Are Play to Earn Crypto Games Still Profitable?

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Contributor, Benzinga
July 14, 2022

Play-to-earn games are a broad category that brings together variations of digital farming, MMORPG, battle games, tower defenses and other models. The goal is to play the game and earn crypto assets, with the potential to extract their value on the open market. Most games also use non-fungible tokens, or NFT, to assign in-game items which also hold value and can be resold.

NFTs were conceived first as a blockchain standard to assign real items to a token, keeping a record on the blockchain. One of the initial ideas was to assign NFT tokens to real estate. But NFTs are mostly used for digital creations, in-game items, images, video and more rarely music. Within games, NFTs usually include playable characters, armor, enhancements or craftable items.

The newly emerged collection of games worked in multiple ways: one, they reached out to end users and taught some to use a crypto wallet and trade for the first time. And two, the games promised blockchain utility, leading to new rounds of investment. Games became a promising element of building new projects and testing out the capability of new blockchains.

Earning within the game worked by issuing crypto tokens for in-game actions. Axie Infinity was the first to introduce the two-token model, by minting Smooth Love Potion (SLP). Players could earn SLP by playing and choose to sell SLP for cash, or use it to breed more Axies, the game’s playable characters. This model was viable while player count grew and SLP could reach a favorable exchange rate. The hype also lifted the price of Axie characters to $100,000 or above, and the game even sold digital land plots for millions in valuation.

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How Projects Burn Out

The Axie Infinity model, which was copied by other play-to-earn games, relied on two unsustainable factors - a bull market for crypto assets and a constant inflow of new players and Axie buyers. Those conditions existed only for a few months.

Over time, the Axie Infinity model could not be sustained anymore. Player count and net earnings fell off a cliff. But in the seasons when Axie Infinity was successful, other games started to appear almost daily, hoping to copy the model. 

Some games like Pegaxy and Crabada did become extremely successful in terms of player count and overall popularity. But the games also had to raise their defenses against bots, which they are both doing successfully so far. 

Crabada adapted, adding more human-centered play with battles and decision-making, in place of the idle resource game. Pegaxy banned the wallets of accounts identified for bot activity.

Axie Infinity was also not finished with its evolution, going back to the drawing board, working on its Origin update and a more sustainable P2E model. Axie also gave some signs that its future lies in onboarding free-to-play registrations, reaching 600,000 registered users for the testing of its new version.

How Organic Growth Works for Games

Games on the blockchain launched within multiple genres and offered varied game mechanics. Game action only happened off-chain, with limited records on token transactions and NFT usage and sales. 

Farming-style games rely on a slower, more sustainable model to build in-game assets. For example, Sunflower Land, Every Farm and others try to keep players for the long haul by offering almost constant farming and item challenges. The earnings model allows the items to be exchanged for a token, which can then be hypothetically sold for fiat.

For instance, Sunflower Land encourages farming, but not the immediate conversion into tradable SFL tokens. The added layer of resource-gathering can help avoid the fate of Axie Infinity, where each game produced more and more Smooth Love Potion (SLP) tokens, driving the price down 99%.

The simulated crypto mining game Mining Network also added a divide between in-game resources and the game’s token. Instead of receiving tokens outright, players of Miner Network first had to generate and accrue “hashes”. Earning the in-game BTK token depends on the supply of in-game resources, which prevents a rush of players to cash out.

Slow organic growth is also used as a way to retain players. Mines of Dalarnia uses upfront fees to join mining missions, and players are only profitable after they upgrade. This allows some leeway for the project to gather and redistribute tokens for rewards. Internal marketplaces and item exchanges also help build an in-game economy based on real player activity. 

Other games like Sunflower Land have a fixed signup fee to mint an indispensable farm as an NFT. Later, rare or hard to craft items can also be sold on the market or owned as game trophies.

There is also a third approach where already developed Web2 games try to add a play to earn or NFT element in a way that is simple and intuitive to their players. Castle Crush is currently working on adding an Avalanche-based NFT and token element to a game already downloaded by millions of accounts worldwide.

Games on the WAX blockchain can also be tied to a Web2 account on Google or Facebook, while also seamlessly creating a wallet to minimize clicks and make the experience smoother.

Can Games Exist Without Forced Item Purchase

The NFT market reached its peak in late 2021, driven by the popularity of markets like OpenSea. But play-to-earn games try to reactivate this market while giving new utility to NFT. 

More P2E games choosing to launch in 2022 offer an option to start out for free. NFT purchases may be optional or happen once the player is happy with the game. 

Players may also wish to wait for better conditions on crypto markets. But there are many players on the sidelines who want to just login the usual way, using Web2 resources, while also gaining access to a Web3 ecosystem. 

Each game tries to establish its own balance, somewhere between extremely aggressive pay-to-win and optional in-game items that grant advantage and faster leveling opportunities. 

The future of gaming with an earnings model may lie in reaching out to players with almost no awareness of crypto assets or wallets. A free-to-play onboarding cuts a substantial part of the risk and worry of over-investing in a game.

About the author:

Konstantin Dinev is the co-founder and hands-on leader of his own group of development companies. He has motivated and managed a growing team of experts across an ever-expanding technology stack. Over the course of 15 years, Konstantin supervised hundreds of projects to completion, reaching millions of customers on web, mobile and gaming ecosystems. In the past couple of years, Konstantin is moving into Web3 and self-managed products. Konstantin is currently working on TimeShuffle, an NFT game that introduces the play-and-earn model where the fun of gaming is at the core and earnings follow player engagement.

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