What is Play to Earn?
Play to Earn is a form of helping players receive a certain benefit or reward when participating in the game. In a word, Play to Earn is playing games to earn money.
Play to Earn or play games to make money have been around for a long time, for example, the games Vo Lam Truyen Ky, CrossFire,… When you can have a high-level account with good items, you can sell that account and earn money, many games also allow players to buy and sell items with each other. Or when the level is high, players can participate in different tournaments.
Play to Earn has been around for a long time but why popular now?
Play to Earn is popular that comes with the advantages that Crypto brings, which include:
- Using NFT technology as leverage for the Play to Earn game group
- True ownership
Use NFT as leverage
NFT (Non-Fungible Token) is a unique token and cannot be replaced by other tokens. The NFTs will represent different collectible items or assets, that’s why the NFT token is widely used by artists, illustrators, or game developers to tokenize their products.
Surely, some of you who have been in the market for a long time will know that the potential of NFT is huge. Previously, most NFTs were in the form of works of art such as paintings, photos, etc., what gives them value lies in (1) the story behind, (2) the collectibles, the selling value. Gaming creates another value for NFT that is (3) the applicability.
This greatly increases the accessibility for NFT, thereby expanding the potential market and moving towards the mainstream.
In the past, when I was playing a game, I owned a super rare skin and could be sold for a high value. But in an event, the publisher opened the sale of that skin for an unlimited amount of 24 hours, and then my skin was almost worthless.
This is just a small example of the current state of games, in-game items can only be traded within that game. All power belongs to the publisher, they can control the supply, use and value of the item, but not the player. And if that publisher goes bankrupt and closes the game, all the player’s values and efforts will be in vain.
Another example is the case of FiFa Online 3 upgrading to FiFa Online 4, players who deposit money into FiFa Online 3 lose all the money they have deposited.
In contrast, by taking advantage of NFTs and their properties, NFT games help to solve the above problem and let the players have:
- True Ownership: The user owns the item in the form of NFT (token) and is certified by the Blockchain, so no publisher can take away the item, even if the server is down. Items are tokens that allow users to trade with anyone in the world without being limited in the game as before.
- Reserve of value: NFTs are unique, the number of NFTs issued and their characteristics are fixed and cannot be changed. Therefore, there will be no chance of rare items becoming “less rare”. In addition, with more and more game ecosystems and different Dapps supporting NFT, their applicability is increasing, not just limited to a single game.
All of the above advantages help the Play to Earn model – Playing games for money in the Crypto market really shines, users can confidently consider playing games as a real job to help create income for themselves.
Axie Infinity – The one who paved the way for play-to-earn
In the “play-to-earn” video surveying people in the Philippines, Axie Infinity has really become popular in this country. The low income and negative impacts of Covid-19 forced them to look for another source of income and Axie was like a lifeline for Filipinos.
In the video, we see a large number of players from the elderly to children of all walks of life who consider Axie as a daily job and this percentage is increasing.
This taxi driver’s income from Axie Infinity is almost double the base salary of the Philippines.
With revenue outstripping all other dApps by weeks, Axie is a testament to the potential of Play to Earn and has paved the way for other Play to Earn projects to learn from and perfect their products.
Axie’s revenue is many times higher than that of other protocols
To get a correlative look at how far on-chain gaming can grow, let’s take a look at the value of the current gaming market.
Prediction of the gaming market
According to Newzoo, one of the world’s leading data collection sites for gaming, the gaming market is growing steadily every year. At the current average growth rate, this market could reach $200 billion with 3 billion players by 2023.
According to Newzoo, a game’s revenue (the amount a player is willing to spend in a game) can account for up to 77% of that game’s revenue.
Adding the total market capitalization of the current top 10 on-chain game projects (accounting for almost the entire market share of on-chain gaming), we find that the market for on-chain gaming is quite small and has lots of growth potential.
Total capitalization and diluted value of the top 10 gaming projects.
However, Newzoo’s data above only covers the traditional gaming market, with Play to Earn, the gaming market can grow much more.
Gaming then will be more than just a game, it can be a real job and will be recognized by more and more people, like what Axie Infinity did to people in the Philippines in particular and the world in general.
Obstacles to overcome
Conditions to play the game
Although I have high expectations for on-chain gaming, there are still many obstacles from a player’s perspective.
The first time I tried to download Axie, to be eligible to play (with 3 pets) I lost more than $700, but with this $700 I only received the weakest pets. Trying to play the CryptoBlades game also costs me about $300/account, this amount is relatively or even too high for ordinary players.
To become mainstream and reach more players, Play to Earn games should learn from traditional game models:
- Anyone can participate.
- Almost completely free or only low cost.
- Monetization can be flexibly integrated into the game.
The currency in the game should not fluctuate too much like current games (similar to Aavegotchi with the bonding curve model that helps the GHST price to be stable and difficult to pump as strongly as Axie or My Neighbor Alice,…).
Infrastructure for gaming
Axie using layer 2 Ronin is clear proof that developing games on Ethrereum is not a good idea.
To handle a large number of transactions and provide a smooth and low-cost game experience, the current Ethereum blockchain is completely inadequate. No player wants to spend tens of dollars and wait a few minutes for a transaction to play a game.
