NFT games, like Axie Infinity, move economy during the pandemic

extra income in tough times

Many of the players adopted the game in order to secure a monthly income amid the social and economic crisis accentuated by the Covid-19 pandemic.

Hamilton Dangel, 31, started playing Axie Infinity after becoming unemployed in the midst of the pandemic.

Because of the game, created a canal no YouTube in which it shares tips for new users. “Axie Infinity has been my job and my primary source of income. I got to know the game because of a friend, who invested around R$ 10 thousand. With the income I got, I also started investing in other NFT games”, he says.

Like Dangel, Diogo Ferreira, 39, a game designer and partner at SLP Hunters, started playing Axie because of the quick payback potential the game presented. “It’s the most expensive game I know and that’s why I consider it not just fun, but a business and an investment,” he said. After four months at Axie Infinity, Ferreira says he reinvested all the profit he raised.

And the regulation, how is it?

Before talking about the regulation of NFT games, it is necessary to first reflect on the regulation of cryptocurrencies as a whole, explains Raphael Souza, a lawyer specializing in cryptocurrencies.

For him, in addition to the difficulty in taxing this technology, there is also a need to deal with an eventual labor relationship proposed by the scholarships. “Depending on the requirements and contracts, it can be classified as a close working relationship”, he points out.

On the tax side, the Federal Revenue Service requires that the possession of cryptocurrencies above R$ 5 thousand be reported in the Income Tax.

In addition, since August 2019 the operations involving cryptocurrencies in Brazil must be reported to the federal agency.

O report it is done directly by exchange agencies. For operations outside the Brazilian exchanges, the investor himself must report for transactions above R$30,000 per month and pay taxes if the amounts traded exceed R$35 thousand reais per month.

Also according to the Federal Revenue, Brazilians moved R$ 127 billion in cryptocurrencies in 2020. During the period, 445,000 individuals and about 6,000 companies reported transactions with virtual currencies.

For Souza, it is important that investors and players follow two simple guidelines when starting to invest in crypto and NFT games: “Don’t invest in what you don’t know, study. And it’s important to research the brokers that have the lowest rate of complaints. You can check this in Reclame Aqui, for example”, he says.

In other countries, regulation is also starting to be ruled. In September of this year, China decided to prohibition cryptocurrency mining across the country. After the announcement, bitcoin, the world’s largest cryptocurrency, dropped 5%.

In a decision similar to China’s, Nigeria decided to ban financial institutions from processing bitcoin transactions.

Recently, the country’s government launched the eNaira digital currency, which is issued by the country’s central bank and is subject to the exchange rate.

In the Philippines, one of the countries where Axie Infinity is most popular, profits from the game will be taxed;

Across the counter: investors

While quite eye-catching on paper, Axie Infinity also features its hotspots.

The game requires prior knowledge about the universe and trends in the cryptocurrency market. Also, the investment in a single account is high.

Now, for risky profile investors, NFT games can be attractive. That’s what 33-year-old lawyer and investor Luiz Felippe Quites explains. In June of this year, while still working at a law firm, he read a news story about the massive adoption of the game in the Philippines. Disbelieving in the period, he invested around R$ 6 thousand in an initial Axie Infinity account. Shortly thereafter, it allocated R$70,000 in new agency accounts for friends and family. More recently, he founded Khal Special Forces, an organization focused on eSports and NFT games.

At Khal Special Forces, around 700 people are hired to work with the Axie universe — and there is a waiting list for 2,000 people, says Quites.

All users are over 18 years old and have a signed agreement where 45% of the profit generated by the game is for the players, while the rest is split between the company and investors, but this is not a rule in all scholarships.

José Arthur, CEO of Coinext, a brokerage specializing in cryptocurrencies, says NFT games have led many unbanked adults in developing countries like Bangladesh and the Philippines to gain access to the world of cryptocurrencies. “There is an interesting social aspect in these countries. Including people who managed to exchange game currency for a fiat currency”, he says.

In Venezuela and the Philippines, there are stories that Axie Infinity’s SLP began to be accepted as a current means of payment.

But after all, is it a pyramid?

This is a question that surrounds the universe of NFT games and there are players who accuse the pyramid game among the hundreds of posts in the community on Facebook. That’s because, especially in scholarship schemes, there is usually someone at the “top” getting paid on top of other players.

For the accounting and finance professor at USP, Marcelo Botelho, there aren’t many similarities between the pyramid scheme and the Axie Infinity game.

For him, the main point that usually generates this type of reaction is the lack of understanding in relation to the dynamics of supply and demand presented. “The game’s valuation trend is due to the inflationary increase of more people entering. Every coin only has value when it is scarce”, he reflects.

In Brazil, Law 1521/51 defines that the pyramid scheme is usually sold as advantageous, promising surreal returns while attracting new investors. However, as soon as new applicators stop coming in, the system can start to collapse. Payouts stop and those at the top win based on the money invested from those who lost at the bottom—practices that seem far removed from that definition.

For journalist João Kamradt, the blockchain technology, which is used in the game, is safe because it contains all the information on negotiations. “For me, what scares people is that the money is not centered in a bank. Now, how can I control João’s money if part of my income comes from a token called gentle love potion [SLP, sigla para Smooth Love Potions]?” questions.

For experts, Axie Infinity has become a phenomenon for being the first game of its kind to “bomb” among young people around the world, but it won’t be the last. There are other NFT games that are already on the players’ horizon.

In addition, Andrew Wilson, head of Electronic Arts (EA), argued this week that NFTs and games that pay users to play are “an important part of the industry’s future.”