The gaming industry has always advocated inclusivity and equality, however, many games implemented a pay-to-play aspect which gave those with money an unfair advantage. The introduction of NFTs and blockchain technology in gaming have paved the way for play-to-earn games to establish themselves in the market and gain momentum.
Play-to-earn games have been surging in popularity in recent months, gaining traction beyond blockchain and cryptocurrency enthusiasts. For a nascent industry, recording close to a million unique blockchain game users in October 2021 was impressive. Look closer into the play-to-earn gaming model and its economies, and you will see why there is no stopping a revolution that is not just changing the landscape of work and play, but can be arguably the fastest redistribution of wealth history has ever witnessed.
Lee Lin Liew is the CMO at Decentral Games and was recently listed as one of the world’s top 50 BAME entrepreneurs by TechRound. Lee Lin is a seasoned technologist and growth strategist. She has held several advising and mentoring roles, driving growth for several blockchain applications and startup ventures. She is passionate about disruptive tech solutions in bridging socioeconomic gaps and improving quality of life.
Speaking to The Fintech Times, Lee Lin explores how play-to-earn can help less privileged members of society earn a living, whilst also analysing the developments of the metaverse and the knock-on effects this may have:
Play-to-earn games have been surging in popularity in recent months, gaining broader traction beyond blockchain and cryptocurrency enthusiasts. For a nascent industry, recording close to a million unique blockchain game users in October 2021 was impressive. Looking closer into the play-to-earn gaming model along with the economics, it’s clear to see a revolution that is redefining the work and play landscape with arguably the fastest redistribution of wealth in history to empower communities from all over the world.
Play-To-Earn As A New Source of Income
The pandemic has brought on instability and skyrocketing unemployment rates, exposing the downsides of neglecting economic inequality. To reduce poverty and reduce wealth disparities, governments typically execute redistributive policies such as progressive taxation and cash transfers. However, these methods are limited to individual countries and for some countries, the rates of redistribution are deemed too slow and small in impact to make a difference. In developing economies, especially those affected by turbulent political landscapes, resources funnelled towards redistribution programs are often insufficient and lagging behind in efficiency.
With many looking for urgent solutions to secure enough earnings to survive and feed their families, crypto gaming became a natural go-to. The advent of blockchain technology has facilitated a radical change in gaming’s business model, shifting the gaming industry from pay-to-play to play-to-earn. Play-to-earn gaming allows just about anyone from anywhere in the world to participate in earning crypto assets, which can then be exchanged for real world money.
Furthermore, there is no longer the need to wait for payouts at the end of the week or month, as crypto transactions are instant and crypto gaming payouts are often done on a daily basis. For a player from a developing country, the value gained from exchanging a crypto gaming asset, in the form of non-fungible tokens (NFTs) on any third-party exchange can easily be more than his or her daily wage. For example, a person who plays Axie Infinity as his or her main activity can earn around $2700, which is more than the GDP per capita for some countries, such as Vietnam and Indonesia.
The Rising Success of Play-to-Earn
The advent of blockchain technology has facilitated a radical change in the gaming business model which shifts the industry from pay-to-play to play-to-earn. In the past, traditional gaming has utilised pay-to-play or freemium models. Players who want to advance in the game, more often than not, have to spend money on better game features or in-game items. In 2020 alone, over $54billion was spent on in-game items. Furthermore, there is no real ownership of these items, which means that these in-game purchases can be taken away by the gaming company at any time. In contrast to traditional gaming companies which reap all the profits for themselves, the play-to-earn model creates a new economy from collecting revenue and redistributing these profits as rewards to players for their gameplay. Overall, money is going back to players instead of large corporations.
A prime illustration of the play-to-earn movement is Axie Infinity, a game where players collect NFTs in the form of cute, animated monsters called Axies and trade them to other players for cryptocurrency. In the past year, there have been over $2.7billion of Axie NFTs traded with over 350,000 daily active players on Axie Infinity. Notably, a majority of players are from developing countries, including the Philippines which makes up 40 per cent of Axie Infinity players. Many of these players earn daily rewards that are many times higher than their average minimum wages. Media outlets regularly report how many players’ lives have positively changed with earnings ranging from Php 20,000 to 60,000 every month.
In addition to collecting NFTs which players can sell on multiple platforms, gamers can also earn the games’ native currency. Players are encouraged to stake their native coins which often grants them the opportunity to contribute in governing their Decentralised Autonomous Organisation (DAO) treasuries. Through this contribution, they are given participation rights in the game’s governance-related decision making including revenue distribution and interest accrual on their investments.
With game developers, investors and players coming together to form a dynamic and engaging community, this enables an enriching virtual experience. The benefits of taking part in this community-driven ecosystem are multifold for the stakeholders. In the context of socioeconomics, it is beneficial for the industry and society in general when players are given a democratic voice and autonomy to decide on the gaming platform’s distribution of revenue. In particular, struggling communities from developing countries are empowered financially without resorting to hard or dangerous labour, as is often the case among the underprivileged.
