As increasing innovations in technology continue to disrupt the established modus operandi of various industries, one undeniable example is the gaming industry. With the introduction of computers and mobile devices on a large scale, gaming has moved from the days of arcade machines to gaming consoles like Xbox, PlayStation, and others.
The blockchain revolution has further widened the scope of technological realities in gaming. One such reality is a new gaming model known as "play2earn," which has not only been trending worldwide since the pandemic but has actually begun to disrupt the labor economies of certain developing and industrialized nations. Before P2E, businesses utilized two major models – the pay-to-play and free-to-play or freemium models—to engage potential and existing clients.
So what exactly is play2Earn?
Play2Earn (P2E) or Play To Earn is simply what it is – playing blockchain games to earn digital in-game assets such as NFTs, crypto coins, virtual land, skins, weapons, and more. These virtual assets can easily be monetized for real-life purposes. It is a relatively new concept that is based on the creation of autonomous virtual economies that are guided by tokenomics. That is, P2E communities operate their own formal blockchain-backed digital assets, whether cryptocurrencies or non-fungible tokens (NFTs)
The Play2Earn model got a big popularity boost with the release of Axie Infinity, a blockchain game developed by Sky Mavis. The success of the game not only established the Play2Earn concept but has also encouraged the emergence of other “To-Earn” models such as
Together with Play2Earn, all the concepts listed above are known as X2Earn. Here, X denotes any viable web 3.0 tokenomic model that promises users the possibility of earning convertible digital assets after they take certain actions.
Though Play2Earn is not an entirely new concept, the history of the model with respect to blockchain and earning crypto coins dates back to February 2014. It was that year that Huntercoin, the first blockchain and decentralized strategy MMO game in the world, was launched. Huntercoin, which was created in 2013, was more or less an experiment to observe the impact that thousands of mapped gamers would have on a decentralized blockchain network. The experiment was a success.
Unlike Bitcoin where mining is based on solving complex mathematical problems, Huntercoin was based on ‘human mining.’ In Huntercoin, players aim to claim the crypto coins on the map and also eliminate other players. Those that succeed in earning crypto coins deposit them in randomly located “banks” within the map. Any banked coins are reflected in the gamer’s wallet. Miners are entitled to ten percent of banked coins, while the death of a gamer yields them four percent of dropped coins.
Another notable chapter in the Play2Earn book was written in November 2017 with the launch of CryptoKitties, the world’s first Ethereum-based game. About one week after its launch, CryptoKitties transactions amounted to more than 5 million USD–or roughly a quarter–of all traffic in the Ethereum ecosystem. The game’s popularity meant increased network congestion for the Ethereum platform, a situation that showed the scalability concerns facing both Ethereum and other blockchain networks.
Play2Earn has made a significant impact over the last few years, particularly in 2021. This success is linked to its convergence with blockchain technology, especially NFTs which continue to rise in value. The revolutionary effects of blockchain on gaming include:
It should come as no surprise–and indeed it is no secret–that major centralized gaming platforms such as Microsoft (XBOX) and Sony (PlayStation) have been making large and concerted leaps–and major acquisitions–into the crypto gaming and metaverse spaces.
Moreover, Play2Earn has not been popular only in the West but in other areas of the world as well. Take the Philippines, for instance, where Axie Infinity has had a massive impact when it comes to providing income to those who need it. There, the emergence of guilds and scholarships has helped provide more game access to people who could not afford to purchase the minimum three Axies required to commence gameplay.
Under the guild system, rather than worry about the cost of buying Axies, new players called ‘scholars’ rent in-game assets from guilds or individuals (including Western investors). The guild takes 10% of the gaming revenues, the guild manager keeps 20%, and the scholar gets the major share of 70%. (In many instances, experienced players in the Philippines earned more from Axie Infinity than stocking shelves at the local grocer or delivering food.)
The popularity of the guild model has led to the emergence of several gaming guilds in the Philippines in a short span (over 500 as of the first quarter of 2022). These guilds have become crucial because they help provide many Filipinos (especially those in rural areas and smaller towns) with access to financial services, including GameFi and blockchain.
Without these guilds, many would have been denied access to these life-changing Play2Earn crypto games (and their adjacent financial services overlapping Game-Fi and DeFi). At some point, one of the more popular guilds known as Yield Guild Games (YGG) had 8,000 scholars and about 60,000 yet-to-be-approved applicants aspiring to be part of its program. (The YGG periodically trains and mentors a specific number of players.)
In a nutshell, the infusion of blockchain technology into gaming in the form of “play to earn” has been an economic success. A large number of gamers not only get to enjoy their passion (or job) but earn significant income from it.
History indicates that most game publishers are averse to decentralization, even with advancements such as Chainlink. They would rather place greater emphasis on areas like programmability, higher throughput, enhanced computing power, and accessibility. Their overriding powers mean that user accounts can be unilaterally penalized or restricted from accessing centralized servers.
The above are just a few of the monopolistic tendencies that decentralized networks seek to correct. For instance, the failure of a server in a decentralized network does not cause any major problems (due to the ‘redundant’ nature of decentralized systems). Rather, activities continue in other nodes, helping to ensure a hitch-free continuity of gaming operations.
