My Little Experiment

Some of you who have been following my social media will know that I have dabbling with a little experiment following my “retirement”. Many of you have been persistently messaging me about it as well.

WARNING: THIS IS A VERY LONG POST. SO GET A CUP OF COFFEE.

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Before that, I need to provide some very critical disclaimer. Although I cannot stop you, I INSIST that you read it:

Whatever I am going to share may sound exciting. It may sound like an escape from your financial situation. But like every other investments, it has its pros and cons. After participating in it for more than 3 months, I can say that it’s not for everyone and it should be treated as an investment, meaning that you understand that the risk for you to lose up to 100% of your investment is VERY REAL. I am merely sharing my journey investing in this and I am not recommending that you to invest in it. Instead, I am advocating that you exercise independent thinking before deciding where to put your money.

With that part clarified, what is the earning potential of this project?
I have actually posted about it on my Instagram Stories. You can see them via this link.

But just in case some reason you cannot view the Instagram stories, I will share some of them here to bring you up to speed:

As of the time of writing this blog post, my total investment is still the same:
US$ 7,131.23

And the the new profits I have generated since my last posting (30 days ago from the time I am writing this article) is:
US$ 1,834.50.
I will show you how I calculated this figure later on in this article.

With my total investment, that is a 25.72% return in just 30 days. Now, convert that to Ringgit, thats RM 7,705 in 30 days. With that, I am looking forward to breakeven very soon. After that, its pure profit. Best part is that I am putting in less than 2 hours a day on this and still earning this money. This may not sound like a lot for wealthier folks. But for those among us living paycheck to paycheck, it is very exciting.

This is probably one of the reasons why selling options is becoming a lot less attractive to me. On top of other sources of income, this game can generate the cash flow I need to continue investing into my portfolio without me needing to risk too much capital! The good thing about the profits you are seeing now is that it is currently at its lowest potential. Hence it can be a lot more than that. At its peak, I could be generating approximately US$ 3,468 and above in 30 days (RM 14,523 or 48.6% in 30 days!). But the bad part is that it can also go even lower than
US$ 1,834.50.

So, what exactly am I experimenting on?

Well, its not stocks. It’s also not options. I know I used to teach those subjects a lot. But some of you who followed and interacted with me a lot also know that I mention to always be curious. Explore every opportunities available. I am still heavily invested using stocks and options, but I decided to add this method into my arsenal of cash-generating machines.

And to finally give you the answer you have waited for months for, I have been experimenting on:

Axie Infinity!

I personally believe that if Grab and Food Panda riders learn about this, there will potentially be a lot less of them on the road! But that’s just a wild guess. Anyways, let’s get into the content, shall we?

First, What is Axie Infinity?

I have attached a short documentary video about it below:

It is basically a Play-To-Earn GAME!

To play this game, you need to invest some of your hard earned money to buy 3 “Pokemon” like creatures called “Axies” to create a “Team”. With this team, you can then play the game to earn tokens which you can then sell for money on crypto exchanges like Binance, Coinbase or Uniswap.

Currently, the lowest price for each Axie is about US $114. So, to buy 3 of them, you only need about US $342 to begin. But I would encourage you to prepare a capital of at least US $1,000 (Update 15/11/2021: About $1,500 ~ $2,000) to get started. This is because you need to pick a good team. Some Axies are cheap for good reasons.

Below is basically a screenshot of me playing the game. Feel free to add my in-game name, Atomic_Samurai as a friend xD.

Background of Axie Infinity

Axie Infinity is basically a block-chain or Non-Fungible Token (NFT) based game, developed by a team of Vietnamese developers back in 2017. Although the story following its creation was quite fascinating, we are not going to cover that extensively in this post. But if you are interested, you can read about it here.

What I am more interested to share, is where the game is at currently. The developers have constantly reminded every player that the game is still in Alpha mode. But despite being only in Alpha, based on what the developers have done so far, I feel that it is promising enough to invest some money in.

For example, the game is now has one of the highest weekly volumes compared to many other crypto games in the market.

The market cap of its main token, the AXS token, is also rivalling some of the largest game studios in the market now.

But as mentioned, Axie Infinity is a game. A game that you need to pay to play but after that, you play to earn. And as with any game, its sustainability depends on the number of players playing the game.

The table below shows you the number of players currently playing the game; approximately 2 million players actively playing the game daily from all around the world and that number has been increasing every month. You can access the same table from this link.

Below, you can see a tweet from the Growth Lead of the company regarding the retention rate of players playing the game.

Obviously, the retention rate hovering around 40-60% (There is a reason for this) isn’t the best in the world. But at least the number of players are constantly increasing every month. Plus the game is not yet at its max potential (Only in Alpha Stage).

