Play-to-earn games give players ownership of the items they earn as they play — assets with real-world value.
After reading this, you'll understand:
When a player earns an NFT or in-game token, smart contracts transfer ownership to the player.
Free-to-play games, where revenue comes from in-game purchases, are the most profitable.
Games flourish on fast, inexpensive distributed ledgers that enhance the player experience.
For many, getting paid to play video games sounds like a dream. This attractive idea is no longer isolated to professional gamers. Various crypto games let you play to earn money. Play-to-earn gaming is rising in popularity year over year. According to Market Watch, "play-to-earn NFT games market size was valued at USD 3292.73 million in 2022 and is expected to expand at a compound annual growth rate of 17.93% during the forecast period, reaching USD 8856.95 million by 2028.”
In this article, we'll discuss what play-to-earn games are, how they work, and their challenges and risks.
There are various play-to-earn gaming models. Some let players earn rewards in the form of cryptocurrency. Others mint in-game items as NFTs that can be sold on the secondary market. In some cases, games use both models. For example, the popular crypto game "Gods Unchained" rewards players with cards as they level up. Each week, players have a chance to earn tokens if they win enough matches. The GODS token is an in-game currency and can be sold for ETH.
“The Sandbox” is a metaverse game with unique play-to-earn elements. Players can buy and sell land to be used for games and virtual experiences. You can also design gaming assets in the Sandbox's VoxEdit software, which can be sold in the Sandbox marketplace and used to build scenes or games.
Blockchain technology and smart contracts are essential to the play-to-earn gaming experience. Players must connect their wallets to the game before they can play. When a player earns an NFT or in-game token, smart contracts transfer ownership of these digital assets to the player.
In "My Neighbor Alice," players can collaborate to build homes and achieve other goals. They can buy in-game items using the game’s native currency, the ALICE token, and earn rewards through staking and governance. They also can make a profit on loans and borrow NFTs through its DeFi system.
The most profitable games are typically those that are free to play. These games generally rely on in-game purchases for revenue. People can play for free but are incentivized to buy items that help them win. For example, the popular game "Alien Worlds" rewards players based on how many minerals they mine and the overall quality of their mining tools. Players are incentivized to buy better tools since they can improve their earning potential.
Free-to-play games also have a better chance of surviving bear markets. The once-popular "Axie Infinity" game was on the verge of extinction due to plummeting revenue throughout the latest bear market. This game requires people to own three Axie NFTs to play. Additionally, they must buy smooth love potion tokens to breed new characters. Axie Infinity's sales dropped from a high of $869.5 million in August 2021 to just $3.1 million in March 2022. Still, despite its significant downturn, Axie Infinity still earns more than some of its competitors.
A play-to-earn game gives players ownership of the items they earn as they play. These digital assets have real-world value and can be sold at any time. These games also give developers new ways to monetize their efforts, as they can earn royalties on secondary sales of their gaming assets.
The play-to-earn crypto game ecosystem is mostly decentralized. The games often have governance tokens that let players influence their decision-making processes. For example, Decentraland's MANA governance token is used to vote on proposals. Players use their MANA balance to vote on topics ranging from emotes to collaboration with artists. The token for Splinterlands, where you battle players using trading cards, is Dark Energy Crystals.
The blockchain's public ledger lets players closely monitor item releases and distribution. When a developer claims to release 500 items, players can review the public ledger to ensure this statement is true. Players could quickly identify the scheme if a game's development team kept many of these items to themselves. The public nature of these gaming elements incentivizes developers to act honestly.
Free play-to-earn crypto games enhance accessibility for players in developing countries. In developing nations with low living costs, play-to-earn games present a new way for people to make a living or earn extra money.
Play-to-earn smart contracts contain large sums of money. In some cases, the total value of their assets is in the tens of millions. Hackers who exploit these contracts can crash the value of players' assets and steal money from developers. For example, Axie Infinity suffered $620 million in losses after one of its developers opened a fake job offer from hackers. The game's decline in revenue began well before the hack, but the exploit certainly didn't help it recover.
These games also rely on cryptocurrencies for revenue and player payouts. Despite the inherent security and speed offered by many cryptocurrencies, they can be volatile, which may negatively impact earnings. Depending on the blockchain developers use for their games, transaction speeds and costs can adversely affect the gameplay experience.
Although play-to-earn games can enhance accessibility for players in developing nations, they can also be used to exploit them. In late 2022, Mikhai Kossar, a chartered accountant and member of WolvesDAO, told Rest Of World that he envisions a future where poor people are used as NPCs. "With the cheap labor of a developing country, you could use people in the Philippines as NPCs (non-playable characters), real-life NPCs in your game,” said Kossar. “[They can] just populate the world—maybe do a random job or just walk back and forth, fishing, telling stories, a shopkeeper, anything is really possible.”
Some observers felt these statements were dehumanizing. Some suggested this idea highlighted a dystopian capitalistic world in which poor people are little more than props.
Play-to-earn gaming is set to continue its meteoric rise in popularity. Still, these games must be built with fast, inexpensive ledgers that enhance the player experience. Developers must ensure players' assets are secured and protect children and players in developing nations from exploitation.
Hedera is an ideal solution for the play-to-earn gaming ecosystem. The Hedera Consensus Service allows developers to decouple consequential in-game events from live gameplay. In doing so, developers can postpone smart contract interactions until the gameplay history is validated.
Hedera's predictable fees and high throughput ensure players will never be burdened by slow in-game interactions or payouts. Additionally, Hedera's hashgraph consensus mechanism is asynchronous Byzantine Fault Tolerant (ABFT), the highest possible level of security for a distributed ledger system.