Indeed, blockchains and cryptocurrencies have revolutionized Play2Earn and enabled gamers to transform digital assets into real-world pecuniary uses. However, many blockchain P2E systems are still far from being totally decentralized. According to a report by the World Economic Forum (WEF), most of these “Play2Earn" do not inherently and fully eliminate the centralization found in games: they still require the authority of the publisher to define, issue, and constrain the asset that eventually is traded as an NFT.”
But the WEF also notes the significant capability of P2E games when it comes to decentralization:
“…the greatest promise of Play To Earn games is in their potential to decentralize marketplaces for the creation, ownership, and exchange of digital assets, as well as the potential created when these marketplaces are connected to the traditional economy and fiat currencies—allowing players to transfer their digital time, effort and earnings into disposable income in the physical world.”
Hence, P2E gaming is a welcome development for millions around the world. Having some form of control over your gaming experience (not to mention remuneration) is, for many, preferable to being subject to the whims and decisions of a few influential game developers or worse, uninvolved corporate executives.
Many gaming enthusiasts used to play for leisure or as a hobby, but things are changing: Thanks to P2E, gaming is turning into a viable source of income as well. The interesting part is that the Play2Earn market is still in its early stages. This means that the huge potential of the model remains largely unexplored. However, the projections are promising. For instance, it is expected that the market for Play2Earn NFT games could grow from 755 million USD in 2021 to billions by 2028.
Play2Earn games will continue to revolutionize and set the growth pace for the crypto incentive gaming market because of:
But like every other industry, P2E and other crypto-based incentive gaming models have their challenges. However, these challenges look more like stepping stones toward the next big thing in P2E than limitations.
Like traditional gaming, P2E blockchain games can be classified under a number of typologies. Below are some of them.
A metaverse is a virtual world through which a gamer can play with other gamers in any part of the world as well as create, and monetize ideas in virtual space. Metaverse gaming is the hosting of games on the metaverse, ideally, a 3D environment where players are avatars. Other features include VR hardware and in-game assets. Alien Worlds and Decentraland are examples of metaverse games.
In role-playing games, players are able to control the game’s characters and actions, usually to advance further in the game and attract more rewards. In-game assets in crypto RPG games are mostly in the form of NFTs.
Digital trading cards include NFTs. They are often limited in supply and their value is determined by a number of factors such as ownership, scarcity, and utility.
Below are a few of the more popular P2E games.
Axie Infinity is an Ethereum-based metaverse/card game that is inspired by Pokemon. As noted earlier, you need to purchase at least three Axies to play this very popular game from a Vietnamese developer. The gameplay involves breeding Axies with other Axies and engaging in battles to earn SLP (Smooth Love Portion), one of the two native tokens in the game.
Players can also earn income by staking the game’s other native token known as AXS (Axie Infinity Shards). The game has recorded a trading volume in excess of 3.6 billion USD and over 2.8 million daily active players. It is very popular in Asian countries such as the Philippines, Vietnam, and China. Axie Infinity is compatible with Android, iOS, and Windows devices.
Alien Worlds is a crypto game that was released in December 2020. It is based on the Ethereum, WAX, and BSC blockchains. The game is a decentralized metaverse that adopts Trillium (TLM) as its native crypto token. In terms of gameplay, Alien Worlds is made up of six planets that are organized as Decentralized Autonomous Organizations (DAO). Players can mine TLM, engage in quests, own land, and adventure on various planets, among other things.
The game can be described as revolutionary because it's the first time in history that a game has been designed to have DAOs compete against one another as teams and also have their individual NFTs. It was reported that the trading volume of Alien World NFTs had reached 42.7 million USD as of October 2022. (Learn more here.)
As highlighted above, CryptoKitties is one of the pioneers when it comes to Play To Earn gaming. It is based on five Ethereum smart contracts and has WCK (Wrapped Basic CryptoKitties) as its token. The major way players can earn from this game is through the breeding and sale of the CryptoKitties via auction.
In 2017, the year it was introduced, Cryptokitties transactions constituted eleven percent of all transactions on Ethereum. In 2019, over two million CryptoKitties transactions were processed on the Ethereum platform, an achievement no other decentralized app could match.
Sandbox is a voxel-based game inspired by another very popular game–Minecraft. But unlike Sandbox, the developers of Minecraft have yet to allow any modification of the game to incorporate blockchain technology, including NFTs. The game’s native currency is SAND.
The value of NFTs in the Sandbox marketplace varies from less than one dollar to close to five thousand dollars. Players can earn money by creating and trading NFTs. They can also earn by purchasing land and selling or renting it to other gamers at a higher price.
Decentraland is a user-created decentralized 3D metaverse that operates two native tokens–Land NFTs and MANA (its in-game currency). Gamers can purchase land (and other digital assets) for MANA which landowners can then rent or sell to other gamers for MANA. They can also build on their land and/or use it for business, e.g., by setting up a digital art gallery to promote and trade their collections–or real-world business &/ products (...like HSBC–a notoriously anti-crypto retail bank.)
The success of P2E gaming owes a lot to blockchain technology. With its adoption of blockchain principles such as decentralization and NFTs, P2E is now a global phenomenon. Growth in the Play2Earn market has also contributed to the growth of the crypto industry as a whole, despite the effects of the pandemic.
Disclaimer: This article is not intended to provide investment, legal, accounting, tax, or any other advice and should not be relied on in that or any other regard. The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of cryptocurrencies or otherwise.