After a bit more than a decade upon its emergence into the mainstream, the application of blockchain technology and its by-products, coins and tokens, went far beyond mere transactions and data storage. And while there has been significant progress in the adoption of crypto as a payment vehicle by both small-time businesses and mega-corporations like Visa and PayPal, it has also permeated other industries like sports and gaming. The latter, in fact, began welcoming blockchain initiatives with open hands years ago as gamers constitute perhaps the most progressive group of tech consumers who have always been familiar with the concept of in-game economy and virtual assets.
But it wasn’t until the popularity boom of non-fungible tokens, which took the crypto world by storm in 2020, that the blockchain-based games began to gather a significant player base and compete with the dominating “free-to-play” and “pay-to-play” models. In this article, we offer an in-depth review of the play-to-earn (play2earn or P2E) model, its pros and cons and provide a short list of the most popular games and tokens that fuel them. In addition, we will speculate about the prospects of the development of a unique job market within this particular niche of the gaming industry.
The readers in their 30’s who sometimes indulge in recreational gaming should consider themselves lucky to some extent because they have witnessed the progress that the gaming industry made from coin-op games at bars and amusement arcades: Skee-Ball, Whac-A-Mole, or motion simulator games like Street Fighter II or Mortal Kombat must really bring out the childhood memories, to games with top-notch visuals that can be played on a little pocket device called a smartphone, not to mention the ultra-realistic games that are now being released for personal computers and gaming consoles of the last generation. And while each new spiral brought about substantial improvements of visuals, the vastness of gaming worlds, controls, and storylines, the majority of games have been mostly about taking the money from players and rewarding them with the thrill and experience rather than monetary prizes.
The model around which the “older” games are built is called “pay-to-play,” which stipulates that players had to spend some money - like putting quarters in the machines to activate an arcade game or paying steep sums for the titles designed for PCs and consoles - and it has been around for decades, making billions for gaming franchises. Later, with the emergence of online gaming, this model evolved to the “free-to-play” one, within which the player got free access to the basic versions of games but had to splash out on in-game items and buffs (the features that allowed to expedite the characters’ progress) like skins, exclusive weaponry, magic portions, or artifacts. This model has proven to be even more successful in terms of revenue as the innovative technology and the global reach offered by the ever-growing Internet coverage offered means for tapping into broader markets and audiences. For instance, one of the most popular free-to-play games, Fortnite, boasts a revenue of over $9 billion in the first two quarters of 2021, which is on par with the profits generated by other globally popular titles like Dota 2 and League of Legends. But then again, if one wanted to become particularly good at said games and compete in a growing number of tournaments, he had to either grind (a slang word which means devoting a lot of time and effort to a particular game) for weeks if not months, or pay for special perks that ensured quicker progress.
Obviously, the main downside of these two approaches is that their economic models offer virtually no means for gamers to capitalize on their efforts and skills unless they are competing in popular tournaments as a part of a professional gaming team. One could fill up his storage with rare items and artifacts but couldn’t freely sell them for real money on an open marketplace. Free-to-play games offer tons of in-game currencies and other collectibles, but they are literally worth nothing because, until lately, there was no means to transfer an item from one player to another without resorting to some sophisticated tricks.
But the rise of the blockchain technology, and with it the play-to-earn gaming model, changed this situation drastically and for the better. In essence, the P2E model stipulates that the players are generating value for their colleagues as well as for the developers. In return, they get financially rewarded with in-game assets that are tokenized on the blockchain. Unlike the previous two models that are explicitly forbidding the sale of accounts, characters, or items, the play2earn model actually instigates these activities and even provides an array of marketplaces where these operations can be carried out.
P2E emerged as one of many use cases for blockchain technology and cryptocurrencies. It stems from the famous CryptoKitties game that was released in 2017 by the Canadian studio Dapper Labs on the Ethereum blockchain. It was probably the first integration of non-fungible tokens into the gameplay in the form of virtual kittens that had to be fed, groomed, and bred, the concept that bears similarity with a popular handheld video game, Tamagotchi.
CryptoKitties could be freely bought and sold on the designated online marketplaces - some of them were purchased for mind-blowing sums. For instance, the first cat dubbed Genesis was auctioned out for 247 ETH, while the most expensive one called Dragon had exchanged hands for a whopping 600 ETH. The popularity of CryptoKitties was so enormous that the number of transactions even caused a congestion of the Ethereum network. It was the first instance of the use of non-fungible tokens in gaming that has turned out to be a major success. But as the infamous crypto winter descended on the industry, non-fungible tokens and blockchain gaming have dropped off the radar for a while, only to reappear in 2020 with the start of the NFT fever that lasted for several months and saw all kinds of tokens, from the ones that depicted contemporary art to Internet memes, being sold for mind-blowing sums.
