The gaming industry was among the first to adopt the idea of earning tokens in games. However, the adoption of blockchain technology in gaming is embodied by the play-to-earn gaming model that has taken the gaming industry by storm. With games like Axie Infinity valued at almost 1 billion dollars, there is no doubt that the gaming industry is experiencing what could be a massive shift in the way games are viewed and played.
But first, what is play-to-earn gaming?
What is Play-to-Earn?
Play-to-earn gaming, also known as P2E gaming, is a blockchain gaming model that allows players to earn assets and cryptocurrencies by playing a game. P2E games use cryptocurrencies, NFTs, and blockchain technology to create gaming environments that will enable players to earn while playing.
In a typical P2E game, players play and earn rewards by advancing to higher stages or completing tasks within the game. The rewards in a P2E game differ from game to game but can be broadly categorized into two types:
- In-game Assets (land, skin, tools, weapons, avatars)
- Native cryptocurrencies
Non-fungible tokens (NFTs) represent the in-game assets in Blockchain play-to-earn games to prove and trace ownership.
The idea of a reward system in gaming is not new. Traditional games have reward systems where players are rewarded with in-game assets, ammunition, new lives, immunity, tools, etc. The P2E gaming mechanics only builds on what already exists with a twist – using GameFi to enable real-world benefits of these assets.
The added trading function that allows players to trade their assets and crypto tokens for real-world benefits makes a P2E gaming model different from traditional games. This feature is why P2E games fall under GameFi, a mash of gaming and finance.
Earn NFTs & Play-To-Earn
In a P2E gaming platform where users play to earn crypto, they can trade their earnings on a decentralized exchange (DEX) for other cryptocurrencies or fiat currency. The same goes for asset rewards represented by non-fungible tokens. These assets can be sold on NFT marketplaces such as OpenSea for a tidy sum. A good example is the Axie monster from Axie Infinity which sells for $400 US dollars on average. In some games, players can earn a passive income by lending or staking their assets.
In play-to-earn games, the more assets a player has, the more benefits they enjoy and the higher their chances of getting more.
Benefits of P2E Gaming. The benefits of P2E gaming or GameFi are not only limited to players, although the player benefits are a new improvement on traditional gaming. The benefits of P2E gaming include the following:
As mentioned above, one of the categories of P2E game rewards is in-game assets. These assets are represented by non-fungible tokens and can be traded on NFT marketplaces. For example, in P2E games, NFT assets could be pets, avatars, new player upgrades, land, property, tools, or weapons.
These rewards are known as digital assets, and the players own them. Just like other non-fungible digital collectibles, the NFTs from P2E games have the same characteristics. However, unlike traditional games where the gaming company owns the assets players use, the players in a P2E game have full ownership of these rewards and can do with them as they please. To earn real-world benefits, players either sell them off on NFT marketplaces or stake them.
The features of metaverse gaming give provisions for interoperability of assets allowing players to port their game assets from one game to another, showing that they have full ownership over these assets.
But that’s not all; in some games like Sandbox, Decentraland, and Axie Infinity, players can also improve their assets by investing in them and either renting them out for a passive income or selling them for more money. For example, in Decentraland, players can develop their land and charge rent for ‘tenants.’
P2E gaming platforms open the door for passive income streams. The assets in a play and earn gaming platform can be used to earn passive income in DeFi. How this works is that some gaming platforms offer DeFi services to players. Players can use services like liquidity mining, NFT staking, and yield farming to earn passive incomes on their assets. Players can also get other exclusive rewards, including the chance to advance to new game stages through staking.
Another way players can earn passively from their assets is through NFT lending and renting. While P2E gaming might be the bee’s knees, starting as a new P2E player can be expensive. Take Axie Infinity, for example. One Axie monster is averaging $400 US dollars and having an Axie monster is necessary to play. This makes the entry barrier very high for many players and limits participation. NFT lending and renting solve this problem while allowing the renter to earn an excellent passive income from their assets.
Two P2E games that have adopted lending and renting NFTs are Axie Infinity with their Axie Scholarship program and Blockchain Brawlers with their ‘Rent a Brawler’ program.
The rewards for owning many assets within a P2E game outweigh the potential financial benefit when sold. Players with certain assets become stakeholders in the game’s running. Through a decentralized autonomous organization (DAO), these players can vote on future updates and decisions in the game. Decentraland is one of the games that allows players with a certain amount of locked MANA, the governance token, to vote on decisions.
The P2E gaming model has many advantages for players, but even creators benefit from a decentralized game model. In centralized games, game creators receive a royalty for the games they help create. However, they forfeit the right to those royalties if they leave the company within that time. It also limits the different projects they can work on as they have to work on the company’s creations. In P2E gaming, which runs on blockchain technology, creators aren’t bound by these rules and can earn royalties from their creations perpetually.
The P2E Business Model
What is the playing to earn business model, and how do P2E gaming companies like Decentraland make money from this model?
To understand the P2E gaming model as a business model, you have to understand how it works as a gaming model. Play-to-earn crypto games are built on blockchain technology and use smart contracts that automate the game’s ecosystem activities. This model allows players to unlock and own game assets as NFTs when the pre-set conditions are met. These assets immutably belong to the gamer and can then be ported to other games, sold, lent, rented, or traded as they wish. This is a financial gain for players.
