The Block reported that a piece of virtual land in the game Axie Infinity sold for $2.4 million😳
When I read that, I thought: “Why on earth would anyone pay millions for virtual land in a video game?”
But the more I read, the more it made sense. The play-to-earn (P2P) model makes a gamer not only a participant, but an owner. An owner of the game’s assets. Assets like land.
In this article, we’re going to discuss play-to-earn games (P2P) and why they are superior to the previous era of video games.
To start, let's define what play-to-earn games are
They're games where you earn rewards (objects like swords, armor, or land) for completing tasks or missions. The rewards are represented as NFTs and stored on the blockchain.
How are play-to-earn games different from games of the past?
Messari broke down (paywall) the history of games from a business model perspective.
Here's the TLDR.
Pay-to-play (P2P): The first video games
When I grew up, the game-playing process was simple. I paid money for two things: the console and the game. First, I bought a Super Nintendo; then I paid for Mario Cart. There was no internet so I could play with others, no expansion packs. Nothing was free.
And with pay-to-play, all the value accrued to the game maker.
Free-to-play (F2P): Democratized access to games
Free-to-play came along in the late '90s. With this model, you downloaded a game, and game makers made money through ads or premium subscriptions.
I see this model every day. The games my daughter plays on my phone make you watch ads unless you buy the game outright.
League of Legends took free-to-play mainstream by selling cosmetic upgrades, called skins. And the creator of League of Legends, Riot Games, became a multi-billion dollar company.
These games started giving more control to the player, but game makers still captured the majority of the value.
Play-to-earn (P2E): GameFi
Play-to-earn games differ from the old models in one fundamental way: objects and rewards accrued in the game are assets that players can sell, trade, lend out, or stake as collateral.
With P2E, time equals economic value. In the old model, you could spend 100 hours building your character and acquiring objects and get no monetary value.
With P2E, those objects are assets. And players capture a greater slice of the game's value.
For example, my daughter has accumulated hundreds of objects in Animal Crossing. She spent an ungodly amount of hours doing this. And she gets no economic value for those objects or her time. If Animal Crossing was a P2E game, all those objects would be NFTs, and she could sell them on a marketplace or lend them to other players.
In fact, guilds are popping up to do just that. For example, Avocado Guild buys in-game objects, lends them to gamers, and splits the rewards with them.
Avocado Guild raised $18 million and is on an $80 million revenue run rate this year. The company is only six months old🤯
How can we participate in play-to-earn games?
There are several ways, but first, here's what I'm doing.
I'm starting with something simple.
Update: I tried to stake my $AXS tokens but the gas fee to transfer my $AXS to my Ronin wallet was prohibitively expensive.
- I tried this transaction during regular business hours. I've heard gas fees are cheaper on weekends and late in the evening or early morning (2-3 a.m.) hours.
Other ways to participate
- You can play the games and earn rewards.
- In Axie, you can buy Axies and land through its marketplace.
Games are coming out every week, and hundreds more are in development. Unfortunately, it's too many for me to keep up with, but here are a few I've seen lately.