"After DeFi, it’s NFTs and DAOs. We're Gathering Tinder:" Jihoz of Axie Infinity

Hello Defiers! This week’s interview is with Jeff Zirlin, aka Jihoz, growth lead at Axie Infinity. Axie is a digital game built on Ethereum, which involves cute animals going to battle against each other and allowing gamers to take control of their digital assets. Jihoz got into blockchain-based games with CryptoKitties after he was banned from his World of Warcraft account and lost all the in-game assets he had accumulated after years of playing. Then Axie came along which he thought had more utility and a bigger vision, so he joined the community and eventually became one of the first hires.

Axie is at the center of the growth of NFTs, which are non-fungible tokens, or tokens that represent unique assets, from a cute creature in a game to artworks and property. After CryptoKitties and Gods Unchained, Axie is the third NFT project with most historical sales. Axie is becoming a gateway to DeFi, as its leading users who have never owned cryptocurrencies, to use Uniswap and open CDPs.

The big vision is that as we increasingly live our lives in the digital world, digital assets will become more and more important and applications like Axie Infinity, will become more than just games, but places where people work and socialize. The key value that blockchains and NFT tokens add to this picture is that we’ll be able to actually own these assets. There will be no company or centralized entity able to ban an account and take their assets away.

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🎙Listen to the interview in this week’s podcast episode here:

Jeff Zirlin aka Jihoz: I've always been a collector of rare and interesting things, so I grew up collecting butterflies and insects. But during college, I also studied military and economic history, so I was really interested in central banking, things like that.

From Insects to Crypto

I started researching Ethereum in 2017, and then I actually found out about blockchain gaming and non-fungible tokens through CryptoKitties. That was the first experiment. I dove in as a community member, met a lot of really interesting people. I thought it was fascinating this idea of truly being able to earn your game asset and sell it to anyone, anywhere in the world. I thought that was awesome.

“I thought it was fascinating this idea of truly being able to earn your game asset and sell it to anyone, anywhere in the world.”

But obviously, CryptoKitties is kind of a very basic proof of concept. There are a lot of people in the community who wanted something more, something with a bigger vision some game asset with more utility, more fun baked into it. I actually found the Axie Infinity project right as it was starting and I was fascinated by this idea, the digital pet game, Pokemon built on Ethereum.

As a community member Web 3.0 is very community-driven ecosystem and ethos. I started out as a community member, just started helping out and my involvement and my kind of responsibilities start to grow over time. I ended up joining the team as, I think, one of the first hires and so that was kind of the start of this crazy journey.

Camila Russo: Were you a gamer before getting into Axie and CryptoKitties?

Lack of Property Rights

JZ: I grew up playing Diablo, World of Warcraft, I was a beta tester and I was in kind of prominent in a World of Warcraft guild when I was young. Actually, I had to go to boarding school, because I was playing WOW so much that my mom couldn't take it, so I was sent to go away. I’m a lifelong gamer.

Actually, I got banned randomly while playing World of Warcraft for things that my guildmates had done while I was away at summer camp. That was a taste of this idea that traditional gamers, we lacked a lot of property rights that we wouldn't necessarily think of. But there are a lot of, I think, gamers do lack a lot of freedoms that we would take for granted and we don't see our game assets as forms of digital wealth yet. But if people did, they would see that, they're lacking a lot of these property rights.

I had a taste of that in an early age when I was around 14 or something, I had my account banned. It was at the time worth, if I could easily sell it, worth a couple of thousand dollars.

“…we don't see our game assets as forms of digital wealth yet. But if people did, they would see that, they're lacking a lot of these property rights.”

CR: Were you able to get it back?

JZ: No. We had to start over. I think there's some kind of claim system, but that was a pretty negative experience for me back then.

CR: Wow. Okay, so that very clearly highlighted the value of a permissionless system where you actually own the assets within the game. That's a nice segue way for you to explain what Axie Infinity actually is and what value it has relative to traditional games.

