The bear market is forcing GameFi projects to rethink their user retention strategy: as daily token rewards become less attractive, the focus is shifting to the long-term value of holding game NFTs and to free-to-play as the best way to attract players.
The Fundamental P2E Problem Uncovered by the Bear Market
When Play-to-Earn (or P2E) crypto games exploded in 2021, many called them the new iteration of gaming poised to replace “obsolete” mobile or desktop games, a bit like Web3 should replace Web2.
Indeed (by this logic), why should users continue to play traditional games where they earn nothing (and pay for premium features) when they can earn passive tokenized income in P2E? At the height of the Axie Infinity hype, the top players were reportedly earning more than $400 a day — much higher than the median wage.
Then, of course, came the big correction that hit Play-to-Earn hard and exposed its biggest flaws. As P2E and metaverse tokens fell by 90% and competition remained high, “passive income” became so meager that for many it was no longer worth the time to click.
The classic P2E model only works as long as new players continue to join a game, so the demand for its token grows faster than the inflationary supply. Once public interest begins to wane, the effect of hyperinflation kicks in and prices fall, eroding players’ daily profits. Axie’s own SLP token is a prime example, with a hype peak followed by a long descent to zero.
What Play-to-Earn should learn from free-to-play mobile games
At this point, it’s time for the P2E industry to stop and take a hard look at what makes so-called ‘obsolete’ mobile games so successful in the long run – even if they don’t pay a monetary reward.
For example, in the second quarter alone, Candy Crush Saga made $200 million on Android and iOS, while Rise of Kingdoms made nearly $170 million to reach a total of $2 billion on iOS alone. And Roblox, a metaverse seen as a competitor to Decentraland and The Sandbox (only without a blockchain token or NFTs) made $68 million in revenue.
Please note that all these games are free to play (F2P), which means that users do not have to pay anything upfront to enjoy the product and can freely choose to purchase additional features later. In addition, some premium games are moving to the F2P model because it turns out to be more profitable in the long run: Overwatch, for example, is now abandoning its system of paid loot boxes.
This is in stark contrast to most P2E blockchain games, where you normally have to buy an NFT (or several) to use the game. Take DeFi Kingdoms: At the peak of its popularity, a single Hero NFT was worth about $400.
How do F2P games like Candy Crush, My Little Universe of Honor or Gods manage to attract many times more users than P2E games and earn hundreds of millions of dollars? The answer is engaging gameplay that keeps users coming back – something that Play-to-Earn games generally don’t offer. In other words, a game that requires users to pay to let them play has failed in its most fundamental goal: to be interesting.
Instead of talking about “a new era” in gaming, Play-to-Earn platforms should implement the best practices of free-to-play projects to keep engagement high, even during the bear market. This is already happening through a combination of two new trends: F2P blockchain games and P2O, or Play-to-Own.
Why the best GameFi projects are moving to Free-to-Play
NFTs are a huge innovation for gaming and a major source of revenue for the publishers, so it wouldn’t make sense to get rid of them or make them free. Instead, an F2P blockchain project usually has a section that doesn’t require NFTs and another, more advanced part of the gameplay that does.
For example, Pocket Space, the first true idle arcade in GameFi, has two types of planets in its “galaxy.” The so-called Story Planets can be explored and mined for free for resources, while NFT planets contain more advanced resources, quests and other utilities.
Another example is Gods Unchained, which uses a different model: each player is first given a free set of 140 collectible cards that are not captured as NFTs. But if players use their free cards to compete in battles, they can eventually get real, tradeable NFT cards.
Splinterlands uses yet another approach: you can get a free set of NFT cards and use them in the game, but if you want to be able to sell them in the market, you have to pay $10 for a so-called Summoner’s Spellbook – an upgrade that the player turns into the on-chain owner of their NFT assets.
While the mechanics differ, the F2P approach as a whole has been very successful thus far: free-to-play games like Alien Worlds and Splinterlands top the list of the most popular GameFi dApps.
As for Pocket Space, the two-pronged approach to building galaxies will be tested very soon, as the alpha tests begin on August 25 and run through August 30. But there is little doubt that it will become popular, as 4,000 people have already signed up for a spot on the waiting list. The gameplay is inspired by My Little Universe, a worldwide hit by Estoty with 400k daily users. In turn, Estoty is a strategic partner of Pocket Space publisher Hexacore – itself a mobile gaming studio whose releases have been downloaded 250 million times.
Hexacore makes some significant additions to the proven gameplay of My Little Universe, such as the multiplayer and PvP (player vs. player) mode in the Arena and of course NFTs. They take center stage in a new GameFi model known as Play-to-Own.
Play-to-Own: a new paradigm of value generation
Play-to-Earn economies are rarely sustainable as the best strategy is to sell your rewards regularly to take profits, then sell the NFTs themselves after they get a good ROI and move on to the next game. Play-to-Own is the opposite: long-term NFT holdings provide the most value, while token rewards play a lesser role.
NFT planets in Pocket Space serve as a prime example: they belong to the players who buy them (although users can also travel to explore others’ NFT planets) and yield more varied resources, as well as more valuable treasure chests to find. are in the dungeons. Also, NFT owners can take advantage of allowing other players to get resources from their planets.
Note that the resources are not tokens that can be sold, but rather substances such as wood or stone, which can be used to craft better performing gear to extract even more value from NFT planets and win in PvP battles. This is a combination of a classic idle game (click to edit resources) and arcade (level up a character through combat and quests) – a first in GameFi.
If GameFi wants to become a real competitor to F2P mobile games, it has to reinvent itself. From Play-to-Earn with its hyperinflation to the long-term utility of Play-to-Own and from high entry costs to free-to-play, these could be the innovations that will fuel the next blockchain gaming rally.
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