What is Axie Infinity? Is it Halal?

Axie Infinity is a blockchain based virtual metaverse that allows players to collect and battle using in-game collectibles. The in-game tokens used are AXS, and users can also buy LAND tokens to purchase virtual real estate.

Axie Infinity is not a unique offering, given that it has tough competition from the likes of Decentraland and The Sandbox.

Most scholars hold AXS and its NFT counterpart LAND to be halal. We also share this view.

Read on for a deep dive on whether AXS is a good investment and the Islamic views on it.

What is Axie Infinity?

Axie Infinity is an open-world blockchain-based platform for gaming, ownership, and creation. It was founded by the Axie Infinity Foundation in 2020, with the goal of creating a decentralised platform where users can own, trade, and create their own unique creatures called Axies.

The Axie Infinity Foundation held a fundraising round in 2020 to raise funds for the development of the platform. The Foundation holds the intellectual property rights to the underlying software and maintains the Axie Infinity website, in addition to retaining a portion of the initial token supply.

Users can explore the Axie Infinity world and interact with others, play games with them, trade with them, create content and monetise it, and buy virtual real estate. These parcels of land can be used to develop different environments, marketplaces, and applications. You experience the world through the use of a 3D avatar and need digital tokens to access most activities, such as trading with other users, buying digital art, or playing games.

The platform is built on the Ethereum blockchain, and all transactions are recorded on the Ethereum blockchain, making them secure and permanent. The Axie Infinity economy is fueled by two tokens: AXS and LAND.

The virtual world in Axie Infinity consists of individual portions of LAND that you can buy using the AXS token in Axie Infinity’s marketplace. Users can also purchase various items for their Axies, such as abilities, spells, and weapons.

In addition to developing applications and digital environments on LAND you own, users can merge parcels of LAND to create Estates. Companies and individuals are already creating virtual offices and art galleries in Axie Infinity, and the platform has a thriving ecosystem of players and creators.

Axie Infinity is governed through a decentralised autonomous organization (DAO), giving players direct control over the in-game rules and governance and allowing them to vote on policy changes, such as changes to in-game items and investments for the DAO’s treasury.

How does Axie Infinity work technically?

Axie Infinity is a blockchain-based digital world and marketplace where players can own and trade unique creatures called Axies. It is built on the Ethereum blockchain, using smart contract technology to allow for secure ownership, transfer, and trade of Axies and other digital assets.

The infrastructure behind Axie Infinity consists of the Ethereum blockchain, which provides the secure and transparent ledger for all transactions, and a set of smart contracts that manage the rules and logic of the Axie Infinity ecosystem.

In the Axie Infinity world, Axies are represented as non-fungible tokens (NFTs) based on the ERC-721 standard. Each Axie is unique and has its own set of traits and attributes, making them one-of-a-kind and highly sought after by players.

In addition to Axies, the Axie Infinity ecosystem also includes other digital assets such as land and items, which can be traded and used to enhance the player experience. These digital assets are also represented as NFTs based on the ERC-721 standard.

The Axie Infinity marketplace is powered by its native cryptocurrency, the SLP token, which is used for transactions and to access certain features within the ecosystem. SLP is an ERC-20 token and can be bought, sold, and traded on various cryptocurrency exchanges.

To ensure the security and stability of the Axie Infinity ecosystem, the platform is governed by a Decentralised Autonomous Organization (DAO). The DAO is run by its community of SLP token holders, who use their tokens to vote on proposals and make decisions about the future direction of the platform.

Overall, the combination of Ethereum’s blockchain technology and the smart contract-based governance system in Axie Infinity provide a secure and transparent platform for players to own and trade unique digital assets, participate in the economy, and play games.

What are the use cases of Axie Infinity?

Applications

Axie Infinity was created to be a metaverse, with a primary focus on games and gaming-related activities. Users can participate in battles, quests, and other in-game events to earn rewards and progress through the game world. The games and activities within the metaverse are made more engaging through the use of blockchain-based assets, which provide unique value and ownership.

