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Axie Infinity, a monster-battling NFT game, has been gaining a lot of traction with over $600 million Axies bought and sold in the past month. Each Axie is a non fungible token, or NFT, minted on the Ethereum (ETH) blockchain. Similar in theme to Nintendo’s Pokemon series, Axies come in different rarity types, with varying strengths and attributes, with the strongest fetching very high prices on the game’s marketplace. Players earn Smooth Love Potions (SLPs) by completing daily quests, defeating monsters, and battling other players in arenas with their Axies. SLPs can then be sold in exchange for various cryptocurrencies.
Due to the high initial cost of buying/borrowing/breeding Axies, in-game guilds have formed as of late to fund players’ upfront expenses, or offer scholarships, in exchange for their SLP earnings as they play. One such in-game guild is Singapore-based Crypto Gaming United, or CGU, which has close to 100,000 Discord users and regularly looks for new scholars in the official Axie Infinity Discord.
In a statement sent to Cointelegraph, Sergei Sergienko, co-founder of CGU, explained that players are not required to pay anything to start playing. Instead, CGU funds all characters/NFTs costs via a scholarship, which can amount to $4,000 per player. What’s more, CGU provides education and mentoring for its partnered players to enhance their cryptocurrency knowledge and gaming skills. In exchange, CGU takes a 50% commission on players’ earnings, some of which are issued to investors of the CGU token; afterward, 5% of earnings go to local management in countries that CGU operates in, with players keeping the remaining 45%. In addition, the company is currently trialing a “pension plan” of 3% to 5% for its players as a social security initiative.
According to Sergienko, top players earn up to 680 SLPs per day on a net basis (after CGU’s cut). The game time for top players is around six hours daily. Meanwhile, players on the lower end of the earnings can make approximately $120 for 60 hours of play each month. Even this amount surpasses the minimum wage for full-time work in countries such as the Philippines and Russia on a pro-rated basis, where Axie Infinity is very popular. CGU claims to also attract many Axie players from Cuba, Venezuela, Turkmenistan, Myanmar, and African nations.
I’ve been tracking the income of my Ghanaian players over the past 4 months and this is the average income per month of them playing #AxieInfinity.
I don’t know about ending world hunger, but play-2-earn has proven to be an extra stream of income.
_#AxieAfrica $MC #crypto $axs https://t.co/6mjniAUrdA pic.twitter.com/V3wkJRIdt0
— Saharan-sub (@godwin_france) November 3, 2021
In addition to focusing on play-to-earn gaming, CGU also operates crypto-freelancing platform LaborX. A collection of stories and testimonies from players partnering with CGU can be found on its website. With regards to long-term development for the CGU guild and its players, Sergei had the following to say:
We also realize that play to earn may well be a passing phase, and as such, we are looking at the greater opportunities for all our people. We are hiring scholars with a view of what may happen after the hype. Having a freelancing platform and a massive education experience helps us with that.
In an interview, Do Kwon, co-founder and CEO of Terraform Labs, said that Terra’s ecosystem was built with several use cases such as savings, payments, investments and others that leverage its stablecoin assets. The previous Market Insights newsletter tackled Terra’s ecosystem growth in 2021 and how it got to hundreds of decentralized applications from just two at the beginning of last year.
And all of it is grounded on Terra’s stablecoins and the protocol’s ability to maintain the stability of their peg. Yet the key ingredient for such stability is its primary staking asset, LUNA. On the surface, investors got to know LUNA because of its rapid price rise in 2021, but according to the project’s white paper, owning and holding LUNA is meant to represent something entirely more foundational to the stability of the entire network.
Terra is a Tendermint-based blockchain maintained by validators who follow the Tendermint delegated proof-of-stake algorithm and vote on new blocks. Validators run programs called full nodes and are required to stake a certain amount of LUNA tokens to be included in the active validator list, which is made up of 130 validators at the moment. Active validators earn revenue via the transaction fees associated with each block.
Those who prefer not to set up full nodes but want to get a share of the validator’s revenue are called delegators. Delegators are fundamentally stakers who delegate their LUNA tokens to validators in order to increase the weight of staked LUNA. Essentially, LUNA represents the mining power in the Terra network, and the more its economy grows, the more LUNA stakers earn in rewards from fees.
Another critical role of LUNA is maintaining its stablecoin peg. As mentioned, Terra’s stablecoins follow an algorithmic market module, which means the protocol adjusts its supply automatically based on the market’s condition. The protocol is able to achieve this through open market arbitrage incentives.
Take the scenario of 1 TerraUSD (UST) trading above the $1 peg. LUNA holders, in this case, can swap $1 worth of LUNA using the market swap feature of Terra Station and sell it for 1 UST. Then, users can sell this for its equivalent dollar value and profit from the difference. In this regard, the protocol effectively decreases the supply of LUNA and increases the supply of UST, which, with enough volume, could eventually pull it back down to $1.
On the flip side, when the price of UST goes below the $1 peg, the protocol incentivizes users to burn UST in exchange for LUNA. This expands the LUNA supply and reduces UST, driving its value back to $1. The volatility in UST’s price is, therefore, absorbed through the minting and burning of LUNA tokens. So far, the market has been able to respect the peg even at times when it went as high as 30% from $1. In a year, UST deviated from its peg at an average of about 4%.