As a business model, the play and earn gaming model effectively combines the idea of value for money on both sides of the stakeholders. On one side, game developers provide value by creating a great game and earning from transaction fees and the entry fees from players paying to play. Conversely, players can earn according to the value they bring to the game. The biggest value players get is keeping the business going by consistently playing. The longer a player plays, the more their earning capacity. In addition, they are able to unlock assets at high-difficulty levels. Also, they earn more of the native cryptocurrency, making them eligible for voting on major decisions.
For the first time in the gaming industry, the P2E business model allows the two major stakeholders to benefit financially from their efforts.
How does P2E Differ From Traditional Gaming
Traditional gaming and P2E gaming have a lot of similarities, and yet there are core differences between what has been the standard of the gaming industry and the newly emerging P2E. They both depict games that show a virtual reality where players go to complete tasks, follow a storyline and derive satisfaction from playing.
The core difference that informs the other differences between both gaming ideals is that P2E games are built on blockchain technology. In contrast, traditional games are centralized, are free-to-play, and work on a pay-to-win model.
The pay-to-win model is a gaming model for traditional games where gamers pay to buy assets within the game as they advance from level to level. Note that these assets still belong to the game developer and are not useful beyond the usage within the game. In this gaming model, entry could be free, and developers make money from purchasing in-game assets, or players have to also pay for the games to start.
The P2E model is different, although there are some similarities. For one, the entry barrier for play-to-earn games is higher than that of traditional games. Players in the P2E gaming model need a crypto wallet to be eligible to play. But they also have to make initial NFT purchases of assets and players. During the game, just like in traditional games, players also purchase upgrades to their avatars, players, tools, and weapons. But what sets P2E apart from traditional gaming is that the rewards users get have real-world benefits.
Firstly, players have total ownership and control over their assets and tokens and can use them as they see fit, which could include any of the following: selling, renting, lending, staking, etc.
In conclusion, the value players derive from traditional game models is restricted to the fun of playing the game. At the same time, P2E players can get financial benefits while also having fun playing the game.
How P2E is Changing Traditional Gaming
Having seen the difference between traditional gaming and P2E gaming, what does the future hold for conventional gaming? Are we about to see a total revolution and change in the conventional gaming industry?
The answer is a lot different than you would have expected. While play and earn games herald a new gaming era where gamers enjoy financial benefits, the adoption curve is a bit slow.
For two primary reasons, many legacy gaming titles are notably wary of adopting GameFi and P2E games. One, they rightly believe that the entry barrier is too high, and for game titles with a very low entry barrier courtesy of their free-to-play gaming models, a P2E model might cripple their number of players. Still, on the high entry barrier, P2E gaming models also restrict underage players who comprise a significant part of their gaming demographic.
Another significant restriction for legacy gaming titles is the idea that P2E gaming is a fad that will fizzle out in the coming years, and some are reluctant to invest in it. This fear is unfounded and is constantly proven wrong by the growth of P2E gaming companies like Axie Infinity and SandBox.
Some of the biggest gaming companies have started investing in or considering investing in GameFi. Whether they invest or not, there is a wave of investment into the GameFi industry, with investors investing as much as 3.2 billion USD in crypto gaming startups. But this is not the only validation that P2E gaming is here to stay. The adoption of blockchain gaming may be slow, but it is inevitable. With the value that GameFi offers gamers, the numbers will tell in the coming years.
Examples of P2E Games
The P2E gaming industry is nowhere near fully developed. It is in its growing stage, with so many gaming startups hosting Initial Dex Offerings to raise funds for their game ideas. Yet, as nascent as this industry is, there are already well-known giants that have set the path for future gaming industries. Some of the top three examples of P2E games are:
The Future of Play-To-Earn Games
Play-to-earn games are here to stay, and adoption across the board for traditional legacy game title companies might be slow, but the numbers don’t lie, and they’re telling a different story. The adoption of GameFi and P2E games is gaining momentum. Right now, the market capitalization of the biggest P2E gaming companies is more than $14 billion US dollars.
Compared to the total gaming market valuation, these numbers may not seem very comforting, but the signs all point to increased adoption of P2E games by gamers.
The adoption of blockchain technology in gaming birthed the play-to-earn gaming model that allows players to be rewarded financially for their time and effort spent playing. It is the first gaming model with a business model that incentivizes creators and players with rewards. With this gaming model, players play and earn crypto tokens and game assets represented by non-fungible tokens.
The most crucial feature of P2E gaming models is complete ownership of game assets, allowing users to trade and earn passive incomes from their investments outside those assets’ monetary benefits.
As a new gaming model different from the existing free-to-play games that require players to pay-to-win, P2E gaming is gaining traction, with over half of wallet owners connected to at least one gaming platform. Although big traditional game companies haven’t adopted this model yet for some viable reasons, the future holds even more engagement for blockchain games. With games like Axie Infinity, Ethermon, or Coin Master, the future of GameFi and P2E games is secure.