By James Browning
The play-to-earn model
The largest gaming business model today (aside from the traditional pay-to-buy and increasingly-popular subscription-based models) is the free-to-play system.
Games are free to play at the basic level, and users can pay for extra content over and above this. In this way, users are pulled in with the free product and can then buy optional cosmetics or a better game experience.
Basic play-to-earn can be achieved through the same model that powers much of the modern internet: advertising. Most prevalent on mobile, these types of games show advertisements give payouts to users (usually in a form of cryptocurrency, e.g Bitcoin).
This makes common sense – the developers get money from advertisers and encourage users to play the game (more importantly, to watch ads) by promising a payout. While these payouts are real, they are small and take considerable time to rack up, only technically justifying the “earn” in “play-to-earn” title.
The new generation of play-to-earn games are built on top of blockchain technology. This means that assets acquired in the game can be traded on marketplaces for other game assets (potentially from other games entirely), or for cryptocurrency. The exact ways that developers make money from these games differs, but all bring in income primarily through transaction fees.
Fundamentally, blockchain-based games incentivise the user to play the game as the in-game rewards are owned by the user rather than the game developers, and can be exchanged (even if the game stops existing) for other assets or money in the form of cryptocurrency, rather than in a traditional game where the money and time you invest is a one-way transaction.
While the rewards from these games are small, the ability to trade them in for cryptocurrency allows those living in the developing world to leverage more relative value out of them by exchanging them for weaker local currencies. $5.8 can buy you a Big Mac in the USA, but if you exchange it to Rand and buy from a local McDonalds, you could buy two Big Macs with a little change to spare.
But which games?
The crypto play-to-earn market is seeing a huge amount of investment and diversification.
However, with only a couple years of development behind the market, this means a lot of choices and few that are actually worthwhile in terms of real earning potential.
Many games are play-to-earn but can be more accurately described as games with potential monetary rewards, such as the fantasy football-meets-crypto service Sorare. In terms of games where you can reliably exchange your time and effort for money, there is currently really only one option.
Initially released in 2018, Axie Infinity has been the stand out star in the blockchain play-to-earn space. The Vietnam-based game exploded to popularity in the Philippines during the pandemic, as poorer individuals turned to the online world to generate income.
The game itself consists of battling your team of 3 Pokémon-esque creatures against the teams of others in a turn-based card system.
These creatures, called Axies, are the primary in-game asset, with their price being based on how valuable they are for battling. Axies can be traded and bred with each other to create new Axies.
Playing the game earns the user SLP (Smooth Love Potion) which can be used to breed Axies or trade on the marketplace for Axies or to cash out into Ethereum.
Users are capped at the amount of battles they can play per day (lest the economy implode), and based on two hours of play a day earning 75 SLP (a middle-ground estimate higher than the lowest amounts but lower than the upper bounds of about 150 SLP daily), one can expect to earn around R168 a week.
But here’s the catch – Axie Infinity could be better described as ‘pay-to-earn’, because to begin playing you need to invest money in buying your first three Axies. Of course, you can then re-sell them on the marketplace, but that doesn’t make the initial investment of around $300 or R4400 for a decent team (with no guaranteed return of investment) much easier to stomach.
What the majority of players turn to is what is colloquially known as Axie Scholarships, where one ‘rents’ someone else’s Axies to play with, with the ‘manager’ taking a percentage of the earnings. While the author is cautious to condone any kind of rent-seeking behaviour, this arrangement does have its benefits.
The player does not take on the risk or cost or the initial investment, and can get access to Axies of a higher quality than they could have afforded, enabling them to earn more SLP. Earnings vary wildly depending on the manager’s cut and the team they rent to you, but one can expect an average of about R130 a week for 2-3 hours of daily play.
The time-to-money ratio isn’t fantastic, but does allow you to exchange some time gaming for real-world value. The real potential value of these games is the fact that you are being rewarded in cryptocurrency. This ties the value of your rewards to the value of the cryptocurrency the game is built on (in this case, Ethereum), with increased cryptocurrency value leading to higher earnings. These games sit atop the messy, speculative value of cryptocurrencies which is both their greatest potential upside and their riskiest weakness.
A game such as Axie Infinity can give anyone with a basic smartphone (or desktop computer) the ability to earn small amounts in exchange for time spent gaming. This is valuable at a time when employment and income opportunities are scarce, but importantly also gives people the opportunity to ride along with any future growth of the crypto market.
Luckily, you can give the game a try without spending any money or finding an Axie Scholarship. Just last week, parent company Sky Mavis announced a free-to-play version called Axie Infinity: Origin, which requires no initial investment or involvement with cryptocurrencies.
IOL Wealth