With these considerations, it is understandable how crucial LUNAs role is in the Terra ecosystem and how equally important it is to keep mining demand steady. However, Terra is designed in such a way that fees generated from blocks increase along with the expansion of its ecosystem and vice versa.
Moreover, the supply of LUNA also shrinks when the Terra network grows since its supply is reduced from minting UST. Because of this, mining rewards would not be as predictable, which could discourage users from staking LUNA since it would make profitability difficult to determine.
The protocol’s solution is to make the mining rewards more predictable regardless of whether Terra is in a period of contraction or expansion. It uses stability levers in the form of transaction fees and “seigniorage” (or the amount of LUNA burned) to achieve this.
For instance, when mining rewards are decreasing, indicating a contraction period for Terra’s economy, the protocol kicks up the LUNA burn rate and increases the fees. This makes LUNA stakers less inclined to abandon staking LUNA altogether.
Prior to the Columbus-5 upgrade last year, seigniorage was directed to a community pool to foster more adoption during expansions. Now, all seigniorage are burned, simplifying the economic design of Terra where minting 1 UST means burning $1 worth of LUNA. All fees are also rerouted to staking rewards for LUNA, making staking more attractive as a long-term commitment.
Terra’s creation of decentralized money with a dependable and stable value has encouraged further innovation on its platform. Cointelegraph Research’s upcoming report will take a deeper look at Terra’s ecosystem, design, community, and a whole lot more. Stay tuned!
Cointelegraph’s Market Insights Newsletter shares our knowledge on the fundamentals that move the digital asset market. The newsletter dives into the latest data on social media sentiment, on-chain metrics and derivatives. We also review the industry’s most important news, including mergers and acquisitions, changes in the regulatory landscape, and enterprise blockchain integrations. Sign up now to be the first to receive these insights. All past editions of Market Insights are also available on Cointelegraph.com.
A top special agent from the Internal Revenue Service has told a conference that NFTs and crypto are the “future” but highlighted that fraud and manipulation is still rampant in the space.
Ryan Korner from the IRS Criminal Investigation’s Los Angeles field office made the comments virtual event held on Tuesday by the USC Gould School of Law, Korner. Bloomberg reports Korner said:
“We’re just seeing mountains and mountains of fraud in this area.”
He told the event the IRS CI division acknowledges the significant growth of the crypto sector, but noted that the usage of digital assets has not been limited to payments and trading. He outlined various illicit behaviors such as fraud, including money laundering, market manipulation and tax evasion.
Korner highlighted market manipulation in particular, pointing to high-profile investors having the ability to sway asset prices with a single Tweet.
He spoke about the involvement of celebrities in the space, perhaps thinking of examples as Kim Kardashian and Floyd Mayweather — who recently got into hot water over promoting an allegedly fraudulent token dubbed EthereumMax. Korner said:
“We’re not necessarily out there looking for celebrities, but when they make a blatant or open comment that says ‘Hey, IRS, you should probably come look at me,’ that’s what we do.”
During the event, Korner stated the reason the division was actively training and educating its agents on crypto and NFT regulation, was because “this space is the future” and wasn’t going anywhere.
Korner also stated that the IRS has collaborated with other federal agencies, including the Justice Department to “make sure everyone is on the same page and staying ahead of the criminals,’ he said.
IRS investigators seized $3.5 billion worth of cryptocurrencies tied to financial crimes during the fiscal year 2021. This accounted for 93% of all the assets seized by the division in that time frame.
“IRS CI ended the year with 80 cases in its inventory that it was still actively working on where the primary violation was tied to crypto,” Korner said.
Turkish President Recep Tayyip Erdoğan and ruling Ak Party officials met earlier this week to discuss the metaverse, with the president calling for comprehensive research on the subject.
Erdoğan has reportedly urged the Ak Party to study the metaverse, cryptocurrencies, and how transactions are made using them, according to a Daily Sabah report.
At a meeting on Jan. 25, party leaders were instructed to research the phenomenon with significant ramifications for the future. The economic aspects of the metaverse, cryptocurrencies, and social media are anticipated to be addressed at a forum that will be subsequently be organized by the ruling party.
In Turkey, the metaverse is gaining interest. According to some reports, thousands of virtual territories in Turkey, most of which are located in the historic former capital of Istanbul, have already been purchased in game-based metaverse platforms.
— AK Parti Bilgi İletişim Teknolojileri (@AKbilgitek) January 17, 2022
As Cointelegraph reported, the Turkish government recently met in the metaverse to discuss cryptocurrency legislation. Grand National Assembly of Turkey chairman Mustafa Elitaş then said, “I believe that metaverse-based meetings would be improved expeditiously and become an essential part of our lives.”
While the Turkish government is open to blockchain technology, metaverse and a state-issued digital currency, President Erdoğan is notorious for his harsh opposition to cryptocurrencies. Last year, during a public Q&A session, he “declared war” on cryptocurrencies, implying the country had no interest in adopting them.
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