What Axie Infinity is all about
Axie Infinity – the mobile game you may associate with cute colorful cartoon creatures helping their owners rake in cryptocurrency gains – has been splashed over news headlines lately.
To explain why it’s sweeping through the Philippines to the point that the Bureau of Internal Revenue (BIR) has just reminded everyone that players’ earnings are taxable, here’s a noob’s guide to what Axie Infinity is and how it works.
Note: this article does not constitute financial or investment advice and is meant for informational purposes only.
1. Gamers play with cute creatures called Axies to earn crypto
Image credit: @axieinfinity
Axie Infinity is a blockchain-powered video game that lets gamers earn cryptocurrency called Axie Infinity Shards (AXS) and Smooth Love Potion (SLP). To do this, gamers collect, exchange, and battle with blob-shaped creatures called Axies.
Yes, the axolotl is a real animal.
Image credit: Max Pixel
These creatures are incidentally inspired by the real-life animal axolotl, which are salamanders found in lakes and known for their cute smiley faces.
To start playing, new gamers have to collect at least three Axies first. After their Axies complete in-game challenges to earn in-game cryptocurrency, this cryptocurrency can be exchanged for Ethereum, the world’s second-most widespread cryptocurrency after Bitcoin.
After that, gamers can cash out by converting Ethereum to pesos or any other country’s currency on a crypto exchange.
2. To start playing, you need a cryptocurrency exchange account and a crypto wallet
ETH-to-USD currency exchange rates on Binance. Rates change constantly as cryptocurrency exchanges are open 24/7, 365 days a year.
Image adapted from Binance
This isn’t Pokemon Go – one does not simply begin playing Axie Infinity by downloading an app and grinding quests immediately. First, you need to open an account on any cryptocurrency exchange that accepts Ethereum (ETH), such as Binance.
Next, you need a reliable cryptocurrency wallet to store your currency in. Ronin is just one example of a crypto wallet. You’ll have to attach your wallet to your Axie Infinity account.
Axies up for adoption at the Axie Infinity Marketplace
Image adapted from Axie Infinity
After purchasing your Ethereum, you need to buy your first 3 Axies to start playing. You can do so on the Axie Infinity Marketplace, where most Axies are going from USD200 and up.
Yes, this means you’ll need a minimum of around USD600 to even begin playing this game – there is no free lunch in this world after all.
3. You can breed Axies and sell them for money
An Axie’s stats, including its dominant (D) and recessive (R1 and R2) genes.
Image credit: Axie Infinity
Before you think of making money by breeding and selling off your Axies, you’ll want to think carefully about which two Axies of yours that you want to breed a new Axie from, because this will determine its traits that will help it in battles and gameplay.
Each Axie has genes that affect its child’s six body parts – and like human genes, Axie genes can be dominant or recessive. Dominant genes have a higher chance of being passed down to offspring.
Axie incest is also banned – this means Axies cannot be bred with their parents or siblings. You’ll need to pay a breeding cost of 4 AXS and some SLP, depending on the parents, in order to breed a new Axie. Once the two Axies mate, they will lay an egg which matures into an adult in 5 days.
Each Axie can only be bred 7 times, so breeding isn’t an infinite source of money either. Breed responsibly, everyone!
4. Game assets such as Axies and land plots are kinds of NFTs
Image credit: Brian Wangenheim
In real life, a 20-peso note can be exchanged easily for another 20-peso note. That’s all well and good because the purpose of conventional currency requires similar units to be readily swopped.
But when you want to claim a work of art, music, or a unique item – such as an Axie – as your own, you need to make sure it cannot be exchanged for another.
A plot of land in Axie Infinity. Players can buy such plots of land with cryptocurrency.
Image credit: Axie Infinity
That’s why Axies and in-game plots of land are created as non-fungible tokens (NFTs). NFTs are data about assets that is stored on a blockchain, which is a digital ledger.
The blockchain enables each Axie to be certified as unique and not interchangeable with any other. Plus, if you own an Axie, the blockchain verifies that you are its owner, so theft is extremely difficult.
Axies are, of course, not the only NFTs in existence. Paintings, songs, and more can also be represented through NFTs and traded with cryptocurrency.
5. Axie Infinity was developed in Vietnam
The team behind Axie Infinity – Sky Mavis’ staff in Vietnam.
Image adapted from Sky Mavis
Interestingly, Axie Infinity is developed by Sky Mavis, a gaming studio from Vietnam. The studio’s co-founders are Jeffrey Zirlin from the US, Nguyễn Thanh Trung from Vietnam, and Aleksander Leonard Larsen from Norway. Sky Mavis’ staff include past startup co-founders and others with work experience at Google, Uber, PayPal, and Garena.
Sky Mavis is a startup from the first batch of companies under Saola Accelerator – a tech startup program named after a rare Vietnamese deer. Saola Accelerator focuses on tech startups serving the Vietnamese market, with a team based in Vietnam, or which have a Vietnamese co-founder. It was launched by 500 Startups Vietnam, one of the country’s most active venture capital investors.
Axie Infinity is Sky Mavis’ first product, and is inspired by nostalgic games such as Pokémon, Neopets, and Tamagotchi, according to CEO Nguyễn Thanh Trung’s Linkedin profile.
While Sky Mavis’s office is in Ho Chi Minh City, it also has a registered address in Singapore.
6. No money, no problem – you can get a job as an Axie Scholar
Image credit: Yura Fresh
Playing Axie Infinity, as with many other games, takes time and money. For those who want to get some crypto earnings from playing, and have spare time to do so but not the cash, it’s not the end of the road.
You can get hired as an Axie Scholar – a salaried job that an Axie owner or group of owners, called a guild, offers in exchange for your labor. While this job lets you earn a share of the in-game earnings from helping your manager battle their Axies, managers also gain passive income by subcontracting out the manual work to you and receiving their cut.
Of course, it takes a lot to trust someone to take care of one’s precious Axies. Most scholarship programs have an application process through which they verify that you are keen to learn about the game, have done your research on blockchain and crypto, or if you have something to contribute to your scholarship guild such as website maintenance or design skills for their publicity efforts.
7. Filipino Axie Infinity players are subject to taxes on their in-game earnings
Image credit: Mari Gimenez
Yes, in-game Axie Infinity earnings are taxable for Philippine residents – this is according to the Bureau of Internal Revenue’s announcement via PTV yesterday. This is in fact not new news, because all along, all Philippine residents have been liable to pay taxes on all income, including that from online gaming. Late payment penalties and jail time for tax evaders may apply, whether they play Axie Infinity or not.
All the details on income tax law, including resident citizens getting income from sources outside the country, are on the BIR’s official website. However, anyone earning under P250,000 (~USD4,987.28) a year is exempt from paying taxes, according to the BIR, so the law will not have a big impact on this group of earners.
Axie Infinity 101
There is so much more to the complex world of earning crypto through NFT gaming, but hopefully, this basic guide to Axie Infinity will help clarify the basics about how the game works and shed light on why it’s attracting so many Filipinos to play it as a pandemic side hustle.
Have fun raising your army of cute and powerful Axies, but always do your research and due diligence before investing real money into any game or blockchain-related activity, and never invest more than you are willing to lose.
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