokens of the Axie platform, SLP, and AXS. With USDC and WETH available as methods to cash out or HODL for players.
Axie Origin coming soon
Then, on February 14, we reported that Axie was set to release Axie Origin and bring a whole new level of accessibility to the Axie ecosystem. The Sky Mavis team released the upcoming game update details, with an Alpha test version potentially available by March 2022.
According to the announcement, Axie Infinity: Origin will offer a wide range of new features. Most importantly, Sky Mavis wants to push the adoption of the Axie Infinity platform even further. To achieve this, the team has decided to give all Origin players three free Axies. This virtually removes the entry barrier for newcomers. Importantly, these starter Axies are not NFTs, and players can’t earn SLP from using them.
This is a significant change to how the Axie players experience things right now. A player currently needs to purchase 3 Axies to make the team and start playing. With Axie Infinity: Origin, the entry point will be completely free, providing a potentially bigger audience to the game.
In the previous setup, players could wait out a turn to conserve their energy or cards for later. However, with Origin, there will be only sequential turns. This means cards and energy will last for the given turn, and players will only have one chance to use them. Shaking up the gaming mechanics like this will bring an engagement boost to Axie Infinity. Gamers will have to carefully think about how to best use the cards and energy they get with each turn. At the time of writing, Axie has further announced that Origin is just around the corner. The soft launch of Origin will come in phases, first available on the desktop around the end of this month.
Furthermore, Land gameplay is expected to arrive later this year. The land will primarily be available for Land Owners for the first test phase since Axie focuses on producing a new town-building game. The update mentioned that they plan to introduce off-chain Pawn Axies for Land Owners to do tasks within their land. Along with the update, they said they are looking to incorporate AXS as a resource for selling crafted materials to NPCs.
In 2021, the two largest metaverse platforms, Decentraland, and The Sandbox made a combined total volume of approximately $460 million in digital real estate. Axie Infinity builds out their respective metaverse world within their land gameplay to yield valuable resources. Therefore, Axie will very soon be tapping actively into one of the hottest developments in the blockchain space: virtual land.
Stay ahead of the game
DappRadar will continue monitoring Axie Infinity as the Sky Mavis team pushes to expand this ecosystem further. While the game started as a simple turn-based battler, Axie Infinity has now become a whole universe of dapps and functionalities on the blockchain.
With the introduction of the Ronin sidechain, Sky Mavis has facilitated not only an almost gasless environment for the game but also essential DeFi products. Katana DEX and the RON token play a massive role in the success of the Axie Infinity brand. With the launch of Axie Infinity: Origin, Sky Mavis is looking to expand the brand’s reach even further.
To learn more about Axie Infinity, Ronin, and the native tokens of the Axie ecosystem, check out the links below. Additionally, you can follow DappRadar on Twitter and join our Discord community to learn the latest gaming and play-to-earn news first.
The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your research. The writer holds positions in various cryptocurrencies, including BTC, ETH, and RADAR.