So how does the company make money from the game itself? Its simple - FEES

Remember I mentioned that to play this game, you need to purchase at least 3 Pokemon-like pets called Axies from the marketplace? You purchase these Axies with Ethereum as its main currency, and the seller will be charged a 4.25% fee on that transaction. From the picture below, you can see that every day, $24.65 million worth of axies are bought/sold in the marketplace. At 4.25%, thats about $1,0427,625 worth of ETH that the company, SkyMavis generated in fees every day. Not bad for a small company.

Of course, these are only one of the fees the company generates. There are many other economic activities which they too, charge a fee such as breeding axies, for example. Below you can see the revenues that they have been generating from various sources:

Also, compared to various other Ethereum (ETH) based games available in the market now, we can see that Axie Infinity dominates in terms of volume and number of traders.

My main purpose of sharing these with all of you is to let you know that this is not a fly by night company. It has been around since 2017 and despite being only in Alpha mode, they have made some pretty remarkable achievements compared to many other Crypto based games in the market. Which is why I had the courage to shell out a considerable amount of money to invest in them in the first place.

How To Generate Cash From The Game

As of now, there are 3 ways you can generate income from the game. You can either be earning by:
1. Generating and selling an in game token called “Smooth Love Potions” or SLP
2. Breeding and selling Axies on the marketplace to earn a profit
3. Or you can simply be a trader buying tokens generated from the game for cheap and selling them at a higher price.

Personally, the last option sounds too much of a gamble for me. Therefore, I will focus on the first 2, earning SLP and breeding.

Earning & Selling SLP

What you are seeing below is a screenshot of my account. On the right side of the screen, you can see that there are 2 different game modes, “Adventure” and “Arena”.

In adventure mode, you simply battle monsters and for every battle you win, you will be awarded with some SLP which goes into your account.

In Arena mode, you battle other players. If you win the arena battle, you will also be awarded with SLP.

“Arena” battles obviously take up a lot more brain power compared to playing in adventure mode. But that is also why you earn a lot more SLP when you play arena battles. After generating these SLPs, I can then send them to Crypto exchanges such as Binance to be sold for Ethereum (ETH) which I can then choose to either re-invest in the game or convert them to Fiat currency such as MYR, USD or SGD!

Yes, I know some of you will be saying that Binance is currently banned in your countries. But nevertheless it can still be used. And for some reason that Binance is no longer usable, there are plenty of other methods to cash out. This is one of the key benefits I have discovered in the world of crypto currencies. It is very flexible and there’s plenty of methods that can be used to move these digital currencies around.

And just to show you that I have generated about US$ 1800 in just 30 days, you can see from the picture below:

I have generated a total of about 20,412 SLP tokens over the past 30 days which I have deposited into Binance. And at current price of SLP hovering at about US$ 0.09 each, that means that in that 30 days, I have generated about US$ 1,837.08 in cash should I choose to liquidate all of it now.

Some of you would probably be asking a couple of questions.

Firstly, how long does I have to play every day? - 2 hours MAXIMUM. And I don’t have to play all 2 hours at one go. I can split the play time to the time when I am free. But most of the time, I will complete my game by 10am daily. That will free up my for the rest of the day for other activities.

However, if you choose to, you can play more than 2 hours everyday and double your earnings. How much you make with this game is totally up to your ambition.

Secondly, who on earth will pay you US$ 0.09 for SLP and why would they even do it?

There are 2 different people who will buy SLP. One would be the trader who speculates on the price of SLP and the other player would be the one who is interested in the 2nd way to generate income from the game - breeding.

Breeding & Selling Axies

There are investors who will purchase these SLP to breed. When they breed, they create new axies which they then sell in the market place to new or existing players for a profit.

You need to purchase the ingredients for breeding, one of which as you know by now, is SLP. This creates demand for SLP and that gives SLP its value.

So What Could The Future Look Like?

If you have read the Axie Infinity’s Whitepaper

You would have noticed their completed milestones. I have watched some old youtube videos on Axie Infinity and realised how far the game has come compared to where they were back then:

And these are their progress as well as their roadmap in 2021:

Will they complete everything according to the timeline specified? I don’t expect it. But will they complete it at the soonest they could? I choose to believe it based on their historical track record.

If you are unfamiliar with the terminologies, basically all these developments are aimed towards:

  1. Increasing the number of players in the game

  2. Increasing the demand for axies

  3. Increasing the number of ways SLP can be consumed (so that SLP prices can increase or stabilize)

  4. Increase more ways to earn money from the game itself

And that is one of the reasons why I am vested until today.

Investment Risks

As with every investment, there are risks. And Axie Infinity is not excluded. The reason I couldn’t disclose this experiment on social media too early was because I am not familiar with the risks associated with this game. Hence I need to put my own money in, experience it for a while, only then will I have a better understanding of what I am dealing with. With that, I can give readers a better picture of the game.

