AMA Highlights — Axie Infinity & The Sandbox

By Daniel Dal Bello, Director.
December 8, 2020–10 min read.

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On Friday 4 December we welcomed both Aleksander Larsen from Axie Infinity and Sebastien Borget from The Sandbox into the Hillrise Capital Telegram chat for an AMA. Aleksander is COO and a cofounder of Axie Infinity, Sebastien is also COO and a cofounder of The Sandbox.

Blockchain-enabled gaming is quickly becoming one of the industry’s most exciting niches and a natural progression for many games today that sport internal micro-economies.

Axie Infinity is a game where users collect, battle and trade in-game creatures called Axies. The Sandbox is a voxel-based game that allows users to monetize gaming assets and experiences in a virtual environment.

In this post, we share our second combined AMA and have compiled key questions and answers from the event.

Daniel Dal Bello
Welcome to you both, we’re really excited about this AMA because NFTs are super hot at the moment and you are both leading the charge. This is also our second joint-AMA, so we’re looking forward to chatting about some common ground in the NFT and gaming arena.

As always we’d love to start with some introductions and background on yourselves and your companies.

Aleksander Larsen
Hi everyone. I’m Aleksander, the COO, and co-founder of Axie Infinity. I am responsible for all things business-related and have been working in the blockchain industry since late 2017 with a focus on blockchain games and player-owned economies.

I also serve on the board of directors in the Blockchain Game Alliance and hold the secretary position. Before entering the blockchain industry I worked for the Norwegian state and spent most of my free time playing games. I have represented the Norwegian national team in Warcraft 3 and Dota, and also been ranked a top 200 player in Dota 2 — long ago.

Axie Infinity is a Pokémon-inspired universe where anyone can earn tokens through skilled gameplay and contributions to the ecosystem. Players can battle, collect, raise, and build a land-based kingdom for their pets. Although Axie is still in early access, Axie is ranked the #1 Ethereum game by daily, weekly, and monthly active users. It has generated over 6,800 ETH in revenue (3M+ USD) so far.

While Axie is a fun game, it’s also taken on characteristics of a social network and jobs platform due to the strong community and play-to-earn opportunities that have come from its early success.

Sebastien Borget
Few words about myself, my name is Sébastien Borget, I am the COO, co-founder of The Sandbox.

I’m 35 years old and this is my 4th company, the 3 previous ones have been acquired. I was involved in peer-to-peer technology, mobile gaming and cloud media streaming. Then at the end of 2017, we became interested in blockchain technology and especially NFTs, and we found combining it with the User-Generated Content made by The Sandbox players would be the perfect match.

I am also the president of the Blockchain Game Alliance, a non-profit organization with 150+ members from the blockchain and gaming industry. I am an advocate for NFTs and blockchain in games.

Let me do a quick intro The Sandbox. The Sandbox is a virtual world where players can build, own, and monetize their gaming experiences in the Ethereum blockchain using NFTs and SAND, the platform’s utility token. You will be able to enter a virtual world where you can build, own and monetize games, next to gaming giants Atari, Square Enix and more!

The Sandbox metaverse invites players and creators to:
• Make NFTs with VoxEdit
• Sell and trade them on our
• Create fun games with our ‘gamemaker’
• Play, stake and earn SAND
• Play and create with huge IPs and brands

We are thrilled to see the demand for SAND and also want to confirm our long term vision on building a gaming metaverse. We have great achievements, fantastic team, partners, IP and more.

Ray Reijnders
Hi Aleksander, with the introduction of governance for AXS you’re effectively directing a massive amount of resources to your community members. From the last time I checked we noticed that there was over US $250,000 in the community treasury. To what extent will your community be able to put this to use, and what will the governance platform look like?

Aleksander Larsen
Hi Ray! We haven’t activated the treasury quite yet but if we had the amount would be even higher than what you mentioned.

Some details about the treasury. The Treasury is at the heart of the feedback loop that drives AXS demand within our ecosystem. Once it’s live, 100% of all fees and primary sales from the Axie universe will be deposited in the Treasury.

