-Penned by Jeevan Joseph and Rajdeep Sil
This Macroscan explores the vast ocean of money making opportunities in the emergent Play-to-Earn (P2E) segment powered by blockchain elements.
The gaming industry has always been synonymous with fun. However, in recent times, it has matured beyond merely being a provider of entertainment options and has opened up some great money-making possibilities. With the arrival of Web 3.0, these possibilities are only set to increase. At the end of 2019, the global gaming market was valued at around $152 billion.
The gaming ecosystem has witnessed major transformations over the years, going from games like Mario to GTA Vice City to Assassin’s Creed. In fact, in the current scenarios, people are willing to spend hundreds of dollars for various in-game items like skins, weapons and other amenities to further enhance their gaming experience.
But here’s the catch, the reader would definitely agree that whatever amenities you purchase from these games, they remain within the game and present no opportunities of value addition in the real world. Further, it is majorly the developers of the games who made financial gains while the gamers only spent money to enhance their gaming experience. However, all of this is set for a change with the advent of a new ecosystem of gaming, namely the play-to-earn games in the metaverse, which is set to become an economy of its own.
Rise of Play-to-Earn (P2E) Gaming
The entire concept of play-to-earn rests on the success of metaverse & effective implementation of blockchain technologies. At a high level, metaverse will be a 3D representation of a virtual world and it will be in these virtual worlds where these play-to-earn games will be hosted and will form a self-sustaining economy of a “gaming metaverse”. In these gaming metaverses, people can buy real estate, create avatars as their own digital representation. In the metaverse, they can also conduct any other economic activity that can be performed in the real world. What makes these play-to-earn gaming models special is that this embraces the idea of an open economy and rewards every user who can contribute to value creation by playing & spending time in the ecosystem. This space is receiving a lot of attention especially after the covid induced lockdowns which made people take note of this potential & rising space in gaming. If we look at the investments, these blockchain based play-to-earn gaming ecosystem has already received $476 million worth of investments in the first half of 2021.
In fact, in India a gaming metaverse called Zionverse is already on the rise & has also launched its own NFTs called the Lakshmi NFT.
Philippine & its tryst with P2E Games
During the covid-19 pandemic, like any other economy, Philippines was affected quite negatively as well which saw a GDP contraction of nearly 9%. As a result, many people lost jobs and their livelihoods were destroyed. In the middle of all this, people got to know of a game called “Axie Infnity”. Axie Infinity uses NFTs for the rights to each of the pets (referred to as Axie). These pets are used as a tool to play the game, complete various missions and much more. The better you play, you earn something called SLP (small-love potions), these SLP can be sold for cryptocurrencies and ultimately can be swapped for the respective domestic currency. The money that they received from playing Axie infinity was a great temporary substitute for their regular income.
One of the Filipino players, who is also a mother of three, was quoted as saying : “What matters is having money so we can eat, avoid debts and get through every day. It [Axie Infinity] sustained our daily needs, paid our bills, and debts”.
In fact, the game has become so popular that the Philippine government is considering imposing taxes on the income earned from Axie Infinity.
Modes of earning from P2E Games
Having read the case of the Philippines, where a game like Axie infinity became a major source of income for the residents there, we see a need to explore the economics behind such a game. How is it possible for a video game to provide so much economic value and how do these mini economies even sustain themselves?
Revenue earning models:
a) Direct Revenue:
In this mode, the player makes an initial investment in the NFTs required to participate & play the game. Having acquired the necessary NFT, these are then used to play the game, during which various activities like breeding of pets, buying, selling, development of land and many more such economic activities ultimately cause value creation to take place. Now this value creation can be in multiple forms like : upgradation of the possessed NFT, acquiring of a different digital asset and many more. With the value being created, these NFTs can be turned into a crypto token which can be further converted into a real world currency through various crypto exchanges.
In fact, there are many existing marketplaces where this trading of NFTs happen in exchange of the cryptos. The most popular of them being ‘OpenSea’.
b) Rental Revenue:
With increasing popularity of these play-to-earn games, the demand for these NFTs is also on the rise, which is causing the price of these NFTs to increase substantially. As a result, many people may not be able to afford such expensive NFTs. In such cases, rich investors buy these NFTs and rent it out to the players to play the game. Thus these players pay a rent for using these NFTs and with their gaming skills create value from the game, which they can exchange for real world money.
It can be observed from the graph the price of the Axie Infinity token prices is on the rise driven by the increasing demand of these tokens.
Currenc-I’s take on P2E Games
The concept of play-to-earn games which are based on blockchain technology are very much still in the budding phase. With players being allowed to create new digital assets, trade them using the game’s infrastructure & earn virtual in-game currencies that can be easily sold for other cryptocurrencies & fiat currencies, this definitely looks very lucrative on paper.
However, the creators of these P2E games should be cautious in designing incentive structures that are not based simply on gameplay alone. In this case the players will move out easily from one game to another in search of more income.
Since, the game will be operating in the metaverse, where the opportunities are endless, it is essential that the games are able to create a culture & an ecosystem around the games, so that they create a niche for themselves which is bound to attract investors & players alike. This will help it to stay sustainable for a longer duration of time. Will these play-to-earn be the future of gaming or will it just be a bubble that is on its way to burst? Only time will tell.
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