In a strategic move to fortify the Axie ecosystem's stability and bolster the role of Smooth Love Potion (SLP), significant updates to its monetary policy have been announced. These changes aim to redefine SLP's function within Lunacia, with particular emphasis on its role in the Axie universe.
The Origins of SLP
Before delving into the updates, it's important to understand the cultural and functional significance of SLP within Lunacia. Originating from the age-old tradition of incubating axie eggs, SLP emerged as a vital elixir, drastically reducing incubation times and bolstering axie populations. As a result, its scarcity during adverse environmental conditions, wars, or lunar cycles has always posed challenges, making its management critical.
The SLP Paradigm
Drawing insights from six years of navigating digital economies, SLP has been identified as a 'Reward Currency.' This categorization places it alongside tokens like $AXS for Axie and $RON for the Ronin Network, each playing a distinct role in value generation and network dynamics.
- Reward currencies: Value is relatively stable. Can be emitted rapidly during the birth of a game. Eventually must achieve some sort of balance with supply. Requires deep liquidity. Requires transparent distribution. Requires tons of usage and velocity (pace of transactions). This is how the team see SLP.
- Value accrual tokens: Value accrual tokens are designed to appreciate based on the value of the network. They must coordinate work amongst all network participants, not just the core team. Must be emitted wisely, in ways that directly impact player engagement, growth, protocol revenue, research, product development, and more. $AXS is a value accrual token for Axie. $RON is a value accrual token for the Ronin Network.
Reimagining SLP
The goal of this program is to create a steady and consistent source of demand for SLP and balance supply with demand. Here are the key policy updates:
1. SLP Supply Cap: A Protective Measure
Owing to unforeseen challenges, such as a winter frost affecting key ingredient crops, a definitive SLP supply cap of 44 billion has been set. This cap not only safeguards the asset's value but also fosters a more transparent understanding for market participants. Currently, SLP stands at approximately 41.4 billion, underscoring the strategic choice of the 44 billion cap.
2. SLP Buyback & Stability Fund: Ensuring Consistency
To ensure a consistent deflation rate of 2%, a buyback and stability fund has been initiated. For every SLP burned, a proportionate amount will be directed to a core Axie Infinity team-controlled wallet, supplemented with an initial 60,000 USDC for operational flexibility. Monthly assessments will determine whether SLP should be bought or sold based on its deflation rate against the target.
Operational Mechanisms
The intricate mechanics of this policy are rooted in clear-cut scenarios:
- Inflation Greater than 2%: SLP will be sold for USDC.
- Deflation Exceeding 2%: USDC will be utilized to buyback SLP.
- Deflation Between 0% and 2%: No immediate action required.
The evolution of SLP's monetary policy stands testament to Axie Infinity's commitment to fostering a robust and dynamic ecosystem. As the Axie community engages with these changes, the core team remains vigilant, ready to iterate based on data insights, community feedback, and technological advancements. As the web3 landscape continues to evolve, the Axie universe remains at the forefront, pioneering innovations that redefine the boundaries of web3 economies.
