Play-to-Earn crypto games have exploded onto the scene and are shaking up gaming business models. Here’s how they work and where the value for investors comes from. | Currency News | Financial and business news

  • The value of play-to-earn crypto games comes from a variety of sources, not just one thing.
  • A game’s popularity and demand for its underlying crypto token are part of the equation, along with transaction fees.
  • Such a business model relies on a constant new flow of players entering the ecosystem and adding value that can be extracted by others.
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Play-to-Earn games like Axie Infinity and Decentraland are exploding in the crypto world.

They seem to be revolutionizing the gaming industry with a very attractive new format with huge appeal.

What is the source of the money?

The value of all play-to-earn games comes from the currency players earn on the platform. But not all games have the same model, and some small names are just looking to take advantage of the metaverse craze.

Most games have native tokens for in-game purchases and trading between players. They derive value from the use of their tokens which users and cryptocurrency traders deem valuable, according to blockchain developer James Bachini.

For example, the model used by Axie Infinity relies on players making a large initial investment in game-specific NFTs (or Axies, in this case). Players can then trade their in-game digital assets – earned by playing – at an appreciated price with other players, who continue the loop to inject value into the game economy.

“If everyone decides to leave and swap their Axie tokens for other digital currencies, the value of the token plummets,” Bachini said. “If the game continues to be a success, the demand for the token continues.”

The game’s owners and investors are confident that people will continue to play it and pour money into it. This is because ownership of digital assets is becoming more accepted by the general public.

Indeed, Axie’s axs cryptocurrency gained 18,000% in the year 2021, while Decentraland’s mana token rose 4,000%, ranking them both among the best performers in the world. crypto space last year, all thanks to the popularity of play-to-earn games and the metaverse.

Am I guaranteed to win money by playing?

No. But it depends on the time you invest in the game, its popularity, and the demand for the game assets or the underlying token.

“Gambling to win is not a magic pill that will make any game profitable for players, but it does set a precedent and a canvas for such valuable payout gaming,” said Diego Di Tommaso, co-founder of the open-source AR platform OVR. .

Is the business model sustainable?

Possibly, but there are a number of issues associated with this concept as the lure of making money could dilute the gaming experience. A major risk is a game’s ability to continue to grow the economy he intends to build.

According to Adrian Kolody, founder of DeFi startup Domination Finance, the only way a game-to-win model can be sustainable is if the users of the game are high-quality.

Being entertained and having a good time while gaming could be watered down by people using bot-farmers as a way to get more out of the game just for residual income reasons, he said.

“The behavior of the bots also encourages automatic dumping of the token rewards you receive from these games,” he said. “This leads to negative price action and can mean certain death for some of those projects that rely on their token to succeed on sufficient track.”

Additionally, the continuous trading of in-game assets creates the need for a constant influx of new players to maintain the business model and develop revenue streams.

How does the game itself win something?

Easy. Transaction fees! New players incur fees for purchasing in-game currency, which is a major source of revenue for the game. The most attractive part of the game is the appreciation in the price of native tokens.

Games with strong communities and brands have an edge over others.

“Axie’s sustainability will be based on how quickly it can grow its player base and bring additional utility to its in-game assets,” said Koh Kim, ecosystem manager at the blockchain infrastructure startup. Mysten Labs. “Axie has literally changed people’s lives – it’s their competitive edge. No other play-to-win game has this level of loyalty.”

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