Play-to-Earn: Gaming Future Forecast | Deep Dive

Review Date: November 13, 2021

What does GameFi mean?

Play-to-earn games are a trending concept that refer to enjoyment associated with gaming that you can then monetize with DeFi, NFTs, and blockchain. For instance, the ability to financialize in-game economies, achievements, identities, and even use crypto components to increase competition amongst players XXXX. We at Token Metrics Venture believe this is a paradigm shift, where a gamer has the chance to monetize his or her time and have ownership of its gaming assets. Blockchain facilitates this, as gamers now have verifiable ownership of gaming assets and access to the marketplace for trading inside and outside the game. Before crypto gaming, this was not possible.

Play-to-Earn. Earn. Earn.

We have seen a new type of gaming category emerge called P2E gaming. Its main allure is the ability to earn money by playing the game and spending time in a game’s economy to acquire different assets. The most famous example of this category is Axie Infinity (AXS), which has a fully diluted valuation of $27 billion. We have seen the popularity of this game explode, especially in the Philippines and Vietnam, where dedicated players in these low-income countries can make a living out of playing these types of games. Even with poor gameplay mechanics, these games are appealing to players who want to make real-world money.

Investment thesis on P2E gaming

Play-to-earn games focused on earning rather than superior gameplay are quick to market. One doesn’t have to spend multiple years in game development or focus on having AAA graphics as long as the token economics of the game are strong. These games can use their inﬂationary token emission to bootstrap gaming networks and capture player interest, as players use these token earnings to make a living. For crypto-native users, these games can also be thrilling to invest in, regardless of whether these games are fun or not. Crypto users ﬁnd in-game airdrops, staking, farming, NFTs, and the ownership of in-game assets (land, skins, avatars) akin to DeFi yield farming. We believe, just like you can’t solely rely on high yields and APY to sustain a poor DeFi protocol forever, similar is the case with current P2E games.

We think pure play-to-earn games will dominate in the short to medium term. But we do not see long-term sustainability unless the gameplay and or graphics induce an element of fun. We believe that enjoying the game remains the most critical element for mass adoption.

We do see P2E doing well in the short run for a few reasons. First, there has been an explosion of gaming guilds that focus on earn-ﬁrst games. Gaming guilds are syndicate pools that ﬁnance gamer expenses and provide them resources (NFTS, training) and scholarships in exchange for a

revenue-sharing agreement. The revenue-sharing deal, in this case, basically means splitting tokens earned and NFTs acquired (gaming achievement, items, avatars, lands, and so on). Two guilds leading the market right now are YGG and Merit Circle. We think that with the help of scholarship and guilds, the network effect of P2E will initially remain strong, however, gradually, the earnings of these guilds, by extension also the revenue of the P2E game, will also decline, as the positive feedback loop from inflationary token emission reduces. We already see early signs of revenue decline in AXS.

P2J (Play to Joy)

We absolutely recognize that crypto and Play-to-earn game mechanics will allow games to easily incorporate e-sports (gamers betting against each other with bets settled in crypto). Gamers can furthermore own in-game achievements, items, memorabilia, and have a side income. We believe gamers have already started asking why it wasn’t always this way. For this reason, developers are increasingly incorporating crypto and blockchain technology in gaming. Around 58% of the 197 video game developers surveyed in the US and the UK declared plans to use blockchain in future games. 47% of the same group have already begun incorporating NFTs in their projects for this exact reason.

The irony of this situation is that crypto and P2E mechanics wouldn’t be the game-changing feature — it will become the pre-requisite. The way we see the gaming sector is that “enjoyment.”

For more play-to-earn games, make sure you check out our designated section in the blog: Hidden Gems.