The Metaverse Has Bosses Too. Meet the ‘Managers’ of Axie Infinity

Even before the advent of professional streaming, gamers were able to earn money from their favorite pastime. Whether by trading accounts or cosmetic items, farming in-game resources to sell other players, or offering bots to automate tasks, underground markets that convert playtime to cash have flourished for a long while now.

It's only in the past year, however, that games have begun to not only shoehorn cryptocurrency into their rewards systems but also fully build themselves around crypto-tokens and digital assets like NFTs. What’s emerging is an ecosystem known as “play-to-earn,” where the players can generate revenue directly from playing video games, harvesting digital assets, and trading them.

"90 percent of people will not play a game unless they are being properly valued for that time," Reddit co-founder Alexis Ohanian said in a podcast earlier this year. "In five years, you will actually value your time properly, and instead of being harvested for advertisements, or being fleeced for dollars to buy stupid hammers you don't actually own, you will be playing some on-chain equivalent game that will be just as fun, but you'll actually earn value and you will be the harvester."

Axie Infinity is arguably the industry standard-bearer for play-to-earn games, and it's a deceptively simple one at that. Axie, developed by Vietnam-based studio Sky Mavis, centers on NFTs of monsters called Axies that form a team whose battles earn players Smooth Love Potion (SLP) tokens. The game features its own blockchain, named Ronin, to facilitate faster and cheaper transactions for SLP, Axie’s governance token (AXS), and Ronin’s native token (RON). Battling is basic, akin to if your entire team of Pokémon battled at once. Axies, as well as other in-game items, are represented by NFTs which can be bought or sold on an in-game market. 

The rise of play-to-earn games, however, has not been as clear-cut as some suggest. The prices of Axie Infinity’s core tokens as well as trading of its Axie NFTs have consistently fallen since their peak last year. A recent hack threatens even greater downward pressure on prices. Questionable economics and labor dynamics have risen up from the froth: Play-to-earn is not just giving rise to a new class of digital workers who see a fraction of the total earnings from their efforts, but bosses, too. 

Getting started in Axie isn't like other games, however. To play Axie at the highest level of the game—to be, effectively, a boss—you need start-up capital. 

To start playing Axie Infinity, you need to buy three Axie NFTs—an investment that, when crypto markets were stronger, cost well over a thousand U.S. dollars. Today, the cost hovers around $300. Axies can also be bred―for a fee that grows each time―using a basic tripartite genetics system allows for selection for different traits as well as random permutations. These newer and potentially stronger Axies NFTs can be minted for use in teams, or sold on marketplaces. 

Not everyone has enough money IRL to be their own boss in the metaverse, however. That's why you can also loan your Axies to players unable to afford their own in exchange for a cut of any profits they generate, which can run from 20 to 50 percent. Manager cuts can go even higher, with “ranges from 30% - 75% cut per scholar based on their monthly rewards”  according to Axie Infinity’s co-founder and chief operating officer Aleksander Larsen (also known as "Psycheout" online). These players are known as "scholars," and their benefactors—who may employ a few scholars or run massive operations with dozens or hundreds of scholars toiling away—widely refer to themselves as "managers."

Scholarships are not a formal mechanic, but instead a program developed by the community: Some players simply breed Axies or have too many Axies while many—typically players in countries like the Philippines, Venezuela, and Thailand, which together make up more than half of the game's playerbase, according to estimates—can't afford to buy an Axie team.

"I can't specifically call it a boss/employee. It's more of a partnership, or let’s call it a joint venture. One party puts up the capital and the other puts up the time,” Conor Kenny, an Axie Infinity manager and a YouTuber who documents crypto trades, told Motherboard. “The scholar grinds daily, you split the profits. Everybody wins!"

In his YouTube videos, however, Kenny strikes a different tone. “I employ them,” he enthusiastically says of his scholars in a September video agonizing over whether Axie Infinity was still a worthwhile investment for managers. “As we stand right now, Axie Infinity is a Ponzi scheme. It’s built on new players coming into the world,” Kenny added in the video. 

This attitude was echoed by other managers Motherboard spoke to, who see their profits in Axie as depending on a constant influx of new players, many of whom will be scholars. 

“Everything in life is a Ponzi,” said one Venezuelan manager who goes by Iguano and directs five scholars, reflecting the widespread idea that Axie Infinity's buy-in requirement and diminishing returns as its token sinks in value make it similar to a Ponzi or pyramid scheme. “The first bunch of people who invested in the game have better profit than the people who invest at the end. The economy of Axie needs new people to join to provide gains to the people who were there before.”

