Power to the Players
How to change video games to put the power back into the hands of the players
6 months later, this post deserves an addendum. Axie Infinity has experienced a catastrophic collapse in value, in line with the wider crypto market onslaught. Play-to-Earn gaming, in almost all forms and capacities, has failed to live up to the spirit and desire expressed in this piece. Market dynamics aside, it strikes me as generally unsurprising that crypto PtE games like Axie Infinity, DeFi Kingdoms, and StepN have largely failed in capturing enough transactional velocity to maintain solvency. None of the aforementioned projects have failed yet in the traditional sense, but I do think these games, which we can consider a “v1” iteration of PtE experiments, have surfaced the critical issues that these types of primitives face, and what must be solved for in order to actually create an impact on today’s video game industry.
I don’t try to shy away from the fact that these games begin as grand ponzi schemes. I don’t mean that in a negative or accusatory way. It’s almost as if there is an unwritten law of crypto that states new projects are ponzis until they aren’t. While the word “ponzi” isn’t used in this piece, I certainly don’t attempt to veer away from that ugly reality.
The original title for this post was “Play to Earn a Living”, because one aspect of this experiment I was excited about was the dramatic increase of daily active users from underserved parts of the world. That title missed the forest for the trees - while that aspect is deeply fascinating, it is perhaps the biggest reason the ponzi flywheels were unable to keep up spinning, and resulted in a cratering of value.
I think that there is a truly novel primitive being explored here that grants gamers more ownership over their experience than they currently receive, told through the lens of a once-hot crypto startup. That is the primitive I’m interested in continuing to explore, and hope readers coming back to this keep it in mind.
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Tropes about blockchains democratizing money and enabling accessibility to financial services are common these days. There are examples of Bitcoin being embraced in nations with highly unstable or devalued currencies to enable new financial infrastructure. But what if blockchains could do more than just democratize payments and services? What if you could achieve everyone’s childhood dream of being paid to play video games?
That is exactly the thesis behind games like Axie Infinity that introduce a disruptive model for gaming called Play-to-Earn (PtE). Axie Infinity is a PVP and adventure-mode game akin to Pokemon where you can battle, breed, and trade NFTs called Axies. The game is turn-based and highly strategic; a skilled player might equate the combat engine to chess. Its childlike visuals of internet pets battling disguise an elegant complexity that requires significant time and effort to master.
And Axie Infinity has been a money printer to the tune of over $10 million in revenue per day. It has exploded in popularity, and the momentum doesn’t seem to be slowing down any time soon. Separately, the marketplace for buying and selling Axies is robust, and an entire financial ecosystem has risen around it. Smooth Love Potions (SLP) serve as the utility tokens that players earn simply by playing the game, and can be used to breed new Axies or be exchanged for a different token or currency as earnings. Axie Infinity Shards (AXS) are the governance tokens that enable users to own a piece of the platform and have a vote in future developments. These currencies work together to create the levers that enable a vibrant and stable economy.
Why does a game even need a blockchain? Because it decentralizes ownership; just as a Uniswap holder can vote on updates to the protocol, AXS enables community ownership for Axie Infinity players. Sky Mavis, the company behind Axie Infinity, holds a large amount of the AXS supply in a treasury, and plans to roll ownership over to its community through tournaments, in-game rewards, and more. Soon, you’ll also be able to stake the AXS you own into a liquidity pool to earn even more AXS. And why is this so meaningful? We need to examine the model in place to understand its true impacts.
Pay-to-Play vs. Play-to-Earn
Gaming as a genre has seen dramatic growth over the past year, supercharged by the pandemic and people staying at home. The big studios have used a pay-to-play model for decades, in which an individual can purchase a game at an up-front cost. Epic Games took a different approach, releasing its hit game Fortnite for free and offering myriad in-game purchases for players. Epic’s new model has been enormously lucrative, and the rest of the big studios were quick to follow. The impact of this new model has been significant in removing that initial barrier to entry.
As the Ethereum ecosystem has grown with more apps being developed on top of it, gaming was a natural evolution. Games created on the Ethereum ecosystem are decentralized by nature, as the tokens that govern these games give ownership to the users rather than a central corporation absorbing all the profits. The PtE model rewards players for in-game activity with virtual currencies that can be exchanged for dollars or more in-game items. This is a tectonic shift from the traditional playbook; rather than paying for their time gaming, users are paid for it.
To play Axie, you need to purchase a starting set of three Axies, the cheapest of which are going for several hundred dollars in the current market. This may seem counterintuitive to “no barriers to entry”, so Sky Mavis solves for this in two ways: 1) they have plans in the future to enable new users to acquire a set of ‘starter’ Axies that cannot be bred or sold, and 2) they’ve enabled a scholarship function. The second item is of particular interest here, as this has become the primary method for enabling low-income peoples to play the game.
How the New Model Empowers Users
Any searches for Axie Infinity on Twitter, Discord, or Reddit will result in tons of messages from people all over the world, particularly in the Philippines, attempting to reach out to managers to join their scholarship program. A typical 50/50 split between managers and scholars can yield up to a couple bucks a day in SLP for both, which is a meaningful sum for many in developing parts of the world. All that’s needed is a smartphone and wifi to enable people in underserved communities globally to partake in a life-changing career pivot.
This is an extremely significant use case for crypto that is already being put into practice. A few months ago, I had some ETH to spare and dipped into the Axie marketplace. I was quickly hooked and began breeding Axies for profit. Then, some marketplace dynamics shifted that made me hit pause on the breeding schedule – what to do now with all these NFTs I’ve bred? I can’t believe I actually just wrote that.
Rather than just sit on the sideline, I decided to create my own scholarship program and employ some people looking to play. Not only am I able to put my NFTs to work and generate semi-passive income, but I’m also enabling someone from across the world to partake in a financially meaningful occupation. There are plenty of ways to earn money in crypto passively – but where else can I lend out my fishing rod so someone else can catch their dinner at a non-exploitative rate?
What Does the Future Hold?
PtE gaming will continue to evolve organically within the blockchain space, but I anticipate the big studios are likely to move in and take advantage of a model similar to this, if only as exposure to an alternative source of revenue. If played correctly, it could be a powerful one – reboots of classic games that studios still own the IP for (think World of Warcraft where in-game items can be bought and sold via an NFT marketplace) could be enormously popular.
Looking at Axie Infinity and Fortnite as a comparison, both games are moving toward their own version of a metaverse. These will take time and money to build, and you probably won’t be able to enter a digital experience like the OASIS from Ready Player One anytime soon. Nonetheless, building these metaverses will create new forms of value as byproducts, and the fact that anybody can own equity without the typical bureaucratic obstacles in the way is a powerful development.
For now, Fortnite continues to reap billions on kids spending their parents’ money for character and weapon accessories – items with no intrinsic value beyond a pure revenue stream for Epic Games. But owning a unique character or accessory and having the ability to sell it on a secondary marketplace unlocks exponentially more value for the players, thus creating a more loyal community and a stronger flywheel effect.
PtE gaming is so early that it’s hard to pick the winners; regardless, in this new model the power is finally returning to the hands of the players.
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Disclosure: I own assets mentioned in this article. This is not investment advice.
Special thanks to Jean Louis Trint for assisting with this post.
Fire post!! I am still concerned with the concept of earning real currency from playing a video game— it makes sense when you think of the effort you have put into a game such as Warcraft, that eventually you would have millions of coins within the game, but if that were true currency? What would give blizzard the ability to give them currency? I guess the main question is how does the hosting platform have the ability to distribute currency? Simply through the appreciation of the value in their shares?