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A Decentralized Axie Infinity
Yesterday, SkyMavis announced a plan for “decentralizing” Axie Infinity and its $1B Community Treasury. Now generally speaking, whenever a popular crypto project announces decentralization plans, it’s considered a “buy signal” by the market. Why? Decentralizing a crypto project usually means to “give more control” over to the community, but why would SkyMavis (or any project owner) even want to do that? Don’t they want to continue guiding and thus earning from their work? What does giving more control even mean?
A fully decentralized project allows the community to vote on how the game and platform is supposed to evolve. Remember that the “community” here includes everyone from the players, to the managers, to the guilds, to SkyMavis themselves, so basically it means, that scholars could be voting alongside Jihoz and Psycheout, as well as Kookoo and Gabusch. What kind of things would you vote on? Because the voting process will take time (proposals have to be written and the community needs time to review them), usually this is meant for “big picture” decisions. MakerDAO, the organization that created the $DAI token, is one of the oldest DAOs out there; they completely transitioned to a fully decentralized organization in July of last year. (Their $MKR token also went up about 40% after that.) Here’s an example of what an ongoing community vote looks like for them: There’s currently a proposal to increase the annual working budget of their Core Unit to $8.2M, and so far it looks like 83% have voted “yes.”
At the very bottom of the “vote breakdown” screenshot I took, you can see that there were actually only 27 people voting on this proposal, and they are voting based on their $MKR holdings. The more $MKR tokens you hold, the heavier your vote becomes. Generally, this means that the biggest whales will have the biggest impact, which is one of Vitalik’s key concerns with DAO voting. If you’re a small token holder (let’s say you only own 1 AXS), you would not be very interested to participate in voting because you know that you would have very little impact on the outcome … especially when you know that other voters probably have 1,000 $AXS in their Ronin wallets.
Why doesn’t DAO voting just work like normal IRL voting, where every citizen gets 1 vote, and they are all weighted the same? Well, as we’ve seen in recent months here in the Philippines, you end up with popularity contests powered by social media manipulation and fake news, because all the energy is spent on fooling the biggest number of people that you can. In the real world, it’s not possible to come up with a system where voters have different weights, because you’d never be able to reach an agreement on the criteria. In the crypto world though, you have the governance tokens like AXS. Theoretically, it’s the biggest holders of $AXS (the whales) that have the biggest incentive to make better, well-informed decisions for the organization, right? After all, if they screw up, then their holdings would lose value, right? Well, sort of.
The problem with this system is that the “important people” in the community aren’t just the rich whales; there are also the content creators and influencers, top competitive players, and community managers. There’s a whole developer community creating external tools for Axie Infinity as well. Not all of these other key people own thousands of AXS, but they are definitely critical to the community's growth. More importantly, they all have different perspectives: if there are proposals about gameplay buffs or nerfs, the rich whales would not be the best judge of what to do here. Similarly, if there are proposals about the game’s technology stack or API, the competitive players wouldn’t have enough knowledge to vote wisely. So what happens in these instances?
The idea is to have enough diversity in the voting community that you can have groups of people that are more knowledgeable about certain things, and they can make informed decisions when voting on those things. Additionally, those knowledgeable people could also “rally the troops” to vote a certain way, in much the same way that thought leaders can lend their support to presidential candidates and influence their followers.
SkyMavis’ lengthy DAO announcement doesn’t contain all of the answers for these problems, only potential solutions. They expect to be working on this for at least another year and a half, before they can even start rolling out community voting. The immediate goal is to start seeing 10M daily active players as well as 5% weekly growth for 6 consecutive months, which is a big jump from where we currently are. As of this week, the DAU is 1.5M players and growth has been consistently negative since mid-January, so there’s still a lot of work to be done in this regard. What’s interesting is that SkyMavis has actually set a deadline for themselves: if these goals are not hit by the end of 2023, they’ll establish a new steering committee or an external think tank to find a better strategy for the platform.
My first collaboration with NasAcademy and Coinbase is happening tonight at 6pm! I’ll be teaching a beginner course for crypto first-timers, and talking about why it all matters and how to get started. Please sign up at https://nasacademy.ph/luisbuenaventura if you haven’t already!