Sky Mavis, developers of Axie Infinity, the popular blockchain-based game, has announced significant changes to its monetary policy regarding Smooth Love Potion (SLP), a key in-game asset.
The new policy introduces a supply cap and a dynamic buyback and stability mechanism aimed at stabilizing the digital economy and ensuring the long-term sustainability of SLP.
SLP Supply Now Capped
Sky Mavis has decided to cap the total supply of SLP at 44 billion. This decision, stated in its new blog post, comes in response to the need for a more stable and predictable digital economy within the game. The current supply of SLP is approximately 41.4 billion, making the cap a significant move to curtail future inflation.
Key Aspects of the Supply Cap:
- Enforcement through Social Contract: The supply cap will be maintained through in-game mechanisms and a social contract, thus avoiding the complexities of migrating to a new contract.
- Historical Context: Over the past year, SLP has been deflationary, with more SLP burned than minted. In 2023, the deflation rate was 2.8%, surpassing the targeted 2%.
In a tweet, Gabby Dizon, co-founder of Yield Guild Games, called this a major move for the SLP token:
Introduction of SLP Buyback & Stability Fund
A new buyback and stability fund has been introduced to maintain a deflation rate of 2% for SLP. This mechanism is designed to adjust the supply dynamically based on the actual deflation rate.
Mechanism of the Stability Fund:
- Fund Operation: For every 1 SLP burned, 0.2 SLP will be allocated to a wallet controlled by the core Axie Infinity team, initially seeded with 60,000 USDC.
- Monthly Adjustments: The fund will perform monthly transactions to either buy back SLP using USDC or sell SLP for USDC, depending on the deflation rate.
- Inflation (less than 0% deflation): SLP will be bought back with USDC.
- High Deflation (more than 2%): SLP will be sold for USDC.
- Within Target Range (0 to 2% deflation): No action will be taken.
SLP Price Reaction
Coingecko reveals SLP price increase by 16% in the last 24 hours and 7% in time of the announcement.
SLP Price to PHP
Token Classification in Digital Economies
The Axie Infinity team has outlined two main categories of ERC20 tokens:
- Reward Currencies: Like SLP, these tokens require stability, liquidity, and high transaction rates.
- Value Accrual Tokens: These tokens, including AXS and RON, are designed to increase in value with the network and coordinate work among network participants.
Sky Mavis emphasizes the experimental nature of these policies.
We will continue to monitor the policies above and update them based on data, community feedback, and technical advancements.
This is a developing story: SLP Price Increase As Axie Infinity Caps Supply to 44 billion
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