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The Axie Community Treasury & Progressive Decentralization
Let’s continue our dialogue on treasury governance… we offer a framework to move us forward.
Four years ago, we set out to build a new type of game— a game dedicated to the idea that players deserve ownership of their in-game assets as well as the universes they spend their precious time in.
As passionate gamers ourselves, we saw room in the world for a new kind of social contract between the participants within a gaming ecosystem. In this model, game players, designers, engineers, and creators work collectively under a set of aligned responsibilities and incentives. We think the world is long overdue for an approach that blurs the historic lines between builders and players: empowering all to create, grow, refine, champion, and benefit from the efforts of the collective. We also believe that these efforts need to be protected from co-optive middlemen (such as publishers, online game stores, etc) that limit access via their distribution channels.
In short, we believe that equitable communities are the foundation of our gaming future, and we are aggressively moving towards demonstrating their potential with Axie Infinity. We believe that this is the path towards creating gaming that’s longer lasting, more rewarding, and above all, more fun!
The Community Treasury
While there are a number of interrelated components to a truly decentralized gaming ecosystem, the focus of this update is on describing the way forward for governing the Axie Community Treasury, one of our foundational pillars. This is a pool of assets that has grown considerably (over 1B USD in value) due to Axie’s incredible community growth over the past year. We designed the Treasury to be under the direct influence of all holders of Axie Infinity Shards (AXS tokens). This means that in the future, we expect holders to govern how these resources are used. For example, they could be used to:
supplement token staking rewards
reduce the total long-term supply of AXS (ie, burning AXS).
replenish resources for current initiatives, such as gaming issuance or the ecosystem fund once they are depleted.
invest in new activities/initiatives that improve the overall community experience
resource councils or working groups to carry out strategically important projects
We’re very excited to embark on this journey around the use of Treasury funds, but it’s increasingly clear that we need to do a much better job of helping both our community and the world around us understand our long term vision for Axie Infinity and the Treasury’s role in support of it. It’s hard to govern what might be non-intuitive to understand. Additionally, there are many outstanding operational and legal considerations that need to be approached carefully. In short, we believe that unlocking this pool of capital before the community ecosystem is prepared will likely result in inadvertent long term harm to our above stated vision for Axie Infinity.
Therefore, when considering the overall governance of Axie Infinity and the Community Treasury, we think it’s important to practice progressive decentralization. What does this mean and what does the path towards unlocking the value in the Treasury look like?
The Progressive Decentralization Continuum
We define progressive decentralization as the deliberate, stepwise process we will undergo to enable active partnership/ownership with an increasingly broad set of community members. In short, we ultimately commit to fully empower any willing participant to contribute and benefit from their efforts within the Axie ecosystem. Hopefully, as you’re beginning to notice, we’re already experimenting with this in small ways. We need to unlock everyone’s collective potential, as meaningful contributions are only possible when those participants have the knowledge, experience, and supportive infrastructure needed to convert good intention into something valuable.
Early within a decentralization process, a few founding members have the primary responsibility for guiding the collective, building the product to collaborate around while also creating a process to enable a broader group to partner and watching for indications of community buy-in / progress. Late within a decentralization process, the collective has the primary responsibility to guide one another as everyone works to advance the community’s well defined mission by self organizing within a milieu of easy to understand expectations, conventions, and social norms. While we are passionately committed to this end state, many of the prerequisites needed to properly equip interested contributors don’t yet exist.
Why is this important? We want everyone to understand both our goal of full decentralization, and the process we’re undertaking to make this happen.
Jesse Waldron of the Variant Fund laid out a helpful framework to summarize the cascading stages of progressive decentralization. A quick review shows that we’re still in the early stages, working to establish Axie’s core “product-market fit,” which refers to a product that consistently grows and addresses needs at scale. One measure of product-market fit is weekly growth of at least 5%. While we have experienced periods of hyper-growth, we have not seen long-term sustainable growth rates of 5% weekly growth to date. Axie Infinity: Classic, released in late 2019, never left Alpha and we recognized the need to build a major overhaul of the battle system: Axie Infinity: Origin. Land gameplay of course, has not been released yet. In the words of Jesse Walden: “During <this early> phase, the only thing that matters is product-market fit. To move fast toward finding it, it’s important to avoid design by committee (or community!) A product needs opinionated leadership to test hypotheses and update assumptions quickly.”
As hopefully it’s apparent, we’ve established a core team to lead product development and oversee most decisions related to the progress of the game. This allows us to build and iterate quickly towards product-market fit. Hopefully you’ve also noticed that as time has passed, we’ve also started to seek direct input from the community around decisions such as gameplay and economic balancing. These attempts at engaging the community in decision-making are deliberately intended to get the community familiar with this growing engagement expectation, to learn how to best get input from large audiences, and to identify community members with exceptional interest in governance. This drum beat will only grow louder in the days to come.
Even if Axie’s core product-market fit was clearly established, we still have a large number of technical and social governance coordination challenges that have never been solved before. For example, while we understand that our community is excited to experience on-chain governance, there is still much research around this topic that needs to be conducted. Vitalik Buterin recently wrote about the challenges faced by the current community governance models in Web 3. To quote Vitalik directly:
“Small groups of wealthy participants ("whales") are better at successfully executing decisions than large groups of small-holders. This is because of the tragedy of the commons among small-holders: each small-holder has only an insignificant influence on the outcome, and so they have little incentive to vote. Even if there are rewards for voting, there is little incentive to research and think carefully about what they are voting for.