Axies are Fierce Creatures

JZ: Definitely. Axies are fierce creatures. You can battle them, you can collect them. Axie Infinity is built on Ethereum. Players are able to actually build up a collection of Axies and use them across an ever-expanding universe of games. Axie Infinity isn't just one game, it's a series of game modes built on top of these game assets.

Now, we have a battle system similar to a card game. But you can breed Axie, which is also a separate game as well. Then we're also working on a land system, which is kind of like a Stardew Valley, Animal Crossing, Pokemon mixed with a little bit of DeFi token farming magic. We're really excited about that.

It seems like people have recently been very excited about this idea of like, oh, what if you could do yield farming, but in a video game? Well, we've actually been building that for the last year and a half or so. I think it's going to be a really timely release hopefully in the next half-year or so.

CR: Wow, that's so interesting. Let me see if I understood how it works. Players own different kinds of digital pets. Then they can use them to play with different games built on the Axie Infinity ecosystem?

JZ: Yeah, definitely. Right now, there's a main game that we have out, it's currently an alpha, it’s a battle game. You can play basically a card-based battle system against other players. Then we also have sponsors, like MakerDAO is sponsoring with DAI, Kyber Network is sponsoring with KNC. Digix is actually sponsoring with real gold. We're able to actually distribute those tokens to players on the leaderboard. I like to think that Axie is a pioneer in play to earn. We also have this idea of play to earn which is being able to actually earn an income or actual money just by playing a game.

CR: So the flagship game is this card battle between the different Axies. Then you mentioned other games including something that looks like yield farming, which is also built on the system. Is anyone able to make these games? How does it work? Is it that permissionless that anyone can build on the Axie ecosystem?

Building on Axie

JZ: Eventually, we really want to make an SDK to make building on top of the Axie game assets really simple and easy for anyone. Right now, all the major functionalities that have been built for Axie’shave been built by the Axiecore team called Sky Mavis. But we eventually do want the community to start making alternate games in the future built on top of the system. Right now, we have open API and obviously, a lot of the Axie-related data is on Ethereum. Our players have been turning out some really awesome fan sites and Axie-related websites such as Axiezone, Axieworld. I think that definitely, we do want to go in that direction over time where we have other game studios or the community building Axie games with IP.

CR: Very cool. Before we get off the topic of explaining Axie itself, I'm really interested to hear more about this kind of yield farming game. How will it work?

Axie Governance Token

JZ: The idea is that people are interested in the idea of earning tokens for interacting with the product. We have an upcoming governance token that a lot of people I think are really excited about. One of the ways that we will distribute that governance token is from basically harvesting it on top of a land plot that you can put your Axies to work on, there'll be structures on it. But we'll also send tokens to those land plots to be harvested each day.

“People are interested in the idea of earning tokens for interacting with the product. We have an upcoming governance token that a lot of people I think are really excited about.”

Animal crossing was just very, very popular. Imagine if you're playing that game and you woke up in the morning, one of your chores was to rather than getting your bells, you're actually harvesting a token, which is basically a native governance token for the game that you're playing.

I think our players are really excited about that. When we release it, I think it's going to be a watershed moment for the entire NFT space. It's like when Compound this past June, they released their COMP token and all of a sudden we saw TVL and DeFi applications starting to spike tremendously. I think once blockchain games realize that you can create a governance tokens, give it to your players doing things within your game ecosystem that you want to incentivize, I think that's going to be a major catalyst for NFT-based economies and blockchain games.

“I think once blockchain games realize that you can create a governance token, give it to your players doing things within your game ecosystem that you want to incentivize, I think that's going to be a major catalyst for NFT-based economies and blockchain games.”

CR: What can you tell us more about the token itself? What will users be able to do with the governance token?

JZ: We've been studying token design for probably almost two years now. I was an early member of the Synthetix community, just because I was looking at like, what are the interesting token models that are out there. I think generally, the idea behind the token is that we want to align incentives between the Axie Infinity core developers, Sky Mavis, and the rest of the community.