Overall, this major paradigm shift in the gaming sector is a prominent indicator of how we socialise, work and play in the future. It is no longer sufficient for companies to build products that people will love to use. Consumers are more likely to stay engaged when they are rewarded. Active participation such as staking cryptocurrency to vote on the crypto platform also offers a deeper, personal connection for players that will likely encourage them to spend more time and effort on the platform.
How Play-To-Earn Tackles High Initiation Costs
Crypto games initially struggled when building on popular blockchain networks such as Ethereum, as it was energy-consuming and easily incurred high transaction fees. The development of additional blockchains – Layer 2 solutions that can sustain high traffic and accommodate a higher number of concurrent players while keeping their carbon footprints and subsequent transaction fees low – have allowed play-to-earn options to truly flourish. These solutions like Polygon, Binance Smart Chain, and Ronin have been able to facilitate smoother and faster transactions of cryptocurrencies and NFTs.
In play-to-earn games like Axie Infinity, which requires players to start the game with at least one NFT, the cost fluctuates according to demand. As the demand for Axies increased, the cost for Axies required to play the game surged. Each Axie is unique and provides different in-game value, with the cheapest costing $200. Players need at least three Axies to get started, which means they would typically pay nearly $1,000 before they can start earning in the game. Without the starting capital, regular players could only watch the fun from the sidelines. What seemed like a chance at a better future became too expensive, and the gaming companies were heavily criticised by many that crypto was exclusively for the privileged.
This is where the play-to-earn scene evolved to increase accessibility to all while allowing free trading on the blockchain. For Axie Infinity, the solution came in the form of providing Axie Scholarships. These are informal contracts that allow new players to join player guilds and get a chance to play with the guilds’ Axies for free. The earnings are then split equally with the guild managers. To further counter price volatility, Axie has set in place deflationary mechanisms such as built-in restrictions that prevent players from overbreeding their Axies. The concept took off. In the Philippines, many players who normally would not have been able to afford the $1,000 initiation price, managed to get on the platform through Axie Infinity scholarships.
Another crypto play-to-earn game that is on the rise with a similar approach to increase stakeholder inclusivity is Decentral Games. Their latest collaboration with ICE Poker allows anyone to earn cryptocurrency by obtaining an ICE Wearable NFT and completing daily poker challenges in the Decentral Games metaverse. For those who are not able to purchase an ICE Wearable, Decentral Games offers players the option to “delegate” – enabling players with no capital to borrow another player’s ICE Wearable at no cost with a 70:30 split of their ICE Poker earnings in favor of the delegate who puts in the skills and hours into the games.
Similar to Axie Infinity, ICE Poker at Decentral Games sparked a huge wave of interest, amassing thousands of new Discord followers on their channel within days of the launch. Many players shared their daily progress on social media, including their earnings and the amount of gameplay and delegation. Some players who started out as delegates have been able to earn enough to obtain their own ICE Wearable and delegate to others, cultivating an entrepreneurial culture within the community. Through increasing accessibility of their games, Axie Infinity and Decentral Games have been able to boost their concurrent player counts and increase their platforms’ value.
The Role of The Metaverse In The Future Of Play-To-Earn
It is essential to note that play-to-earn games are pushing the increasing merging of physical and digital realms. As people assign more value to their digital identities and ownership of digital assets, there is a higher demand for a mature medium to accommodate their digital lives. The platforms that many play-to-earn games are built on are on the cusp of transformation as hype for the Metaverse grows. Following Facebook’s rebrand to Meta and Microsoft’s metaverse plans for Teams, metaverse companies including Decentral Games have gained exposure and soared in value.
The amount of investments streaming in, compounded with increased interest from the mainstream crowd, are certain to grow the industry even more, which indicates a higher number of players joining play-to-earn games and better rewards lined up for the players. For example, Animoca, a blockchain-based game developer, has attained $2.2billion in valuation after attracting capital from investors such as French entertainment giant Ubisoft. Reddit co-founder Alexis Ohanian placed a total of $7.5million in funding on the developer behind Axie Infinity – Sky Mavis back in May.
While play-to-earn platforms work on ensuring the degree of wealth decentralisation within their digital economies and maintaining user retention on the Metaverse, it is important that the Metaverse is made accessible via advanced human-computer interaction technology. Infusions of investments must not just target the development of new features and updates for softwares, but they should also be used to design or improve infrastructures and hardwares that allow a seamless virtual reality experience without incurring high costs for the consumer.
On the financial front, the industry is starting to witness hastened regulatory platforms to decide which frameworks are best to manage crypto markets. There appears to be a heightened urgency as market caps for various crypto platforms continue to be on the rise. It is integral that there is a collaborative effort between companies adopting blockchain and cryptocurrency, and regulating bodies to ensure a safe and secure ecosystem for all participants. While many are benefitting from this new medium to earn a living, there are also worries of people falling prey to scams and potential money laundering.
Within a short period of time, play-to-earn games have undeniably influenced the socioeconomics of many countries around the world. As more players regain economic empowerment through democratised gaming models, play-to-earn will remain here to stay. Here is an emerging field that can be part of the solution towards a better future, but it will take more than just the technology industry to pursue this inclusive eutopia.