The Play-to-Earn Gaming Revolution
The Gaming Industry is estimated to become a 250 billion dollar market by 2025 [1]. Millennials on average spend over $100 a month on games and in-game purchases [2]. Apart from the experience of playing, gamers receive very little in return. The absence of positive monetary outcomes for casual gamers in the conventional game economy have led to a wave of Play-to-Earn (P2E) games leveraging cryptocurrency and non-fungible tokens (NFTs) to reward their players monetarily for in-game achievements. Whilst still early, these games promise to solve many of the industry’s challenges. This article will describe some of the current frustrations felt by gamers, explain how P2E gaming works, and highlight some of the most popular P2E games.
The Problem
American gamers spent an average of 16.5 hours a week playing video games in 2021, an increase from previous years likely influenced by the Covid-19 pandemic [4]. Despite this, gamers rarely receive any form of monetary reward for their time playing. They can still monetise their gameplay by sharing it on video streaming sites, however, this comes with the extra set-up cost and is wholly dependent on their success.
Game franchises experience incredible brand loyalty from players, who will buy annual versions of a game despite the gaming studio making little to no changes to the gameplay. Each edition requires the player to start over again, often with little to show for the progress they have made in the previous edition, let alone the money they might have spent on in-game items or currency. It is possible in some cases to buy and sell in-game items or currency, however, this is normally frowned upon by game creators and can lead to permanent bans [5]. More to the point, old games’ items and currencies can lose a lot of value when the new version of the game is out.?
P2E Gaming
Play-to-earn games reward players monetarily for playing their game, and also include decentralised finance mechanisms such as staking and liquidity mining. NFTs feature a lot as characters or usable items. Adding the blockchain element into gaming transforms in-game items and characters into real monetary assets which can be traded. These NFTs are ‘put to work’ by the player to complete quests or battle against other players, with the expectation that the character will generate revenue along the way. Players can level up their characters to become more valuable or even ‘breed’ with others to create new NFTs. This creates a rich game economy with many different revenue-generating opportunities.
With this being said, a play-to-earn game requires multiple types of players to balance the economy. Investors, casual players and high-level/professional players are all essential to making a healthy game economy.
Play-to-earn gaming is popular with cryptocurrency investors, likely due to the hype of large P2E games such as Axie Infinity and DeFi Kingdoms (pictured above), which combined are worth just under $2.4 billion in ecosystem value [6]. New projects are able to leverage this hype with expensive and promising mints (the initial sale of NFTs to players), which can sometimes lead to under-delivery and disappointed investors.[7]
With this being said, P2E games are currently revolutionising the idea of labour in some parts of the world. These games are accessible with just an internet connection and a mobile, which has incentivised individuals from low-income countries, especially those in economic turmoil, to play P2E games as a way to provide for their families [8].
Current P2E Market
The Gamefi market boomed in 2021, aided by a significant increase in Venture Capital (VC) investment. Networks such as Binance Smart Chain (BSC) and Solana have raised nine-figure sums for investment into play-to-earn gaming, backed by some of the largest and most influential VCs in the space [9][10].?
DeFi Kingdoms and Axie Infinity are the two largest P2E games currently by total ecosystem value. Axie infinity itself has 2.8 million daily users [11]. The vast majority of popular P2E games are on low fee networks such as Polygon and BSC. Axie Infinity struggled with high transaction fees and slow confirmations which came with the Ethereum network. This led the company behind the game, Sky Mavis, to create their own network on top of Ethereum, which to date has improved the game’s functionality [12].
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Conclusion
P2E gaming presents a solution to traditional gaming markets, where players aren’t rewarded proportionately for their time and money spent. As well as this, new gamers are entering the market, seizing upon the opportunity for anyone with an internet connection to earn money whilst playing games. Large investments continue to be made in the Gamefi industry, which looks to break its own records of total users and revenue in 2022.
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