And while the global crypto community had been in awe from what went down on the NFT market, this ultra-useful blockchain solution has been actively realized through blockchain-based games that didn’t attract a lot of attention at first, but once the public realized the benefits of NFTs as a means for protecting the authenticity and ownership rights of certain digital asset, and the benefits that they provide to the virtual economy and their own financial wellbeing, the popularity of play-to-earn games has soared to the previously unseen heights, with the largest user base coming from the developing countries and those that are suffering from a permanent financial crisis, with Venezuela being the most shining example.
In fact, Venezuelans were probably the first people who had found the way to turn gaming into a stream of income by engaging in gold farming in the online multiplayer role-playing game called RuneScape. They collected vast amounts of in-game currency and subsequently sold the gold on some outside market to players from the United States. In doing so, players from Venezuela were able to make a hundred times more than the average salary across the country, though it must be noted that the said salary barely exceeded $4 a month, which is truly horrific, considering how wealthy that country is in natural resources.
Jarex, the developer of RuneScape, wasn’t overly excited about the unauthorized commercial activity that involved the in-game assets and tried to suppress it by any means possible, though succeeding only partially. Nevertheless, this gave people the idea that real money can be earned through playing online games, and when the blockchain industry offered a legitimate way of converting gaming skills and time into tokenized assets or cryptocurrencies, the users began flooding the scene.
The crypto space currently features dozens of games that were built on the foundation of the play-to-earn model, some of them will be listed below, but so far, none of them have enjoyed as much popularity as Axie Infinity, an online game that was released in 2018 by the Vietnamese game development studio Sky Mavis as a combination token-based economy, introduced by CryptoKitties, the concept that is reminiscent of Pokemon Go, and the turn-based gaming concept that was inspired by Hearthstone.
In essence, Axie Infinity is the metaverse populated by cartoonish creatures that engage in battles for the virtual land so that the players can expand their kingdoms. The developers’ initial intention was to create an entertaining educational project that should have helped to raise awareness about the perks of blockchain among Pokemon fans and other players who fancy this genre. Ironically, Axie Infinity owes its current popularity to the COVID-19 pandemic and the associated socialization restrictions that forced many people to be confined in their homes while many had lost their jobs or businesses and were looking for any means to earn some money. And since this game originated in South Asia, it’s understandable why the majority of Axie Infinity players come from that region, most notably the Philippines, where the monthly salary of an educated professional is actually lower than the earning of most Axie Infinity players.
Above is the monthly player count chart, which shows exponential growth since the beginning of the year, when the play-to-earn model became the talk of the town. In plain numbers, the number of players has increased by 27%, from 14,905,547 to 18,855,658, over the past 30 days alone. Needless to say, the developers have coped extremely well with the task of attracting interest towards blockchain-based games and popularizing the play-to-earn model and non-fungible tokens.
Now, let’s dive into the intricacies of the earning scheme offered by Axie Infinity that is utilized by the majority of other P2E games. It’s centered around the acquisition of non-fungible tokens that take the form of unique creatures called Axies and their subsequent sale on the open marketplace, which is located on the same platform, at a much higher price. It’s important to mention that Axie Infinity and most other play-to-earn games aren’t free per se. For instance, in order to become a part of the fairytale metaworld, a player would have to make an initial investment of around $1,000 to buy three creatures that would later compete in PVP battles where the winners are rewarded with valuable leaderboard prices that can also be sold on the marketplace. If that entry barrier seems too high, you can try other play-to-earn games where that barrier is significantly lower.
For instance, Splinterlands is a trading card game that runs on the Hive blockchain - to be admitted to the game, a player would have to purchase a magic chest for as little as $10. Football fans can opt for a popular fantasy football game called Sorare, where players manage five-men teams composed of NFTs that contain live stats of actual football players - the entry barrier there is around $200 for a set of common cards.
However, if you don’t have that kind of money to spare, there is a possibility of getting the required number of Axies from an individual sponsor or a guild, with the Real Deal Guild being probably the most popular, who could lend the nascent player the NFTs in exchange for a cut of his future earnings. This cut, however, can be pretty high, sometimes reaching 80%, so rookies would have to grind for some time for a fraction of income.
Once the player settles in the game, he can begin breeding additional creatures using one of the two in-game currencies, the first one being Small Love Portion (SLP), which is farmable during the gameplay. The other currency is called Axie Infinity Shard (AXS), which is a regular ERC-20 token that can be used for governance, a new feature that was made available this year after the introduction of Community Treasury, staked on the platforms for passive income, or traded on centralized exchanges like Binance. SLP is also tradable on Binance. We have already covered the price analysis of both AXS and SLP in one of the previous articles, but just a quick reminder that AXS had a mind-blowing rally a couple of months ago, during which the token gained over 500% in less than three weeks.