Several sources in this piece agreed to speak only with their usernames or pseudonyms; Motherboard verified that they are indeed Axie managers.

Iguano plays almost every day himself on top of managing his scholars and views Axie Infinity both as an opportunity to make money and a game he says he enjoys—at the same time, he has 25 Axies, which have cost him over $2,500, and he's logged a net loss of just over .5 ETH, he said. 

Iguano is from Maracaibo, Venezuela's second-largest city, and he pulls his scholars from a small town nearby. Like many managers, both offline and on, he sees the relationship between managers and scholars as being essentially benevolent. 

In May 2021, after years of hyperinflation in its currency, Venezuela raised its minimum wage to 10 million bolivars a month ($22 USD). His scholars, who sign on with a 50-50 contract, make around $20 every two weeks, he said. "I think $40 or $50 a month is better than nothing.” Because of Axie Infinity’s energy system, there are hard limits to how much a player with a single account can play: most tap out after three hours of grinding.

SavageStudiosFBG owns over 600 Axies and runs a team of about 200 scholars. The burgeoning YouTuber sees his large returns as a chance for his scholars to earn big with him, and rejects the "employee" framing. 

“I don’t portray them as employees, our agreement on Axie is mutually beneficial. I make money from them using my NFTs and they make money by playing them,” FBG told Motherboard. “Philanthropy is something I have never experienced in any way. The message I get from my scholars on how they have used their profit to pay bills, get a washer & dryer, or in some cases new teeth for their grandpa, is truly amazing to see.”

At its peak, FBG's operation was pulling in $20,000 a month, he said. 

Whatever managers want to call their scholars, in many cases they're treated a lot like typical workers. One U.S. expat who goes by Rafar has spent the past nine years living in the Philippines, manages about 15 scholars. He plans on adding one or two more a month even as the market for SLP craters because he’s been able to generate enough returns through a strict quota, an onboarding program, and close management of his scholars. 

Rafar's scholarship program is a comprehensive one: It includes a one-month trial to maintain a competitive ranking, a daily quota of 75 SLP, an onboarding system complete with Google Doc guides, playtesting, live feedback, and a community Discord to ask questions and get further help.

“I also see Axie as a gateway for Filipinos to be educated about crypto which I believe will help advance them in the future,” he told Motherboard. “I've set up crash courses for them about the basics of crypto (how to create wallets, trade, and how to avoid scams)—basically making them literate in the crypto world.”

When someone is in desperate need of funds, Rafar said, he has in the past offered Axie scholarships as a way for them to solve their problems themselves. 

“For example I had one family member that is a scholar earning maybe $250 a month from their job,” Rafar told Motherboard. “They are having a kid and need money to pay the hospital bills, estimated to be about $500. I offered them an Axie account and held on to their SLP till the baby's birth month. They are about to receive about $600 from earnings, which they wouldn't have had otherwise.”

Even Rafar's comprehensive operation and FBG’s roster of 200 scholars are dwarfed by others that blur the line between profit and self-styled philanthropy. 

Yield Guild Games (YGG), a Philippines-based players' guild that launched in April 2021, shared in a 2021 retrospective that it had 1,000 scholars by May, and ended the year with over 10,000 scholars. In March, it raised $1.325 million in a seed round that VC firm Delphi Digital participated in, then a $4 million Series A round led by BITKRAFT, and then another $4.6 million round led by VC firm a16z. YGG also ran a public token sale in July that raised $12.5 million in 31 seconds, and by December 2021 it had $824 million worth of assets held by its DAO via holdings of other crypto tokens, and another $54 million from "the various tokens being farmed by YGG, the gaming, DAO and play-to-earn investments” besides Axie Infinity.

YGG even has key advisors associated with Axie Infinity such as Anil Lulla, the co-founder and chief operating officer of Axie Infinity investor Deplhi Digital, and Aleksander Larsen, co-founder and chief operating officer of Sky Mavis.

“‌‌Organically, the community developed its own scholarship model, which has not only made Axie Infinity more accessible but it’s helped create income-generating opportunities for people around the world,” Larsen told Motherboard. “Scholarships not only remove a barrier to entry, but they also mark a fundamental shift in how NFTs can be used, not only as JPG files or collectibles but as productive assets, generating a return based on using and interacting with them.”

YGG did not respond to Motherboard’s request for comment.

YGG has also made a documentary on play-to-earn gaming in the Philippines,  and co-founder Beryl Li wrote a Coindesk op-ed  titled "A Play-to-Earn Account Beats a Bank Account." Li has also made a host of other media appearances to spread the gospel of play-to-earn. The firm even has an advisory board that Sky Mavis co-founder and COO Aleksander Larsen sits on.

