What Was the Axie Infinity Scholarship Model, and Why Did It Collapse?

29 September 2026

The Axie Infinity scholarship model was a lending arrangement where asset owners loaned NFT teams to players in exchange for a share of earnings. It collapsed because the economic assumptions that made it profitable - rising token prices, low breeding costs, and constant new player demand - all reversed at once.

How the scholarship model worked

Axie Infinity is a game where you need three Axie NFTs to battle and earn Smooth Love Potion (SLP) tokens. In 2021 - 2022, each Axie cost hundreds of dollars. Most people in developing countries could not afford that entry price.

A scholarship was a simple agreement:

1. An investor ("manager") bought three Axies.
2. A player ("scholar") played the game using those Axies.
3. Earnings were split - typically 70% to the scholar, 30% to the manager.
4. The scholar never owned the Axies. The manager kept them in their own wallet.

Managers also had to pay breeding fees and gas costs to transfer SLP to scholars. These costs cut into the manager's share.

Why it looked profitable at first

In early 2021, SLP was worth around $0.20 - $0.30. A good scholar could earn 150 - 200 SLP per day. That meant a scholar's daily payout was roughly $21 - $42, while the manager got $9 - $18 with zero work beyond the initial investment.

Breeding new Axies cost SLP and Axie Infinity Shards (AXS). At that time, breeding was cheap relative to the price of selling the offspring. Managers could recover their investment by selling one or two bred Axies, then keep the rest as a permanent income stream.

New players joined constantly, which increased demand for both Axies and SLP. That pushed prices higher. It looked like a self-sustaining loop.

The Cracks Appear

The model depended on a chain of assumptions:

• SLP price would stay high or rise.
• The number of new players would keep growing.
• Breeding costs would remain low enough to produce new Axies profitably.
• The game's token sinks (ways to remove SLP from circulation) would keep up.

None of those held.

Why it broke down

SLP Inflation

Scholars earned SLP every day. Most sold it immediately for their local currency because they needed the income. Managers also sold SLP to cover breeding costs or take profits. The game had too few ways to burn SLP - upgrading Axie parts cost SLP, but the amounts were tiny compared to daily emissions.

By late 2021, SLP was being produced faster than it was consumed or held. The price began to fall. At $0.10, a scholar earned $15/day instead of $30. At $0.05, $7.50. The game had no mechanism to cut scholar earnings when the token price dropped.

Player Saturation

Axie Infinity's popularity peaked at around 2.7 million daily active players in November 2021. After that, the number declined. Fewer new players meant less demand for Axies to start playing. Axie floor prices dropped. Managers could no longer sell bred Axies for a profit.

Rising Breeding Costs

The game's developers increased the AXS and SLP costs for breeding over time. This was meant to slow Axie supply growth, but it also squeezed managers. When Axie sale prices fell below breeding costs, no manager would breed. That removed the main SLP sink.

The token price collapse

SLP fell from its $0.35 peak to under $0.01 by mid-2022. A scholar earning 150 SLP per day was making $1.50. After the 70% scholar share, that was about $1.05 per day. For many scholars, that was below the minimum wage in their country. They quit.

Managers saw their income drop to cents per day per scholar. Managing hundreds of scholars became a burden with no profit. Most dissolved their programs.

The ronin bridge hack

In March 2022, the Ronin bridge lost $620 million in an exploit. This froze Axie Infinity's sidechain for weeks. Players could not play. The price of AXS and SLP dropped further. While scholars and managers eventually recovered their assets, the event destroyed trust and accelerated the exodus.

What the collapse reveals

The scholarship model was not a sustainable business. It was a bet that token prices would keep rising forever. When that bet failed, the model had no backup.

Key lessons for anyone considering a similar setup in another game:

• Token emissions must match token sinks. If earning tokens is easy but burning them is hard, the token will inflate to zero.
• Player growth is finite. No game attracts new players indefinitely. When growth stops, asset prices fall.
• Scholars have no loyalty. They will leave the moment earnings drop below what they can earn elsewhere. The model cannot retain them.
• Managers bear all the risk. They buy the NFTs, pay the fees, and absorb the depreciation. The scholar walks away with nothing lost.

No play-to-earn game has solved these structural problems. Most scholarship programs that followed Axie's model - in games like Pegaxy, Thetan Arena, or Crabada - collapsed for the same reasons. The model worked only while the game's economy was in a speculative bubble. Once the bubble deflated, the model had nothing left.

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