In terms of risks, basically, there are 5 that I have identified:

  1. Volatility

Volatility simple means the volatile price of Axie Infinity Tokens, namely SLP. I have seen SLP prices going to as high as $0.40 each to as low as $0.06 each. This also means that the income you generate from the game is volatile! As mentioned, I could be generating more than US$ 4,000 a month to just US$ 1,000 a month and there is nothing I can do about it. Therefore, you must be emotionally prepared to handle it.

  1. Player Growth & Scaling Challenges

Player growth is crucial for the growth of Axie Infinity. When there are more players, there will be more demand for axies. With more demand for axies, there will be more demand for breeding. More demand for breeding, there will be more demand for SLP. And when there is more demand for SLP, the price of SLP will go up or stabilize, benefiting every player that earns SLP. Hence the system becomes sustainable.

However, it is not as simple as it seems. When I was playing the game in July 2021, there was a huge influx of players especially when Youtubers started creating a lot of content on Axie Infinity in the Phillipines. A huge influx of players is good right? WRONG!

Apparently, the existing servers couldn’t handle the volume and the game started to crash for everyone. You might think the solution is simple. Simple rent more servers and get the game back online. Apparently after doing a bit of research, it is not that simple. The reason is because unlike a traditional game, this game is built together with the blockchain and it involves crypto currencies. Which means that it is the only one of its kind. Hence scaling the game is not the same as scaling a traditional game such as League of Legends or Dota. It requires more coding. Because of this, the game was barely playable for almost a month.

If you take a look at the graph below, you can see the daily burned and minted rate of SLP. Minting simply means SLP created and burning simply means SLP consumed through breeding. Around Mid July, you can see that almost no SLP are minted for many days and at the same time, many players are rushing into the game. This caused breeders to quickly buy SLP from the market to breed more axies for sale. Check the SLP price during this time and you can see it reaching near $0.40 each.

However, once the server was upgraded and the new players started generating SLP and selling them on the market place, supply outpaced demand and we can see now that SLP prices have dropped from $0.40 to $0.07 each.

  1. Dependence on Development

The only way to resolve a decline in SLP, in my view, is to create more demand for it. Which also means creating more demand for axies in the economy. Currently axies are only required to battle against other players and to play in adventure mode. There are many other game modes that are currently under development such as Battles v2 and Land Gameplay. However, the game being one that is made on the block chain plus the fact that it is still in Alpha mode means that you cannot expect it to be developed as fast as games created in AAA studios. Developers have expressed this time and time again to players that it will take some time to write and test the codes before they can be released.

Previously, some players were fed up with how long it took for developers to release an update. For example, this Youtuber sold all his axies because the SLP prices were falling all the way to $0.05 each and he got fed up of waiting for a development update:

However, within a week, the developers announced an update, causing SLP prices to rise. The next thing I knew, he announced on his Youtube channel that he is returning to axie infinity:

Hence, it pays to be patient and give the developers ample time to improve the game. They are doing their best too.

But, I can tell that they are working because they have been delivering on numerous updates such as AXS staking as well as new gameplay updates.

Although it took time, but so far they have been delivering. And track record is important to me.

However, do take note that while development is good, it can also be bad for players who are unprepared for it. Certain developments can change the gameplay so much that the team of axies you purchased previously suddenly couldn’t earn as much as before. To avoid this, it is suggested to pay close attention to the development updates and to participate in regular chats the developers organized with players to know direction of the game.

  1. Cyber Security

If you know that your device is loaded with viruses and malware, I highly suggest that you do not play this game on that device. This is because we are dealing with crypto currencies. Unlike trading stocks or options, there are no middle men to facilitate your trade executions. Which also means if someone stole your tokens or your axies, it is irreversible and there is NOTHING you can do about it. Therefore, to play this game, please use a device that you are confident about its security and don’t simply click on malicious looking links online.

  1. Substitution Risks

Axie Infinity has popularised the play-to-earn concept of gaming and I strongly believe that this will soon become the norm. Gaming will then have a potential to become a career for everyone, not just for competitive gamers. And because of this, I am expecting to see many other play-to-earn projects spawning. Axie Infinity currently holds the top spot. But there is a risk that they will not be there forever.

For example, although not very successful, there are already some other projects attempting to rival Axie Infinity such as Monsta Infinite, Plant vs Undead and Crypto Blades

However, another promising one that I see on the horizon is Illuvium. They are apparently hiring a team of developers from AAA game studios to develop the game and although the game is yet to be released, previews and leaks about the game showed promising signs. I will be interested to test it out once it is released.

But back to the point, new games simply means more competition for player’s attention and money. And that might slow down the growth of the game. But the good thing for now is that Axie Infinity’s development team are working hard to improve the game.

