From playing hopscotch and catch, to burning through countless Nintendos and video games, games have long been a source of entertainment. Today, blockchain gaming is causing an industry-wide shift. Games will never be the same again when you can earn an income just by playing.
What is Play-to-Earn?
P2E is a gaming model disrupting the traditional gaming industry. While often used interchangeably with GameFi, the two terms are slightly different.
GameFi is a combination of the words ‘gaming’ and ‘finance’. The concept of GameFi combines gaming, crypto, blockchains and NFTs to create a novel gaming experience. It is diverse and can range from gamification elements to full-blown metaversal games.
Meanwhile, P2E is the dominant gaming model in GameFi where players play to obtain in-game virtual assets which they fully own. This is facilitated by blockchain technology that helps prove authenticity and ownership of the assets. The assets can then be used in the game or traded for monetary benefits. P2E games are also often powered by one or two platform tokens. As new gaming products are developed, a whole ecosystem is built around the token.
Play-to-Earn Mechanics
P2E games reward the ‘grind’ or ‘hustling’ culture of traditional games with financial benefits. In-game virtual assets usually involve the game token and game-related NFTs. Generally, players can earn income in a few ways - earning crypto, trading NFTs, and staking assets.
Let’s refer to Axie Infinity, arguably the most popular P2E game, as an example. Axie Infinity is a P2E game similar to Pokémon, as it allows players to collect, battle and trade creatures called ‘Axies’. However, Pokémon in-game items and creatures have no real-world value. In contrast, Axie Infinity players can earn crypto plus they fully own their Axies NFTs and in-game land.
Image credit: Axie Infinity
Players can:
- Earn in-game currency. Smooth Love Potion (SLP) and Axie Infinity Shards (AXS) can be earned by completing quests and winning battles. SLP is used to breed more Axies. AXS is the governance token for the Axie universe.
- Trade Axies and land NFTs. Each Axie NFT has different battle prowess and can belong to 1 out of 9 Axie classes. Players trade Axies to build strong Axie teams, similar to Pokémon. Land NFTs also have different types and can be freely traded.
- Stake AXS. AXS gives players voting rights and a say over the use of Axie Infinity’s community treasury in the future.
- Trade SLP and AXS on the secondary market. This opens an additional source of income for players.
P2E games can be extremely lucrative. In countries like the Philippines, some are already making a living from blockchain gaming.
GameFi doesn’t necessarily have to be as complex as Axie Infinity either. It can be as accessible as the upcoming NFT Lottery Game on ApolloX DEX, where gamification is incorporated into the GameFi product. This would look like allowing players to mint customizable NFTs, which have utility as trading rebates and can provide extra monetary perks.
Further reading: Exclusive Preview: NFT Lottery Game on ApolloX DEX
Will 2022 be the year of blockchain games?
2021 was a record year for blockchain gaming, with $4B in total capital invested from venture capitalists. In August, P2E and GameFi surpassed DeFi as the most used category in the blockchain industry.
Two developments are at play: Firstly, the increasing tie-in of metaversal elements with P2E games. Secondly, traditional gaming companies are seeking to enter blockchain gaming. One example includes Japanese game developer Square Enix’s partnership with The Sandbox. The collaboration will feature IPs of one of its most popular games, Dungeon Siege, in the Sandbox metaverse. The company also declared potential entries into P2E experiences that include NFT elements.
Image credit: The Sandbox, Map of LANDS
With already $1B investments happening in the first quarter of 2022 alone, we’d no doubt see further major developments in the blockchain gaming space.
Criticisms of P2E
Overly focused on monetization
Some think that focusing on monetization takes the fun out of the game. For example, gaming giant Ubisoft’s foray into in-game NFTs with Ubisoft Quartz has drawn much criticism. Its own employees are opposed to the environmental cost of mining crypto and think that games will feel more like jobs instead.
Barriers to entry
Players often have to invest in the game upfront. Referring back to Axie Infinity, players have to buy at least 3 Axies to start playing. To build a strong team, this price could go up to hundreds of dollars, yikes!
This isn’t a problem unique to Axie Infinity. We could argue that any hugely popular P2E game would face increasingly high barriers to entry as demand for in-game assets soar.
Dependent on blockchain performance
Blockchain technology may have innovated traditional gaming, but it’s in its nascent stage and developers are still working on making blockchain transactions - and thus game interactions and gameplay - fast, smooth and low-cost.
Developers have to guarantee smooth execution for P2E games where the gaming experience could make or break the game.
Investor risk
Even though P2E can be a huge financial opportunity, it is still an investment and thus subject to risk. Many gaming ecosystems are powered by the platform’s token, which is vulnerable to market downturns. Essentially, a huge drop in token price could lead to players making a loss.
The views expressed in this article are the author's alone and do not necessarily represent the views of ApolloX.
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