Collectibles

Axie Infinity features a thriving marketplace for unique and collectible creatures known as Axies. These creatures are NFTs (Non-Fungible Tokens) that can be bought, sold, and traded between users. Axies have various traits and abilities that make them unique, providing a level of scarcity and value that is not possible in traditional video games.

Gaming

Axie Infinity has a strong focus on gaming, with various activities and events that users can participate in. From battles to quests and everything in between, there are many ways for users to engage with the game world and earn rewards.

Social

Axie Infinity provides a virtual world for users to interact with one another and form communities around shared interests. The social aspect of the platform is designed to bring people together and provide a place for people to connect and communicate.

Ecosystem

Axie Infinity has a thriving ecosystem that includes its own currencies, AXS and SLP, and a marketplace for trading NFTs. The ecosystem is designed to provide users with a self-contained world that is both fun and engaging, while also providing a way for users to earn rewards and build wealth.

DeFi (Decentralised Finance)

Axie Infinity is being used as a platform for decentralized finance (DeFi) applications. The SLP token and NFTs within the platform can be used as collateral to secure loans, as well as for other DeFi applications such as stablecoins, yield farming, and more.

Are people using Axie Infinity right now?

Axie Infinity currently holds the 47th spot in the crypto space right now with a 0.1% market dominance.

It’s a small player in a big pond. But it is in a similar position to its main competitors: Decentraland and The Sanbox. Decentraland currently holds the 41st spot whilst The Sandbox is only one position ahead of Axie Infinity at rank 46.

Axie Infinity only has around 400,000 monthly active users as of January 2023. This is overall a tiny number, but more importantly it is a declining number.

The platform lost 62% of its active users from 2021 to 2022.

If Axie Infinity can’t get people to explore and trade within their open world, the entire platform could eventually just stagnate and become stale.

Axie Infinity isn’t alone in struggling with user adoption in the blockchain space. Big names in the gaming industry attempting to penetrate the ‘GameFi’ space have found building game platforms within the Web3 world is more difficult than it seems. Both Decentraland and The Sandbox have seen a user reduction in the past two years.

Unlike traditional open-world online games, Axie Infinity and its crypto competitors and other platforms in the blockchain space are heavily skewed towards ‘play-to-win’ mechanics. This means that to be an active user and participant within the platform, users have no choice but to spend a lot of money whether it’s by buying LAND, or through buying various NFTs and accessories.

Axie Infinity not only has to compete with other platforms in the GameFi space, but with traditional games that have a more efficient and cheaper business model, and a better overall user experience.

What are the strengths and weaknesses of Axie Infinity?

Strengths

• Axie Infinity has a strong community and developer team that is dedicated to expanding the platform and delivering a high-quality gaming experience to users.
• The platform uses the Ethereum blockchain, which provides a secure and transparent environment for the creation and trading of NFTs and in-game assets.
• Axie Infinity has a unique and engaging gameplay mechanism that encourages players to engage with the ecosystem and build their own personal collections of digital assets.
• Axie Infinity has a strong focus on sustainability and environmentally-friendly gameplay, which appeals to players who are looking for a more ethical and socially-responsible gaming experience.
  

Weaknesses

• Axie Infinity is still a relatively new platform, and its user base is smaller compared to more established gaming platforms.
• The platform relies on the Ethereum blockchain for its underlying infrastructure, which can result in slow transaction times and high fees.
• The game’s focus on breeding and battling creatures may not appeal to all players, and some may find it too complex or niche.
• As with any blockchain-based platform, Axie Infinity is subject to the uncertainties and fluctuations of the cryptocurrency market, which can impact its value and stability.
  

Is Axie Infinity a good investment?

The Axie Infinity price currently hovers around $10, going down from a peak of $160 in the summer of 2021.

AXS is available to buy on major cryptocurrency exchanges such as Coinbase and Binance.

The case for buying AXS rests on whether investors think it is the winner in the crypto metaverse space. Unfortunately, there doesn’t seem to be much evidence that Axie Infinity has a competitive advantage not only against its larger competitors such as Decentraland and The Sandbox, but other gaming platforms.

It is not only competing against other players in the crypto space, it is competing with people’s attention and its ability to draw gamers in. With a declining user base and economic headwinds, there is not much going in Axie Infinity’s way.

