For every 10 SLP burned, 2 SLP will be issued to the redemption and stability fund. We have allocated 60,000 USDC to the Stability Fund.
Modern central banks target 2% inflation. We will target 2% deflation of SLP.
Why do we do this? The goal of the program is to create a steady and consistent source of demand for SLPs and balance supply and demand.
Smooth Love Potion (SLP) has been a key asset in the Axie ecosystem for a long time. This is a topic of fundamental importance within Lunacia, so before going into more detail, please refer to Tales of Lunacia and learn more about SLP.
In the old days, it took a very long time for Axi eggs to hatch. This incubation period results in lower hatch rates because any small problem can mess up the eggs. Breeding can be a very stressful period for all axie parents, filled with anxiety and fear as they wait for the eggs to develop. When Axies parents lose their eggs, their hearts will be shattered.
To overcome this weakness, the now famous Lunasian alchemists created the following serum: gentle love potion. A concentrated dose is injected very carefully into the egg. Only highly specialized incubation specialists should manage SLPs! If you do it wrong, the egg may break and cause a lot of trouble! Serum provides nutrients to the axis embryo while also increasing the resistance of the egg. But most miraculously, the incubation period is shortened dramatically! Serums are now administered by Axi Alchemists throughout Lunacia.
Many people cite SLP as the reason why Lunacia has such a rich axie population. If you think about it, without it the axie might have been an extinct species with a low birth rate! The scarcity of SLPs can fluctuate. Sometimes they are abundant throughout Lunasia. However, SLP requires very specific ingredients and there have been certain times in history when weather conditions, wars, lunar cycles and pest infestations ruined crops of the very special herbs needed to make serums.
During this season, serum may become scarce or diluted. Sometimes, depending on the number of eggs or hatching eggs at any given time, your monthly supply may be low! Sometimes there is an overabundance and it expires. Axie Alchemists are always working hard to create the right supplies for each period.
Over the past six years, we have learned a lot about how to build and manage the digital economy. Throughout this journey and covering multiple tokens, we have discovered that most ERC20 tokens fall into one of two categories: reward currencies and value generation tokens.
The task definition is:
Reward Currency: Values are relatively stable. It can be released quickly while the game is in development. Ultimately there has to be some balance with supply. Deep liquidity is required. Transparent distribution is needed. It requires tremendous usage and speed (transaction speed). This is how we view SLPs.
Value generating tokens: Value accruing tokens are designed to increase value based on the value of the network. Work must be coordinated across all network participants, not just the core team. It must be released wisely in a way that directly impacts player engagement, growth, protocol revenue, research, product development, etc. AXS is Axie’s value-generating token. RON is the value-generating token of the Ronin Network.*
Based on this definition, we plan to release an SLP monetary policy update targeting a long-term deflation rate of 2% based on two principles.
Why do we do this?
The goal of the program is to create a steady and consistent source of demand for SLPs and balance supply and demand.
Sudden winter frosts destroyed large quantities of key ingredients needed for SLP brewing.
Effective immediately, it limits SLP supply to 44 billion. These limits are enforced through social contracts and in-game emission mechanisms. This is to prevent the need for all SLP holders to migrate to a new contract, which could have many negative implications.** Current SLP supply is ~41.4 billion.
We chose $44 billion to ensure that the limit is within 10% of current supply while providing some buffer in case larger emissions occur over a period of time. Last year SLP was very deflationary. More than three times more SLP is burned than minted. In fact, the 2023 SLP exceeded the 2% target and was actually 2.8% deflationary. This can be easily observed in the data below.
Source: axie.tech
We realized that despite SLP being one of the most deflationary tokens in cryptocurrency, the lack of restrictions was hindering the understanding of market participants and community members. In fact, SLP is over 10 times more deflationary than ETH.
Effective immediately, for every 1 SLP burned, .2 SLP will be transferred to a wallet managed by the core Axie Infinity team. We also seeded this wallet with 60,000 USDC. This covers an operating period of approximately one year.
This SLP is used to target a 2% deflation rate.
At the end of each month, a simple calculation is performed to determine whether to sell SLP for USDC, hold it, or redeem SLP using USDC. During the experiment, your monthly “clip size”, i.e. the amount you will trade on a monthly basis, will be $5,000.
Here’s how it works:
If the annual SLP deflation rate in a given month is less than 0% (i.e. there is inflation), USDC will be used to redeem SLP.
Thank you for participating in this huge experiment with us. Together, we have pushed the boundaries of what is possible in the digital economy. We will continue to monitor the above policies and update them based on data, community feedback, and technological advancements.
We will monitor our community forums for feedback and provide clarification as needed.
* Thanks to 0xHeimdall. This definition was inspired.
* * We have put in place a tracking mechanism to alert you to possible breaches of our 44B supply and have put in place measures to stop emissions in such cases.
