Case Study: Axie Infinity Breeding
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As one of the pioneers of the play-to-earn space, Axie Infinity’s dual-token economy model with integrated breeding has become the de facto standard for many new games. One token, Axie Infinity Shard ($AXS), is an ERC-20 token that serves primarily as the governance and value accrual token for the Axie Infinity ecosystem, while the second token, Smooth Love Potion ($SLP), serves as the game's utility token, or in-game currency, that is minted to reward players for in-game actions. Currently, both tokens are primarily utilized as components in Axie Infinity’s breeding mechanism.
Breeding is a way of creating new Axies by taking two parent Axies and providing $SLP & $AXS. The $SLP is burned while the $AXS is pooled into a fund. This process produces an egg, which hatches into a new Axie. In Axie Infinity, there are four main assumptions with regard to breeding: Each Axie can only be bred seven times before it is sterile in order to avoid Axie hyperinflation. The combined cost of $AXS and $SLP increases each time the Axies are bred. The parameters are updated by the publisher based on a myriad of in-game economic factors. Axie offspring attributes are probabilistically determined by the attributes of the parent Axies.
There are nine classes of Axies: Reptile, Plant, Dusk, Aquatic, Bird, Dawn, Beast, Bug, and Mech. Each Axie has six body parts, namely the Eyes, Ears, Mouth, Horn, Back and Tail. There are six different types of Eyes, six types of Ears, 34 Mouths, 47 Horns, 46 Backs and 46 Tails. Additionally, for each of the six body parts, an Axie possesses three genes: a dominant (D), recessive (R1) and minor recessive gene (R2). Both classes and genes play a role in determining the characteristics of an Axie offspring; the specific combination of attributes is known as the “build.” There are approximately 1,095,563,232 possible Axie builds in existence. To date, only 11 million Axies have been produced.
Part of what makes an Axie build are four statistics: HP, Speed, Skill and Morale. For example, adding an Aquatic body part to a build adds 3 Speed Points and 1 HP Point, while adding a Beast body part to the same build adds only 1 Speed Point but 3 Morale Points. Therefore, a player who wants to have higher overall speed in their team would ideally want more Aquatic body parts in their Axie. The specific combinations of body parts per build are up to the preference and playstyle of each player, and the challenge lies in understanding which of the existing builds are the most effective to use in order to maximize wins and earnings. Thus, while there are plenty of different Axie builds, some Axies perform better in certain areas compared to others, and there are only a few specific builds that players actually desire. To illustrate, from February 14, 2022 to March 14, 2022, out of the 1 billion possible builds, 10 specific builds already comprised 14.1% of all Axies sold during that period.
The characteristics and body parts of a new Axie are determined through a system of inheriting genes from the parent Axies via breeding. Breeding becomes even more difficult due to the randomness that occurs in inheriting genes. When breeding, there is a 50% chance that the offspring will be of the same class as Parent A and a 50% chance that its class will be that of Parent B. On the other hand, each Dominant, R1 and R2 gene has a 37.5%, 9.375%, and 3.125% chance of being passed down respectively. While the probability of dominant genes being passed down is certain, there is still a 10% chance that each R1 and R2 gene changes into a completely random gene. This means that there is a 68% chance [⇗] of at least one mutation occurring every time an Axie is bred, making it very difficult for breeders to receive a build with the exact genes that they want.
Typically, the most desirable Axies are the ones that would yield higher win rates simply because more wins equate to more rewards. To illustrate, according to recent statistics as of March 14, 2022, Reptile Axies have the highest win rates at 50.58% while Dawn Axies have the lowest at 47.19% [⇗]. In this scenario, assuming an equal number of games played and a fixed amount of $SLP earned per game, a player would earn 7.18% more just by using Reptile Axies.
Because of this, skilled players tend to gravitate towards these types of builds when designing their teams, which is evident in the fact that the most used Axie among players with Matchmaking Ratings (MMR) above 2400 is the Indian Star—Kotaro—Scaly Spoon—Tiny Dino Reptile Build. Due to the stats that this Axie possesses and difficulties that come with Axie Infinity’s breeding process, players are willing to pay excessive premiums on the marketplace for such an Axie. Currently, this particular build has an average price of over US$131, almost a 500% premium compared to the current US$22 floor price of Axies in the marketplace. This high price point makes this Axie extremely difficult to attain for the average player, especially considering that there are only 1,311 currently available to purchase in the marketplace.
While this is just one example, it has been observed that there is in fact a shortage of supply of the most desirable Axie builds in the game, resulting in a growing need to develop optimal breeding strategies in order to increase this supply and meet the demand of the players.
This, in essence, is the core service that BreederDAO aims to provide to the blockchain gaming industry. With several games adopting the core principles of the breeding mechanism that Axie Infinity pioneered, BreederDAO is well positioned to provide assets to the next generation of blockchain players.