A Coinbase blog post from September 2021 states that "[YGG] Founder Gabby Dizon likes to say that Yield Guild Games is one part Berkshire Hathaway and one part Uber." What does that mean? Coinbase goes on to add:

"Just as Berkshire Hathaway is a holding company for a multitude of businesses, YGG is essentially a holding company for play-to-earn gaming assets. Starting in 2020, they've been buying yield producing NFTs, governance tokens, and ownership stakes in promising gaming projects and protocols. Similar to how Uber pairs people who want to earn money driving with people who need rides, YGG pairs people who want to make money gaming with NFTs they need to earn in play-to-earn games. In many parts of the world, people are opting to work with YGG over Uber simply because it pays more."

The cottage industry of becoming a boss in the metaverse is turning into big business. But every business has its ups and downs, and Axie is in a downswing.

Among managers, it's an open secret that Axie Infinity’s in-game economy is in free-fall, but opinions are divided on whether a rebound is in the cards. The numbers don’t paint an encouraging picture. 

Axie Infinity's NFTs, for example, have seen a spectacular collapse in trading volume: Volume jumped from $4 million in April to $848 million in August, then crumbled before a second peak in November of $753 million, finally dropping like a concrete block to $82 million in February. Volume doesn't seem to have recovered in March, with trading down even further to shy of $30 million. Axie NFT floor prices are down 96 percent from an all-time high of .24 ETH and now sit around .01 ETH.

Since its all-time high in July of $0.39, SLP has crashed nearly 100 percent and sat at $0.01 until February, when the development team announced key fundamental changes to its economic model in a desperate bid to salvage the prices of its tokens and NFTs, as well as its user base. This sparked a rally that took the coin all the way up to a recent peak of $0.039, which was still ten times less than its all-time high. That rally has since evaporated, with the price spending the weeks since floating around $0.02.

In the Feb. 3 Substack post announcing a host of coming reforms, Sky Mavis stated that, starting Feb. 9, SLP rewards would be removed from some game modes entirely and significantly reduced in others. The goal was to slow down the daily production of SLP, cap it, then eventually deflate it and rescue the token’s price from its death spiral.

"We know that this is painful medicine,” the blog post said. “The Axie economy requires drastic and decisive action now or we risk total and permanent economic collapse. That would be far more painful."

Sky Mavis’ Substack post pointed out that four times as much SLP is being minted as what’s being burned; the only way to remove SLP in circulation and counter the massive pressures to constantly expand the supply (at great cost to the token’s value) is to “burn” it, usually by spending it on another feature of the game’s ecosystem―here, that means on breeding new Axies and making that breeding cost increasingly more SLP. New burn mechanisms will be added in due time, with the developers mentioning cosmetics, upgrades to Axie body parts, in-game emojis, special breeding events, and more. For now, however, these moves will have to suffice.

"We believe that these economic changes will allow us to start righting the ship and getting the economy moving in the right direction. We know that it will be key to execute on delivering new burn mechanisms this year,” the blog post concludes. “These issuance reductions will not be enough to get our economic engine back to full strength, but they are a needed step as we build towards a fully-functioning and sustainable economy."

Over email, Larsen was optimistic about the future of his game and its token economy. “Sustainability of the Axie economy is critical and requires us to find an equilibrium, which is why we introduced economic adjustments in February,” Larsen told Motherboard. “Being at the bleeding edge of gaming and blockchain technology makes Axie Infinity particularly susceptible to volatility, from internal and external factors.”

Still, with the token at historic lows, earnings have never been lower. Now, there are schemes to run more than one account in a bid to bypass the SLP cap. Some managers take painfully high cuts—more than 50 percent—and pair them with strict quotas to generate above-market returns. 

Among managers with large teams—anywhere from a dozen to hundreds of scholars—attitudes vary widely, but a common thread is that while managers can, and often do, earn big, scholars see only a fraction of those earnings, which are now declining.

Near the peak of the market, Rafar spent $3,000 on his initial team and made it back earning just above $1,000 a month with two or three scholars, he said, while today he’s earning $300 a month. His scholars earn $25-50. 

“It's not good,” Rafar told Motherboard, “but it helps with bills around the house.” 

Others are less optimistic about the game’s prospects overall, while paradoxically maintaining optimism for themselves. Troy, a U.S.-based manager with 24 scholars, told Motherboard that “if you want ROI and profits, I would stay away from Axie and crypto games unless it’s your money you’re willing to lose.” He then turned around and told Motherboard how he hoped it would still happen for him.