The Axie ecosystem has a variety of different fees. For now, there is a 4.25% marketplace fee as well as a 0.005 ETH fee for breeding Axies. Over the last 30 days, these fees have totaled over 400 ETH.

Let’s calculate the hypothetical accrual to the Treasury over the period of October 23rd — November 23rd. Please note that this is only hypothetical as the Treasury is not live yet.

In the last month, there was 4838.8 ETH in Axie sales and 1,429.7 ETH in land/item sales. This gives us 6,268.52 ETH in total marketplace volume. 4.25% of this is 266.4 ETH. Lastly, the breeding contract shows us that 161.45 ETH was spent breeding.

Ray Reijnders
To elaborate on my question, what would actual governance proposals look like?

Aleksander Larsen
Through AXS, Axie Infinity will gradually evolve into a community-owned Decentralized Organization. This process occurs as AXS is distributed among players and stakers, with the Sky Mavis ownership becoming less concentrated over time.

AXS holders determine which governance framework should be used and how much should be voted on. Some decisions will not be up for debate such as token supply which is iron-clad in smart contracts.

Potential things that can be voted on:
• Should Axie Infinity continue to pay Sky Mavis to develop Axie Infinity?
• Should Axie Infinity use the marketplace created by Sky Mavis?
• How should the Community Treasury be used to reward AXS holders and the broader Axie community?
• Should the Community Treasury funds be attached to any yield farming/staking services such as Yearn.finance or Rari.Capital? … and more.

Daniel Dal Bello
Sebastien, curious to hear your thoughts on the potential for cross-integrations or “partnerships” with similar existing non-blockchain games, such as Minecraft. Do you think there is room for collaboration in that respect? Or is it more of a competition angle and going down that path wouldn’t be a smart direction to take?

Sebastien Borget
This is a great starter question. Yes, our tools support exporting the content made with our 3D Editor (VoxEdit) in Minecraft.

However, we think that to build a truly decentralized gaming virtual world, 100% owned and governed by players, we should integrate the NFTs and the native token SAND as key elements of the platform from day 1.

That is why we have been building for 3 years now this new version that is a 3D, multiplayer, multi-platform and NFT blockchain-enabled version. We’re attracting the older gaming audience from Minecraft who have been left out by the younger generations (kids) playing there now.

And offering a unique value proposition, where as a Player or Creator, you can own the content you create with our ‘NFT Maker’, trade them in a permissionless manner, build games without any programming knowledge and monetize them.

We’ve raised $4.5M USD from reputable investors on our Seed Round, including from Hashed, True Global Ventures, and Square Enix. We’ve sold for more than $2,500,000 worth of NFTs, our LANDs (ERC-721) over 4 pre-sales, some of them finishing within minutes to a few hours with high demand. Hundreds of artists use it to produce thousands of assets published on our marketplace.

The platform has also secured 60 partnerships with award-winning game companies such as Atari and Square Enix, top decentralized games such as Crypto Kitties, major brands such as Care Bears and Shaun the Sheep to build a fun, creative “play-to-earn” gaming platform, owned and made by players.

Daniel Dal Bello
We took a look at the Sandbox store Sebastien, something that immediately caught our attention was the amount of assets on sale and the number of people creating these. We noted a creator who specifically focused on vegetables — very DeFi-esque.

With the ease of creation, and artistic freedom that comes with your voxel-based assets, have you seen this translate to a dedicated community of creators?

Building on what you’ve said so far, what excites you about the potential for user-created content?

Sebastien Borget
We have a really strong community, over 20,000 users on Telegram, 20,000 on Discord and 60,000 on Twitter now. Many of our community members are non-crypto users. They are artists, creators, and gamers who come because we offer a fun and engaging platform.

We launched VoxEdit in December 2019, it was the first tool in our platform. Today hundreds of artists use it on daily basis, they have made thousands of models you can see here.

@kirbyongeo
Hey Aleksander, I’ve been hearing bout Axie everywhere. How is revenue generated?

Aleksander Larsen
Revenue is generated from primary sales, being Axies and land, and recurring fees from:
• Marketplace (23,000+ ETH in volume so far), and
• Breeding fees (each time an Axie is bred we take, 0.005 ETH).

