In the summer of 2021, a new gaming movement made its way across Southeast Asia. The story of the play-to-earn NFT game Axie Infinity’s meteoric rise that year was especially evident in the Philippines, where market conditions fueled the game’s success. Home to a tech-savvy demographic with 1.4 mobile devices per capita, the Philippines has an online gaming market that will reach US$1.52 billion by 2025.
The appeal of Axie Infinity in the country, as one of the most prominent use cases of the GameFi movement, showed that the real earning potential combined with a casual gaming environment was a lucrative match. The financial return could go a long way as Philippine Axie Infinity gamers send more than ₱2 billion (about US$36.9 million) back to the country.
But a year later, after user confidence was dented following the $600 million hack of Axie Infinity, the game’s ingrained power structures and long-term economic viability have raised broader questions about the promise of play-to-earn. (P2E). After peaking at over 2.7 million players in January this year, Axie Infinity’s popularity has fallen rapidly and now has fewer than 750,000 active players.
So what went wrong with Axie Infinity and P2E – and if we take one more step back – what can we learn from other Web2 fan experiences like fantasy sports, to change the GameFi ecosystem for the better?
faulty mechanics
Ultimately, the economics of P2E lies in the commercialization of the gaming experience. Those who have been in the game industry for decades will be familiar with the powerful economic opportunities that come from strong in-game and out-of-game communities. The supply of monetized collectibles, avatars and in-game experiences will always be in demand, as long as users see their value.
This begs the question: how many people are here to buy in-game assets? and play and how many people are here? nothing but sell in hopes of making a profit? When the dynamics shift towards the latter, the supply-demand balance collapses, leading to a market that is purely full of other sellers operating on the greater theory of folly. In fact, the current state of Axie Infinity’s economy has led critics to deny that the title exploited the story of financial empowerment in underserved economies.
Entering the game hoping for a return (and profit) becomes especially tricky when you factor in inflationary NFT (non-fungible token) prices, cryptocurrency price swings, and transaction fees. As of March 2022, the average cost of a single Axie was about $37, meaning that forming a startup team of Axies could cost a user more than $110 – a totally prohibitive investment considering the average daily minimum wage in the Philippines is about $10. Research has also shown that many scientists — new users who rent in-game assets from individuals or game guilds as part of a profit-sharing model — actually make a profit fewer than the daily minimum wage in the Philippines.
Beyond the profit
If Axie Infinity taught us anything, it’s that earning is one thing, but it can’t be everything. Ultimately, if we consider it one of the first road-markers in the long journey ahead for GameFi, it’s clear that, as an industry, we need to go back to the origins of gaming as a whole. In recognition of this, Axie Infinity is gradually incorporating mechanisms to facilitate an ideological shift towards play-and-Earn to rebalance the current dynamics between players and merchants within his ecosystem.
The introduction of Axie Infinity: Origin (Battles v3), announced earlier this year included the introduction of new game mechanics, such as using runes and charms to improve the performance of one’s Axies. These would be created by issuing SLP and the game’s other off-chain currency Moonshard. As these items disappear and are refreshed after each season, players are forced to keep and use the in-game currency – effectively stabilizing the price of SLP as a token-burning mechanism – to keep their teams competitive. Whether this will ultimately and meaningfully change user behavior is up for debate.
Oddly enough, we’ve seen the same parallels in the Web2 fantasy sports ecosystem. For example, everyday fantasy sports face similar challenges where high earners “play” the system through calculated moves mapped into spreadsheets while having the cash to maximize multiple entries in a match or tournament. The economic inequality here, where the majority — 80% — of players are doomed to lose money, has led to a far from level playing field.
While everyday fantasy sports share synergies with sports betting, those who participate do seasonal fantasy competitions ultimately do this as the next stage in their love of a specific sport and as a social bond with their friends – rather than pure to deserve. Identifying and exploiting the sweet spot that allows players to tap into their love for the game and the community around it is what ultimately shifts the dynamics of P2E.
In light of the parallels, the intersection of sports and crypto has grown rapidly given the participation of sports franchises and leagues looking to bolster their fan engagement efforts. In fact, Deloitte estimates that NFTs in sports are expected to generate more than $2 billion in transactions this year — double the figure for 2021. But moving beyond collectibles toward utility and gamification, fantasy sports could be a clue. talk about how Web 3.0 can meaningfully enable a fairer gaming experience while bypassing the challenges P2E has seen over the past year.
Switch to a new model
If we combine gaming, crypto and sports, there is a chance to switch to a new model – one that promises more focus on the fundamental principles of gaming as a whole. To appeal to these gamers, we need to avoid being easily seduced by the next title or platform that comes their way. This points to the need for mechanics that allow for greater bonding between the player, the surrounding community, and the environment itself, allowing for more sustained engagement and long-term loyalty.
This attachment is especially prevalent in the sports world, where an ecosystem of fan experiences has grown into memorabilia, video games, entertainment, and most importantly fantasy sports. Here, the attachment sports fans have translates into a whole new way of expanding gameplay – where they become active participants in building their own teams and not just viewers from afar. As a result, fantasy sports have dramatically increased the value of sports leagues and franchises, from a hobby where fans follow their one favorite team to an all-encompassing passion where fans have deep-seated interests in every game.
With this in mind, a new kind of NFT gaming is pioneering a new economic model that can be described as play-to-own (P2O) to fix some of P2E’s early flaws. These games are designed to be fundamentally more accessible to new players with mechanics such as free-to-play modes and replaceable tokens to alleviate the user retention issues in Axie Infinity and other P2E games. This ensures that new players enter the game for all the right reasons – be it for gameplay or as an extension of the sports fans’ experience – while at the same time taking advantage of the accessibility and equal opportunity that Web3 offers.
In the context of fantasy sports, P2O promises an environment where players have an equal opportunity to purchase an athlete token and truly own the teams they build. The satisfaction is less in the financial incentives, but more in mastering the game itself, leading to new ownership models.
It goes without saying that the Asia-Pacific region represents a significant user base, with over 1.5 billion gamers, accounting for more than half of the global gamer population. While P2E prepared gamers for the idea that they really could own in-game assets, we believe that as an industry we can go even further by enabling them to take ownership of the gaming experience As a whole. P2O also reinforces the fact that in-game assets have intrinsic utility – in addition to their monetary value as something that can be traded and sold, they allow players to be part of a community that celebrates a sport’s fan culture.
Be it basketball, soccer (or soccer in the US), cricket or anything else involving a ball, sport is the way to Web3 for potential P2O players around the world.
Reviving the spirit of the community
P2E was a crucial first step for the blockchain gaming ecosystem that has come a long way since the early days of CryptoKitties. While it might be easy to fall back on the earning options, Axie Infinity’s battle to turn to play and earn shows that it’s important to get the economy right from the start. After all, the Web3 movement is powered by the participation of many – and what better way to embrace that than real property? Taking collective control of your gaming experience is undoubtedly much more powerful than remaining dependent on the earning and gaming dynamics dictated by a limited number.
0 Comments