What is Axie Infinity?
Over 450,000 people a day play Axie Infinity, a virtual game where players raise and collect digital pets— or Axies— battle their Axies, buy land, exchange goods in a marketplace, and explore digital nations. Axie is designed to distribute the profits and assets earned in the game to its players and allow them to exchange those assets for other stores of value, a more equitable approach than other online games where any assets earned are trapped within the game world. Combined with the functionality of “play-to-earn”—e.g. players can earn useful tokens such as SLP (Smooth Love Potion) or AXS (Axie Infinity Shards) by winning battles— players can create real value by playing Axie and exchange their rewards into assets that can be used outside of the Axie world.
Axies are non-fungible tokens (NFTs) themselves and can be sold or exchanged with other players, as well as “bred” up to seven times if the player pays enough SLP and AXS. Currently, the Axie Marketplace deals in ETH, not Axie’s own tokens, but the project’s intention is to evolve to deal in their own currencies as well. When users spend AXS to breed Axies, those tokens are sent to the Axie Treasury, but when SLP is spent on breeding Axies, that SLP is burnt (i.e. removed from the ecosystem.)
Axie Infinity was created by Sky Mavis, a game development company whose team is primarily based in Vietnam. Sky Mavis not only leads the development of Axie, but also complementary infrastructure such as the Ronin network, an Ethereum sidechain built by Sky Mavis specifically for Axie Infinity. In October 2021, the Sky Mavis team raised $152 million in a Series B venture round led by Andreessen Horowitz to fund further development of Axie Infinity.
What is AXS?
Axie Infinity’s virtual economics involve two ERC-20 tokens, Smooth Love Potion (SLP) and Axie Infinity Shards (AXS). AXS has, and will continue to add, more functionality and uses than SLP, which is simply used to pay for breeding Axies and burned after spent. AXS will eventually be a means by which Axie community members and players can participate in Axie governance and earn staking rewards (roadmap here.)
AXS tokens were created in November 2020 to help deliver on the team’s mission to more equitably distribute the potential financial opportunity of Axie Infinity to its community of players. The value of AXS is closely tied to the popularity of Axie Infinity but AXS can also be traded on public exchanges independent of the game. There is a max supply of 270 million AXS tokens, with a multi-year distribution schedule involving staking rewards, play-to-earn rewards, and spending from the ecosystem fund, with more governance of the treasury being slowly delegated to AXS holders.
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Wealthsimple has performed an assessment of whether AXS can be supported by Wealthsimple’s platform, including whether AXS is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.
We evaluated AXS based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of AXS, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Axie Infinity;
- The supply, demand, maturity, utility and liquidity of AXS;
- Material technical risks associated with AXS, including any code defects, security breaches and other threats concerning AXS and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them;
- Legal and regulatory risks associated with AXS, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of AXS; and
- Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether AXS, or generally about whether the type of crypto asset, is a security and/or a derivative.
Wealthsimple monitors ongoing developments related to crypto assets available on its platform for significant changes that may affect Wealthsimple’s original assessment of those assets, including Wealthsimple’s assessment of the application of securities and derivatives laws. Any significant changes relating to AXS may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support AXS.
Like all other crypto assets, there are some general risks to investing in AXS. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Please review the Wealthsimple Crypto Product Risk Disclosure for additional discussion of general risks associated with the crypto assets made available through the platform.
Additional Risks / Information
AXS has elevated regulatory risk. The United States Securities and Exchange Commission (SEC) has alleged that AXS is a security under U.S. federal securities laws in one or more enforcement proceedings pending before U.S. courts against crypto trading platforms. None of the Sky Mavis team are parties to this proceeding, and the U.S. courts have not determined that AXS is a security. In the event that a U.S. court determines that AXS is a security or there are other material developments affecting the treatment of AXS under securities laws, Wealthsimple may cease to support AXS and/or the market for AXS may be adversely affected.
As the founding team, Sky Mavis, continues to play an important role in ongoing development of Axie Infinity, fixes to any issues or bugs with the game’s operations may be dependent on the Sky Mavis team. AXS also presents higher short history risk because it has only been operational since November 2020, and its value is tied to the popularity of Axie Infinity which could unexpectedly see a drop in active players.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading AXS. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
Wealthsimple is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Investments Inc. dated December 18, 2023 (the Decision).
The statutory rights of action for damages and rescission in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under securities legislation of other jurisdictions of Canada, do not apply in respect of this Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
Last updated: January 1, 2024