AXS/SLP comparison chart. Source: CoinCodex
But since then, AXS and SLP have gone their separate ways, as shown on the chart above. While AXS has experienced a mild 30% correction from the all-time high at $94.73 to its current price level at $66.74, SLP has suffered a major 80% drawdown that could be explained by the growing supply of these tokens that corresponds with the aforementioned 27% increased in the number of players over the past month. They have been farming more SLP and then spending the tokens to breed new creatures or actively selling them on centralized exchanges, which has been forcing the price to go down continuously.
AXS/USDT chart. Source: TradingView
AXS, on the other hand, is forming a support line at the said price level, though it appears that the chart is drawing a bearish pennant that is likely to break to the downside over the next few days that would result in AXS descending to the lower support level around $40. Therefore, if you plan on becoming an Axie Infinity player and stock up on AXS, it would be better to wait until that chart formation is resolved and AXS is traded at a lower price.
SLP historical price chart. Source: Coinmanketcap
At the same time, SLP seems to have hit the rock bottom of this market cycle as the price had capitulated all the way to the historical support that had served as an overhead resistance before the first major bullish rally that took the price to the all-time high at $0.42. Obviously, now could be a good time to start buying SLP if you plan on starting to actively breed the virtual creatures.
Both AXS and SLP can be purchased or sold for ETH within the game, and the rewards can be subsequently transferred to the Ethereum Metamask wallet and spent at the user’s discretion. They are also available on many centralized and decentralized exchanges: Both can be traded on Binance, FTX, KuCoin, Uniswap, and 1inch Exchange, with Binance consistently accommodating the largest trading volume.
To summarize, making more or less decent money playing Axie Infinity or other top play-to-earn games - the full list of these games can be found here - is relatively easy if you have some gaming knowledge and skills, as well as some money to spare. The gameplay is usually not that complicated or sophisticated, which is one of the issues with P2E that is going to be described later, so making a modest income wouldn’t pose a problem even for a nascent gamer. Converting the in-game tokens to top cryptocurrencies or fiat usually goes without any complications. The only thing that gamers need to pay attention to is the taxation policy related to the income made from gaming or crypto trading in one’s country. For instance, the Undersecretary of Finance of the Philippines and its central bank insist that all profits obtained from play-to-earn games, especially Axie Infinity, must be taxed.
Since P2E games provide a source of income and can be perceived as a job or a business, though a very fun one, there is a distinct possibility that this gaming niche could produce an interesting job market that might attract a lot of unemployed people. We already see that Axie Infinity, and some other P2E games, have a community of NFT lenders who are treating it as a business, and the number of “vacancies” will continue to grow. Here is a short list of possible job opportunities that might appear in the crypto space in the very near future.
The issues associated with play-to-earn model and blockchain games in general. Despite the fact that P2E represents a very interesting and promising concept that already changes the lives of many people for the better, it still contains a number of problems that could hinder the development of this niche.
|#||Crypto||Prediction||Accuracy||CVIX||Price||24h||7d||Market Cap||7d price change|
|1||BTC||Bitcoin predictions||60%||87||$28 953.50||-4.17%||-3.67%||$551 514 958 969|
|2||ETH||Ethereum predictions||61.6%||88||$1 929.37||-6.11%||-6.26%||$233 271 604 070|
|3||USDT||Tether predictions||95.6%||1||$0.999062||0%||0.01%||$73 206 337 226|
|4||USDC||USD Coin predictions||96%||1||$1.000165||0.02%||0.01%||$53 264 489 963|
|5||BNB||Binance Coin predictions||58%||88||$316.54||-3.99%||4.58%||$51 683 254 368|
|6||XRP||XRP predictions||58.4%||91||$0.397236||-6.29%||-7.17%||$19 203 606 558|
|7||BUSD||Binance USD predictions||91.6%||1||$1.000278||0.11%||0.03%||$18 328 809 687|
|8||ADA||Cardano predictions||56.4%||93||$0.502003||-7.81%||-12.64%||$16 943 898 369|
|9||SOL||Solana predictions||58.4%||91||$48.07||-9.25%||-12.69%||$16 307 952 335|
|10||DOGE||Dogecoin predictions||60.8%||90||$0.081327||-5.98%||-8.79%||$10 789 659 758|
|11||DOT||Polkadot predictions||55.2%||90||$9.73||-6.72%||-10.15%||$9 613 488 110|
|12||WBTC||Wrapped Bitcoin predictions||56.8%||87||$28 897.59||-4.37%||-3.70%||$7 993 157 722|
|13||TRX||TRON predictions||73.2%||56||$0.079994||5.25%||13.91%||$7 570 190 446|
|14||AVAX||Avalanche predictions||55.6%||93||$27.44||-12.43%||-18.78%||$7 390 659 271|
|15||DAI||Dai predictions||93.2%||1||$0.999659||-0.06%||-0.01%||$6 569 292 513|
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