Coin voting governance empowers coin holders and coin holder interests at the expense of other parts of the community: protocol communities are made up of diverse constituencies that have many different values, visions and goals. Coin voting, however, only gives power to one constituency (coin holders, and especially wealthy ones), and leads to over-valuing the goal of making the coin price go up even if that involves harmful rent extraction.
Conflict of interest issues: giving voting power to one constituency (coin holders), and especially over-empowering wealthy actors in that constituency, risks over-exposure to the conflicts-of-interest within that particular elite (eg. investment funds or holders that also hold tokens of other DeFi platforms that interact with the platform in question).”
A quick scan of Snapshot.io shows just how primitive Web 3 voting infrastructure is. Even for the largest projects on the platform, voter participation is typically limited to hundreds.
When we do enable governance, we want it to be substantive and meaningful. We have not seen this from the current models and believe it will take some time to iterate and experiment towards a model that is airtight and has limits the potential for abuse. Fortunately, we’re learning a lot from community dialog, and we’re arriving at a collection of techniques that’ll help us address some of the concerns. For example, you might have seen us talk collectively about:
Implementing an “Axie score” as a modifier to weight voting. This means allowing one’s contributions to the ecosystem in addition to their AXS ownership amount to be taken into account. We are currently considering a non-transferable badge system that could allow us to build a robust system around this in collaboration with the community.
The creation of player-driven councils that ensure a variety of opinions and recommendations from specialists are used to inform the creation and structure of key proposals.
Quadratic voting: quadratic voting is a system where voters have limited voting power and must spend this power wisely. For example, staking AXS could cause non-transferable voting power to accrue to the staker over time and that voting power would be burned when used to effect the outcome on a proposal. This creates a market dynamic around voting.
Updating Governance Timelines
As it’s likely clear from the above, we have a lot of work to do. In retrospect, placing concrete dates on how we’d proceed with progressively decentralizing might have been misguided, given the evolving lessons we and the space around us are actively trying to learn. We want to move as fast as we can in this direction while protecting our vision, and we want your partnership in accelerating our pace. Perhaps as a framework to measure our progress, we’d like to share a set of phases and criteria for advancing towards full decentralization. Our hope is that it allows us to ground our community discussion, and serves as a call to action:
Phase 1: Product-Market Fit
The Sky Mavis team manages product development and makes key product decisions with feedback and input from the community.
AXS tokens are emitted through AXS staking according to the staking schedule.
AXS tokens are strategically emitted through the gameplay reward allocation.
Sky Mavis manages the ecosystem fund. It’s used to fund early experiments around grant programs.
Sky Mavis will begin the process of council formation around key topics such as gameplay balancing, economic balancing, and cultural development.
The Community Treasury sits dormant.
Governance experimentation with lightweight forums and minor proposals with an emphasis on product feedback (ie, trial voting, non-binding referendums, etc).
Gauge interest in various voting systems
Sky Mavis to research and explore options around commercial rights for Axies.
Criteria for Moving to Phase 2
An Axie game that has over 10 million DAU and average weekly growth rates of 5% for 6 consecutive months or 8 months out of 12 over a 12 month period.
Construction of a functional, easy-to-understand governance portal and process that avoids the pitfalls outlined earlier in this article.
At least 3 outside teams are building games with over 100,000 DAU on top of Axie Infinity outside of the core Sky Mavis team.
If these requirements are not met by the end of 2023, Sky Mavis will lead the formation of a steering committee or similar vehicle to discuss a path forward. Alternatives include hosting a virtual/physical governance summit and enlisting a 3rd party think-tank. We are also open to exploring any combination of these alternatives that gets us through this phase as quickly as possible.
Phase 2: Growth Stage
Certain key product decisions are made through a formal on-chain governance process. The parameters and rules of this voting process are iterated on and improved with experience.
AXS tokens are emitted through AXS staking according to the staking schedule.
AXS token emissions through gameplay scale as product market fit allows for higher reward issuance without pressure on the economy. This increases AXS ownership among the playerbase and decentralizes ownership of the network.
Sky Mavis manages the ecosystem fund with input and soft voting from the community. The fund is used for investments and grants that build vital goods, products, and educational tools for the Axie ecosystem.
Sky Mavis brings forward proposals around use of the Community Treasury.
Criteria For Moving To Phase 3
These criteria will be determined with community input during phase 2.
Phase 3: Community Governance & Ownership
The on-chain governance process around product adjustments and Community Treasury management begins to settle and become dynamic only through a formal amendment process.
AXS token emissions through gameplay scale as product market fit allows for higher reward issuance without pressure on the economy. Eventually, the gaming issuance will run out of tokens and need to be replenished through a combination of distributions from the Treasury and sponsors.
The ecosystem fund is likely fully deployed at this stage.
During this stage the gaming issuance allocation becomes fully distributed to the community.
Proposals related to the Community Treasury are opened up to the Community.
Possible drafting of an Axie constitution.
Four years ago, we set out to build a new type of game. A game that would help ensure that the future of the internet is open and owned by its users. To date, we’ve gotten closer to this goal. We’ve accumulated a number of victories and introduced Axie and Web3 to millions. We’ve also encountered complicated hurdles and roadblocks. We hope that this article has helped align the community around our thoughts on decentralization and the path forward for this community and our collective treasury.
Disclaimer: the framework above reflects our current thinking around the decentralization phases for Axie. Axie Infinity is a bleeding-edge game that incorporates unfinished, risky, and highly experimental technology. Development priorities, roadmap, and features are subject to radical overhaul based on research, traction, feedback from the community, and a myriad of other factors.