The token will be similar to some of the really nice token models that we've seen come out recently with kind of fee sharing, staking to incentivize holding, and gradually, these types of governance rights.

First, governance might be in the form of social signaling. And so right now, I'm not sure if you've seen there's a site called Snapshot, where communities are basically using their tokens to signal their support for different initiatives. Eventually, I think the holy grail is to have a governance where the voting actually is then automatically carried out on-chain.

I think basically, we're going to go with a progressively decentralized rollout. Also in gaming, what’s interesting relative to a true DeFi or a pure DeFi application is, you still need in a game someone to kind of carry out development of the game. It's not like where the thing is kind of born perfectly and the community can kind of often almost take over from a very, very early stage.

I think at the beginning, the token will be a lot about being able to earn it, stake it, will have a DAO treasury that will basically accumulate things like the marketplace commission, future sales, things that Sky Mavis, the core development team had in the past and keeping for ourselves.

CR: Where are those fees and commissions coming from?

JZ: We have an in-house marketplace. You can kind of think of it as an NFT DEX built in-house and we take, that marketplace does 97% of the Axie-related NFT volume and there's a fee associated with that. We also sell limited-edition collectibles. We've sold land in the past. We've sold 25% of the land and there's still actually 75% of the land in the universe to be sold at a later date. Things like basically primary sales and then also kind of fees from the smart contracts that we develop.

CR: Got it. What's the percentage fee for the trades?

JZ: Right now, we take a 4.2% cut for marketplace transactions.

CR: That sounds really high.

JZ: It’s interesting, it is very high when you compare it to something like Uniswap which takes 0.3%, things like that. It's interesting. Well, I think there are a lot of interesting experiments to come with what is the ideal fee. Then also, once the fee starts going towards the community, right now, there are some people who would want to try and bypass that fee, but maybe less would want to bypass that fee if it is actually going into the treasury.

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Paid subscribers have access to the full transcript, including sections on:

• NFTs“Generally, when you think of an ERC 20, every single one is kind of generally is the same, it represents a protocol token, whereas an NFT is something that's unique.”
• Earning by Playing“This idea of being able to basically use an NFT DEX and then this idea of play to earn, I think those are the two most important benefits of a blockchain game. You see a lot of really interesting behaviors that emerge when the incentives are more aligned between the developers and the community. You get crazy evangelists.”
• The Next Big Thing“After DeFi, it’s NFTs and DAOs. I’m a firm believer in that.Right now we're gathering tinder and I think the match that kind of sparks it will be this idea of earning a native governance token by simply playing game.”“… we believe in a future where work and play are kind of indistinguishable. We also believe in empowering players and giving them new economic opportunities.”
• Earning by Playing“This idea of being able to basically use an NFT DEX and then this idea of play to earn, I think those are the two most important benefits of a blockchain game. You see a lot of really interesting behaviors that emerge when the incentives are more aligned between the developers and the community. You get crazy evangelists.”“There are players that have earned in the hundreds of ETH with some of these more complex collecting strategies, arbitrage trading, market-making. So it's not just about people grinding it out $5 an hour at a time. There's also kind of more complex and detailed opportunities.”
• The Next Big Thing“After DeFi, it’s NFTs and DAOs. I’m a firm believer in that.Right now we're gathering tinder and I think the match that kind of sparks it will be this idea of earning a native governance token by simply playing game.”
• Gaming in Developing Nations“I think play to earn, even though it's slow and at a small scale, is making a difference for people in some of these developing countries. They have a lot of passion for the game.”
• Scaling “We're working on something called Ronin, which is basically an Ethereum sidechain, fully compatible, fully EVM compatible, application-specific.”“High gas actually benefits Axie relative to other projects, because you're actually able to earn money by playing the game, so the gas prices are just a cost of doing business.”

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About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.