In our opinion primary fee sales from a gaming project is normal, but once you see a sustainable economy emerge on the secondary market it is a sign of success.

Daniel Dal Bello
With a bit of crossover here, I’m interested to have a discussion around your respective choices on scaling solutions.

For Axie with your proprietary ‘Ronin’ and for The Sandbox, Matic Network. What motivated your choices here if we contrast with an in-house vs. external solution for scaling?

Aleksander Larsen
This is a very interesting topic that I am happy to dive deeper into.

First of all our choice of scaling solution comes after experiencing first hand how early we are in the space. We were one of the first projects to deploy anything NFT related on a layer-2 early in 2019 using Loom Network. In the end Loom pivoted away from gaming and we realized how risky it is for a startup to build on another startup that is building on bleeding edge technology.

We then went deeper into the various technologies available and concluded that nothing is battle tested for NFTs yet, and we needed something that was tailor made for our needs.

As such we set out to build Ronin which is an EVM sidechain to Ethereum, specifically tailored for Axie Infinity and potentially other high quality NFT projects in the future. It is in private testnet already, and a public testnet is imminent.

Ronin will start out as a ‘PoA’ chain (think xDAI just for NFTs) and then move into PoS with ZK-Rollups down the line.

Sebastien Borget
About scalability, in The Sandbox the Ethereum blockchain is used to prove the ownership of the games and assets, but when you are in the game, you are not interacting with the blockchain.

While there is no direct relationship between number of games, number of players and number of blockchain transactions, we have already prepared for the scalability through a partnership with Matic Network, who is a layer-2 solution that can help scale further.

Ray Reijnders
Aleksandr, with the rise of micro-transactions, just about every gamer has been exposed to casino mechanics in gaming (unfavorable random number generation is king).

Do you think that there would be any notable changes for either consumers or companies if those often ‘rare’ micro-transaction items would be issued, and tradeable on a blockchain?

Axie Infinity already seems to already have sprawled a very engaged audience of collectors and traders for the games assets.

Curious to hear your vision for the gaming space as whole, and whether you think a similar model should be implemented for all games that have micro-economies.

Aleksander Larsen
I can see many challenges ahead before mainstream game companies enter the blockchain space. A big part of it is related to IP protection. The current NFT standard is actually too open, there is no way to monetize if people want to trade on other marketplaces for example. That’s a big potential revenue loss for IP creators.

Once that issue is solved I expect more companies to tap into the benefits that the blockchain enables for users and for the companies themselves as well, the fact that ownership of asset adds more emotional connection to assets.
Gambling does not tap into this though, it’s another use case which I find quite boring and straightforward.

Daniel Dal Bello
This is an open question on the topic of borrowing against collateralized NFTs.
With the massive valuations that some NFTs are being priced, collateralizing them for DeFi loans seems to be a developing interest — we’ve seen some projects talking about and looking to build out in this area.

Do you have any commentary on how platforms could deal with “rare” NFTs being bid up (e.g. through wash trading) just so that a larger loan can be taken against it?

Aleksander Larsen
The concern I have around this is more related to that these assets will not be used in the games if they are locked up. If the lending/borrowing platform is not designed well certain game assets can be lost forever because they get split up into shards for example, and no one can use them.

I more believe in in-game guilds tied to the platforms and then those guilds can own assets which players can use, but they can still leverage their worth on lending platforms to unlock liquidity.

Sebastien Borget
LANDS in The Sandbox have been recently appreciating in value significantly. Moving from $5M total value to $25M USD. We are seeing a growing amount of loans and collateral being taking on platforms like NFTfi against LANDS.

However, the value of LAND in The Sandbox is similar to virtual real-estate, it will be growing further as the creators and LAND owners are building up great game experiences on top of them, that will drive more players and fuel the economy.

Hillrise Capital is an independent research and advisory firm exclusively focused on blockchain startups and crypto-assets.

Axie Infinity is a game where users collect, battle and trade in-game creatures called Axies.

The Sandbox is a voxel-based game that allows users to monetize gaming assets and experiences in a virtual environment.

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We’re an independent research and advisory firm focused on blockchain startups and crypto-assets.

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