We’ve written a whole guide on how to invest in crypto the Islamic way, check that out for a good walkthrough on how to actually begin investing.

Alternatives to Axie Infinity

Decentraland (MANA)

Holding the 41st spot in the crypto space, with a market capitalisation of $1.4 billion, Decentraland is a virtual world and digital community based on blockchain technology. Users can interact, play games, explore, and trade in this virtual world. There are two main tokens at their disposal, MANA and LAND.

The Decentraland platform continues to evolve and allows interactive apps with peer-to-peer payment and communication systems for users. Users can also create different forms of content and monetise it, from digital art to online courses to events and environments.

The Sandbox (SAND)

Holding the 46th spot in the crypto space with a market capitalisation of over $1 billion, The Sandbox (ticker: SAND) is a direct competitor to Axie Infinity in the virtual reality on blockchain space.

There are four Sandbox tokens which are also based on the Ethereum standard: SAND, GAMES, LAND, ASSETS.

Is Axie Infinity halal?

Most scholars hold Axie Infinity and its AXS and LAND tokens to be halal. We also share this view. 

The essence of the debate on whether cryptocurrencies are halal comes down to whether they are ‘Māl’ as we have explained previously. Māl is something that can be acquired, whether it be an item or a service.

There are three stances on cryptocurrencies today:

1. Cryptocurrency is not Māl, rather it is a speculative, non-Sharia-compliant investment.
2. Cryptocurrency is a digital asset but not a currency.
3. Cryptocurrency is a digital currency.

Proponents of view (1) argue that cryptocurrencies are not Sharia-compliant since they have no intrinsic value and are merely entries on a digital ledger.

Our view has always been that (1) does not seem right since cryptocurrencies have value as millions of people are willing to buy, hold, and trade them. They are just as real as fiat currency today which mostly exists in the spreadsheets of banks. Our monetary system became predominantly digital a while ago.

View (2) seems to be the most realistic view, as cryptocurrencies are a new and emerging technology that are yet to mature into fully fledged currencies used by economies at large. However, in practice, there is no real difference for casual users between (2) and (3) since they both consider trading cryptocurrencies to be permissible.

When it comes to NFTs, such as digital items within Axie Infinity and LAND, it really depends on whether the item itself is Sharia-compliant. There is nothing inherently impermissible in purchasing LAND tokens and buying virtual real estate. Of course, when purchasing any NFTs within the Decentraland platform it is important to ensure the digital asset in and of itself does not contradict the principles of Sharia.

One should also consider whether the prospective NFT has any negative implications or is wasteful. Refer to this article for a deep dive on the Sharia-compliance of NFTs.

In-game activities, from courses to concerts, follow the ruling of their analogue counterparts. So, for example, attending a ‘virtual’ concert where there is language, media, and music that contravenes the principles of Sharia would be impermissible.

Another thing to bear in mind is that if you purchase NFTs, including LAND, within Axie Infinity, and buy it with the intention to sell in the short-term, Zakat would be due on these collectibles and LAND. Read our article for more information on Zakat on NFTs.

Conclusion

The metaverse is still a mystical concept to many. It is best thought of as just a massive online open-world game with its own economy. Given its user base, platforms like Axie Infinity are still a niche concept where big players like Meta and Apple plan to make a splash. Virtual reality on the blockchain is an even more niche offering for fans of both open-world platforms and blockchain technology.

Because of skewed incentives and high prices, many Axie Infinity features have priced out the average user. This does not bode well in such a competitive space where players will simply avoid it and choose a gaming platform that works for them.

The other issue is, unlike a cryptocurrency like Ethereum where there are real-world applications and use cases, most of Axie Infinity’s use cases are deeply tied to its game mechanics. It cannot go mainstream as a currency because it is intrinsically a game. Of course, they’re not aiming to replace currencies.

The real question a potential investor must ask is, do I believe that Axie Infinity will dominate the gaming space, or even carve out a significant, sustainable market share of the gaming space? If the answer is even slightly negative, there’s not much incentive for most people to invest.