15. What is play-to-earn (P2E) and how does it work?
Play-to-earn is a new business model for DeFi games. In this sector, gamers are no longer overlooked and treated as outcasts who are wasting their time. It is estimated that the games market could be worth as much as US$268 billion by 2025. What do cryptocurrencies and the P2E model have to do with this? Below, we explain everything you need to know about it.
Play-to-earn (P2E) – definition
The history of play-to-earn is very fascinating. In the past, before blockchain became popular, they were something that allowed us to relax after a hard day’s work. Currently, we are faced with a new generation of video games that use blockchain technology and NFTs to reward players with digital assets for their efforts.
What exactly are they? P2Es are online games through which users earn rewards of real value. They complete tasks, compete against other players, gaining levels and progressing through the game. The rewards they receive are most often in the form of assets – unique skins, virtual lands, weapons and more. All of these, come in the form of NFTs, which the player can sell and monetise. P2E games are fully decentralised in nature.
NFTs representing items in P2E games are also traded and sold for fiat currency on any NFT market. Given the sector, these are relatively few and therefore have a real, often very high value. Added to this is a blockchain, which allows players to transact 24/7, wherever they are.
Most users have welcomed the emergence of these types of games with enthusiasm. They make it possible to receive monetary rewards for entertainment that used to be completely free.
Ethereum in the P2E model – what do they have in common?
Vitalik Buterin, the founder of Ethereum, used to be an avid World of Warcraft player. As Blizzard weakened his character by rolling back certain skills, Vitalik realised how sad and unfair centralised services are. This was the driving force for him to create a new system, fully decentralised, that would allow developers to build whatever code they wanted. This is how Ethereum – the basis of Web3 and GameFi – was born.
GameFi & Play-to-earn
GameFi, the basis of P2E, is currently the fastest-growing segment of the video game industry. While traditional games tend to be closed and centralised, P2E is taking this type of entertainment to new heights. By doing what we’ve been doing – completing tasks, battling other players, gaining levels while relaxing – we earn NFTs and cryptocurrencies. This can be an additional way for us to bolster our household budget ☺.
∙ Based on the information you’ve already obtained, you’ve probably noticed that play-to-earn games have their ecosystem. They have tokens that are usually built on a specific blockchain (Solana, Ethereum, Polygon layer 2). Depending on the game, the tokenomics of a particular cryptocurrency differs and has different potential. What they have in common is the economic benefits for players. Some of the most popular P2E games include:
∙ CryptoKitties. A game based on the Ethereum blockchain. It is where we buy, breed and collect virtual cats. It is believed that CryptoKitties was DeFi’s first attempt at gamification.
∙ Axie Infinity. A breeding of adorable creatures known as ‘axies‘. It is very similar to CryptoKitties, as here we also breed, buy and sell our axies. The creatures can also be fought against each other to earn tokens or SLP.
∙ Decentraland. Virtual land. A 3D world where we buy virtual land. What can we do with it? Sell it, lease it or build our own property.
∙ STEPN application. It is presented as a new ‘move-to-earn‘ model. STEPN pays people to move. To participate, you must purchase a virtual pair of trainers in the form of an NFT. The app monitors how far the user has gone and rewards them with tokens accordingly.
Play-to-earn – history
Although it would seem that the model is very fresh, it is actually first mentioned as early as the 1980s, with a history dating back to massively multiplayer online and role-playing games.
Classics such as Island of Kesmai, Meridian 59, EverQuest and World of Warcraft, Vitalik’s favourite game, are considered precursors to the genre. These are the games that were the first to have their ecosystem, managed by players. They allowed players to trade items with each other, accumulate wealth or even sell their services. However, all of this was very complicated, and the supply and demand for the services in question fluctuated quite a lot. What’s more – players were able to bug the system and create fake goods, which often caused hyperinflation in games. So, you can see that P2E is essentially ‘progress’ in entertainment. A new way of funding and monetising in-game activity. So, it’s not surprising that the potential to make money is the incentive that drives many people to come to these games and attempt gamification.
Metaverse & P2E
All over the world, millions of people play different games. They interact with each other, creating a parallel ecosystem in which they can escape from the realities around them. What are we talking about? About a metaverse, or fictional world. When looking at P2E, we have to mention the Metaverse – a new virtual reality.
It is developing in parallel with play-to-earn games. Users of the virtual world interact as avatars and play games with each other in addition to their daily activities. Blockchain, NFT, and cryptocurrencies – these are important component of the Metaverse world. It is not just The Sandbox or Decentraland that are bringing NFT into virtual reality. Mainstream companies Meta, Samsung, Adidas, Nike, global artists or fashion houses are already making their mark in the Metaverse.
The future of the industry
It promises to be very promising. GameFi and P2E ultimately want to take a form similar to the Matrix as we know it. With avatars, players will be able to move freely through virtual reality, passing through different worlds. At the same time, they will be able to socialise and compete at all times, earning cryptocurrencies and NFTs. Major game studios have started to use blockchain and NFT technology, which will benefit them and players alike in the multi-millions. Are we in for a new video game gold rush? We await it with bated breath.
You already know what the phenomenon of play-to-earn games is all about. They are a great way to enter the world of cryptocurrencies, especially for those who are afraid of risk and are just starting out in the industry. The sector is constantly evolving and, combined with the Metaverse, will be a huge and interesting ecosystem.
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