“My dream is to work remotely and become a content creator and stream," said Troy. "I currently have about 80 Axies between my account and scholar accounts. Definitely no profits or ROI yet, but to be honest, it's all play money, and I budget all my bills and max my retirement so I'm in long-term and not worried about short-term profits."

Shin, a Bulgaria-based manager who said he bought in because he felt FOMO, has played for weeks non-stop and manages two scholars. He has nine Axies at this point, has spent $3,500, and earned $1,600 worth of profits. 

"My motivation in this game is I'll still get a profit from it even though the current price of SLP is still going down because I believe it [will] still thrive throughout the years and the price of SLP will go up eventually," he told Motherboard. 

All this may be even further complicated by a recent major hack that rocked the Axie Infinity ecosystem: 173,600 ETH (about $588 million) and 25.5 million in a stablecoin called USDC was stolen from the Ronin Network on March 23, but was only noticed on March 29. Ronin is a so-called "sidechain" designed to allow people to use Axie Infinity without incurring expensive fees on Ethereum for every action. The hackers drained the liquidity from the Ronin “bridge,” which allowed for assets to be transferred between Ethereum to Ronin, leading to the bridge and its affiliated Katana decentralized exchange to both be deactivated. This means deposits and withdrawals are paused, including on Binance, stranding the funds of those who have wagered that this game will make them money, even as its core tokens have shed most of their value over the past year.

RON, the native cryptocurrency of Ronin, cratered by as much as 29 percent following news of the hack. SLP’s price slipped by as much as 14 percent. AXS saw a peak decline of 11 percent.

When Motherboard asked Larsen whether he was concerned about the effects of this hack on Axie Infinity’s tokens and what steps were being taken to make Axie players and investors whole again, he said they were “committed to ensuring that all of the drained funds are recovered or reimbursed, and we are continuing conversations with our stakeholders to determine the best course of action."

Given the ongoing crash of SLP prices, many scholars simply sit on their earnings instead of, say, burning it through breeding. Managers are well-aware that their workers are holding on to tokens that are quickly becoming worthless.

"One problem is most of them hold on to SLP waiting for [an all-time high] and don't believe in bear markets, but you can't force or tell someone how they should manage finances," Rafar told Motherboard. "I don't really understand why some people hold, I've asked them and they tell me they are 'saving for something big'―essentially a big purchase."

Before the reforms announced in February, the most SLP an incredibly skilled player could expect daily was somewhere north of 324 tokens per day in Season 19 if they had 20 or more Axies, played at the highest levels of Adventure Mode, and got a 60 percent win rate while battling in higher ranks of PvP battling. At the current SLP price of $0.02 that’s a daily wage of $6.48, excluding the manager's cut, which could be half of those earnings. In the Philippines, where nearly half of all players reside, the average minimum wage is about 366 pesos or $7.13. 

A research report from gaming research and consulting firm Naavik affirms as much: For low-level players or those just starting out, playing Axie Infinity each day earned less than a minimum wage job in the Philippines, the research concludes. That was in November, when the price oscillated between $0.06 and $0.08.

The firm's exhaustive research report dives into SLP’s inflationary nature, but also paints the picture of a business model that’s inherently unstable and leverages perpetual growth to outpace sputtering tokenomics.

“That said, Axie Infinity’s business model, for the moment, depends on continued growth in its user base and continued fresh money entering the system to prop up the value of Axies, $AXS, and $SLP,” Naavik writes. “The pace of that new user growth is also critical, because any slowdown in the breeding and selling of Axies to new players will lead to a decline in revenue. We think this outcome is likely over the coming months barring any unforeseen spike in new users. In Sky Mavis’ words, 'this is unsustainable.'"

But perhaps questions about whether Axie Infinity scholars (and some managers) can earn a living miss the point―the players and investors who thrive seem ultimately to be those who understand this is a business like any other financial venture. The ones who have made out like bandits, after all, are the ones who have attracted VC funding, who’ve hoarded Axies and loaned them, who’ve traded NFTs like Pokémon cards, and so on. 

All of the bluster about Axie Infinity's future ecosystem, metaverse functionality, and more, ultimately don’t matter here―we’ve seen it all before, in one form or another.

"Crypto may be new, but games involving money are not. Years ago, my friends and I made a lot of money selling skins on the Steam market and the Diablo 3 item shop. For me, this is no different. I know there's a lot of technology behind blockchain and everything, but we are here for the games,” Esteban, a Brazilian manager who plays every day, told Motherboard. “I wish that one day, something like what I read in Ready Player One could be real. Time will tell if the metaverse is a new way of making a living, or a big bubble that will pop."

With reporting by Ekin Genç.