With over ten years of experience playing games, I realize that there is still a pretty big gap between on-chain games and traditional games. Only a few games have outstanding visuals and engaging gameplay.
Currently, there are a number of promising games with eye-catching visuals such as HappyLand, or Ftribe Fighters that are still in the development stage and have not announced a release date.
In short, gameplay will be something to improve if you want to really attract players, not just the usual speculation.
The future of Play to Earn
Is playing games for money just a temporary trend?
Personally, I think with a potential market, create a real use case for NFT and most importantly, help participants generate income. Play to Earn will not be a fad like food coin or animal coin trends.
Note: A prolonged trend does not mean that game token prices will continue to rise from here on, Axie Infinity has been in development since 2018. For an AA and AAA game to hit the market, it usually takes years as well as a lot of costs, and to generate real revenue is even more difficult.
Next, I will summarize some future trends for Play to Earn games.
The evolution of gaming
The NFT gaming space has actually been around for a long time with the launch of CryptoKitties in 2017 when players could only buy or hatch eggs to get NFT cats. Then came the appearance of the second generation of games that we are playing, typically The God Unchained and Axie Infinity, now players can take their NFT to fight with other players, greatly increasing the interactivity of the game.
In the next generation of games, games will solve the limitations of current games to help bring better experience and game quality to players. Players will be able to experience better gameplay, no need to meet too high requirements to participate, the experience in the game will also be fast and smooth.
Curve chart of growth and opportunity in the gaming segment
You may find it a bit off-topic, but it is highly likely that Storage will be an area that any on-chain game will need to pay attention to in the future.
Storing data on blockchains like Ethereum is extremely expensive. According to Seba Bank, to store 1GB of data on Ethereum with 100 gwei gas fees would cost over 60,000 ETH in transaction fees. So instead of being stored on-chain, NFTs will only contain links to data stored at a certain server.
Therefore, there is a possibility that the server will be down, NFTs now only contain a broken link and users will not be able to see it (similar to when you use a link to download a game or movie and after some time the link is broken). If this happens, the creator will need to issue a new NFT to replace the old NFT and it is unlikely that the NFT will retain its original value.
Fun fact: Most games currently only store some data on-chain, most of it is stored on the server.
Therefore, I think that if the gaming and Play to Earn segments continue to grow, the Storage segment will be a gold-digging shovel from this trend. Games and projects that apply decentralized storage projects such as Filecoin, Arweave, IPFS,… at the earliest will also significantly increase the probability of success compared to other competitors.
Learn more about Storage and all things that need to know about Storage in DeFi.
Actually, there is no need to wait in the distant future, now this is a criterion for you to judge whether a game is actually building or not.
You may not have noticed, but randomness is a paramount thing in most games today. The “opening of the chest” and receiving random gifts is one thing that helps increase the appeal of the game.
- League of Legends can open treasure chests.
- FiFa can open player cards,…
- Card games, betting, lottery, etc., if there is no randomness, the game will not ensure fairness for players, and we shouldn’t be playing games that we lost in the first place like that.
A typical way for an on-chain game to integrate randomness is to use Chainlink’s VRF (verifiable random function). Games like Axie, Aavegotchi,… have all integrated their own VRF.
Chainlink VRF example.
Talking about the principle will be quite lengthy, you just need to remember that VRF makes the game really random.
When you learn about a certain game project, one of the top priorities is to find out if the project guarantees this. If you decide to use Chainlink’s VRF, it’s good, if not, you need to learn more carefully before investing.
Interoperable NFT means that NFTs can be used on many different platforms.
Let’s take the example of meebits, the project says that its NFTs can be represented in many different Metaverses. Characters in meebits can adventure in Sandbox, Webaverse and other universes.
As mentioned in the beginning, the application of NFTs in many different platforms will increase the value of NFTs. Interoperable NFT will make gaming more attractive than ever and thereby increase the attraction of playing games to make money.
However, at present, Interoperable NFT is still in its infancy, most of it is still just an idea, there are no concrete results. I will have a detailed article about Interoperable NFT for you when the time is right, projects that are implementing this idea should also be included in the watchlist.
Some complete Play to Earn games
Star Atlas is an online game with a galactic setting, in which you will put yourself in one of three factions and compete for resources, conquer territory, and dominate the game.
The special thing is that the game has two currencies. It is not clear how it will be applied to the game, but the project itself has clearly recognized the limitation of letting tokens be the currency in the game. And with the beautiful images from the teaser, I have high expectations for this game.
Aavegotchi is an NFT project based on the Ethereum blockchain combined with Aave’s lending mechanism. What impresses me is that the project has recognized this problem for a long time and applied the bonding curve mechanism to the token issuance.
The higher the token price, the more tokens are issued, thereby increasing the supply and helping to stabilize the price.
Here are some of my thoughts on the Play to Earn model:
- Play to Earn or playing games for money is a long-term trend and has great potential for growth.
- Currently, the game industry has just started emerging so the quality of gameplay may not be perfect and at its best. But this is just the beginning for the Play to Earn gaming industry. The future of the Gamefi industry can be said to be very potential and promising.
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Disclaimer: This article is for informational purposes only, not investment advice. Investor should research carefully before making decision. We are not responsible for your investment decision