Cryptocurrencies can be a hard to understand. Many crypto websites are laden with jargon and so much technical terminology that it turns off potential investors. 

But there's a coin based on something that more than 1 billion people around the world already understand: video games. That's right, there's a cryptocurrency called Axie Infinity Shards, or AXS (CRYPTO:AXS), that users can earn when they play an online video game called Axie Infinity. Axie Infinity is the brainchild of Vietnam-based developer ​​Trung Nguyen, who launched the game in 2018 and co-founded the game developer company Sky Mavis.

We'll get into the nitty-gritty reasons why AXS is so unique shortly, but two of the most important things potential investors should know about this cryptocurrency is that it's earned by playing the Axie Infinity game, and that it can be exchanged for real money.

The game uses non-fungible token (NFT) monsters that can be bought, sold, traded, and bred to battle each other and earn digital tokens. The concept may seem a little crazy, but Sky Mavis has already attracted well-known investors such as billionaire Mark Cuban. 

Axie Infinity has exploded in popularity, with daily active users skyrocketing more than 5,000% in just six months currently.  

Let's take a quick look at three reasons crypto investors should keep an eye on AXS. 

Axie Infinity creatures on a blue background.

Image source: Axie Infinity.

It was early to play-to-earn blockchain gaming

Axie Infinity is built on the Ethereum blockchain, and although it's not the first game to be built on this type of technology it's certainly one of the largest and fastest-growing. In April 2021 the game had 38,000 daily active users, but just six months later the company boasts more than 2 million daily players and counting.  

The popularity of the game could give Axie Infinity an advantage over other crypto-based games that are sure to come along. More important, many players have invested not just time, but also some of their own money to buy Axies, the creatures players use in the game. Having money at stake could deter players from quickly jumping to a new crypto game. 

Axie Infinity is well funded 

Crypto investors might also be drawn to Axie Infinity because the company has been very successful at raising money. 

In May 2021 the company raised $7.5 million in its Series A funding round, with big names such as Cuban and Reddit co-founder Alexis Ohan among the investors.  

The company's Series B funding round, completed earlier this month, raised a staggering $152 million, led by Silicon Valley venture capital firm Andreessen Horowitz. The latest round gives Sky Mavis a valuation of about $3 billion.  

Sky Mavis, like any small fast-growing start-up, needs cash to keep growing, and the company's recent infusion means that it should be able to stick to its expansion plans. 

The company has racked up huge NFT sales 

One of the most important aspects of Axie Infinity for investors is that the company has created the second-largest marketplace for NFTs, which are unique digital representations of ownership of videos, music, art, and gaming figures. 

Axie Infinity players can buy, sell, earn, trade, and breed their Axie creatures, which has created a burgeoning market for these digital collectibles. To date, $2.5 billion worth of NFT sales have occurred through Axie Infinity. 

That's a staggering amount, accounting for nearly the same amount of sales from the next two NFT marketplaces combined, according to Dappradar. 

There's no telling how big the NFT market will get or where it's going. After all, NFTs didn't even exist a few short years ago. But the early success of Axie Infinity shows that there's certainly a lot of money to be made from digital collectibles -- and that none are worth more right now than Axie Infinity's NFTs. ​

Keep this in mind before investing

Although Axie Infinity is a truly intriguing play in cryptocurrency, investors should keep in mind that investing in any coin right now comes with a lot of uncertainty.

Valuations tend to be very volatile and can often rise and fall on little, or sometimes no, news. AXS tokens have experienced huge price swings in the past, and could certainly see similar moves in the future.

Additionally, Axie Infinity's token could be vulnerable if interest in buying and selling the company's Axie NFTs drops off. If collectors shift their attention to other NFTs, investors could lose interest in the company's AXS coins. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.