  1. It is NOT For Everyone

I have friends whom are eager to get started after learning about Axie Infinity. They see the money and thought that it was a low hanging fruit. They were so wrong. You need to understand that this is a Play-to-Earn GAME. Meaning that you have to play it in order to earn. Of course, you can hire someone to play for you. But you need to first teach them how to play, right? Most of the earnings in this game comes from the “Arena”. That means battling other players and winning against other players is not that simple. It takes time to learn the game, practice and actually playing it to cement your learnings. And it’s also don’t forget that you need to pay to play. Imagine buying the wrong team and you find yourself consistently losing the game. You will be demotivated and at the same time, earn little SLP. That is how many players drop out of the game, giving it a retention rate of 40-60%. When I first started, I committed many weeks learning how to play the game. It is once that I am very familiar with it, I spend less than 2 hours a day generating my daily quota of SLP.

What If I Want To Be A Passive Investor?

I know many of you have this in your mind. Not everyone wants to be a player. Some would rather just be an investor. At the point of time writing this article, I am in the process of transitioning from being an active player to a passive investor of the game. I do this by creating multiple accounts and renting them out to other players to play so that they can enjoy the game and earn some money for themselves. (That is why I re-invested some profits). That way I can generate more income without needing to spend more time on time game.

There are people around the world (Especially in the Philippines) who are really looking to play on your behalf to earn some money. By recruiting them, not only are you giving them a job, you are also giving them an opportunity to put food on their table without needing to risk their lives by exposing themselves to the Pandemic.

To me, financing and renting out my Axie Infinity accounts are like rental properties. Except I don’t have to take on huge debt to start, tenants are easy to find (many will easily play for you if you offer them), and requires very little maintenance. I do not have to worry about the bathroom sink leaking, the water heater failing or renovations. The digital age has brought about a whole new and more powerful digital economy. I sincerely hope that because of this, property prices will eventually decline to a more affordable price for future generations.

To manage your expectations, I must also share that the income I am generating now is because I am renting out a few accounts. With the current market price of SLP and axies, a single account with a decent team of axies should cost about US$ 1,000 and generate a return of about $315 a month.

Crypto/NFT Games V.S. Stocks/Options

Some of you are probably wondering by now, am I leaving stocks & options and fully onboarding into cryptocurrency? The answer is NO. I am still invested heavily into stocks and options (just not selling puts as much now). I believe in having multiple sources of income and Axie Infinity is just one of the few income sources I have that I would like to share with all of you. Every investment vehicle has its place in the ecosystem and I am a true believer that we should always be curious to explore more opportunities. But, also, as the Oracle of Omaha puts it beautifully:

Quick Summary

This is the little experiment that I have been working on. Basically, it is only with the technologies we have today that such economies are possible. I have been following this project for a while and I have seen many under privileged individuals especially those born without a silver or golden spoon be given an opportunity to earn money, put food on the table and of course allowed to enjoy the beauty of life itself.

I come from a background where I start from zero and I need to earn my wealth. So I understand how difficult it is when you start investing from nothing. I wished Axie Infinity existed 5 years ago when I started investing, this will definitely generate the cash flow I needed to finance the growth of my portfolio. There are some of you who shared with me that you have lost your jobs during the pandemic as well. I sincerely hope that this article will give you the hope or solution to carry on and to also change your lives for the better.

I understand that this article, although provides a lot of insights, lack execution. How do you start? How do you open an account? How do I fund my account? Etc
If after reading this, you want to learn more about Axie Infinity, there are actually plenty of sources you can learn more from Google and Youtube by simply searching “Axie Infinity”. There are tonnes of very helpful videos and websites which you can refer to. But of course, you need to spend some time to first discover them, know which is actually helpful and then learn about it. It took me about a 5-6 weeks of trial and error, knowing which source on the internet is helpful and which isn’t to properly learn the game before I can stabilize my daily SLP earnings. And there are also times where I have lost money because I wasn’t moving my funds correctly through the blockchain. So like every other investments, there is an initial learning curve.

However, if you are want to get to the top of the curve quickly in DAYS rather than weeks/months, I am willing to guide you guys, step by step on:
1. How to set up the account
2. How to deposit cash and how to withdraw profits
3. All the mistakes I have made in the past 3 months of learning axie infinity so you do not have to repeat them
4. How to play the game (Learn the mechanics of the game)
5. How to rent out your accounts to other players to play for you.
6. And so much more…!

It is especially useful if you want to save many months of research and start earning SLP ASAP. I am willing to do all these for a small fee (To make it worth my effort). Only if you are want it, simply drop me a private message on my Instagram/Facebook account and I will share with you how you can access them. Till then, happy earning!

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