What are play-to-earn games?

In the broadest sense, the Play-to-earn games that will be discussed are games built on blockchain technology. Thanks to this technology, players get great opportunities. They can own digital assets, and in some cases, control the game. There are many different games created on the blockchain.

Play-to-earn capitalization

The total market capitalization of Play-to-earn games exceeds $16.7 billion. According to Coinmarketcap.com, three-quarters of this capitalization comes from the top 5 games.

Play-to-earn games technology

When we talk about games built on blockchain technology, we mean games that use blockchain technology for one or more aspects of the gameplay. There are games that give ownership only to in-game assets on the blockchain, and there are games in which the entire game world runs on the blockchain. And between these two extremes, there are different types of games with different use of blockchain technology.

Conventionally, play-to-earn games can be divided into three categories, depending on the penetration of blockchain technology into the game.

Minimal penetration – the ability to own gaming assets

Such games run on a centralized server just like any other games on the market. However, players can buy and sell in-game items in the form of NFTs. Only the owner of that particular NFT has access to the digital asset it is associated with. As a result, the player may, for example, be the sole owner of a digital sword within a role-playing game. The blockchain logs every transaction and NFT ownership, and every player can see who owns which in-game NFT. Based on the game's popularity and in-game usefulness, NFTs have some real financial value.

Medium penetration - ownership and contribution to the economy

In addition to buying NFTs, players can create assets in a play-to-earn game. For example, the game might randomly generate a unique sword for players to find and pick up. Upon receipt, this item is stored in the user's cryptocurrency wallet linked to the game. In addition, users can collect resources and sell them to other players in the in-game marketplace powered by blockchain technology. While these types of games still run on a centralized server, they use blockchain technology to own digital assets, trade assets, and randomly create unique NFTs.

Maximum Penetration - Complete Decentralized Governance

In addition to everything described above, in this category of games, the entire gameplay is built on the blockchain. Every action of the players is recorded on the blockchain. This leads to the fact that the developers of the game lose some control over it. There are games that run on existing blockchains, and there are games that use their own blockchain, fully supported by the players themselves.

What is NFT or non-fungible tokens?

In Play-to-Earn games, we often talk about non-fungible tokens or NFTs. In order to better understand their purpose, we need to look at the technology behind them. Let's also compare a non-fungible token with a fungible token.

A token is a piece of data on a blockchain. This piece of data is stored in a cryptocurrency wallet that is owned by a person who also has the keys to that wallet. The owner of this token can be either a company or an individual, it does not matter.

Fungible and non-fungible tokens

A token may be fungible or non-fungible. A fungible token can be replaced by another without much change. For example, bitcoin is fungible because each bitcoin has a certain value. Each bitcoin always has the same market value compared to other bitcoins. There is no first bitcoin or limited edition 10,000th bitcoin. There is just bitcoin.

A non-fungible token cannot be exchanged one for one with another non-fungible token. He is something unique. This is why non-fungible tokens can be compared to a rare piece of art, your own home, or a mint-signed edition of a particular comic book. This gives non-fungible tokens also a unique value that only that particular token represents.

For example, each Axie Infinity creature, called Axie, is a unique, non-fungible token on the blockchain. However, each Small Love Potion that the player can use in this game is a fungible token. Virtual land in League of Kingdoms is an NFT because it is a unique piece of land in a specific location. The same can be said for the Sorare fantasy football trading cards. Each card is unique, numbered and limited in number. An NFT certifies that its owner is the only one who owns a particular asset.

What does full ownership mean?

As mentioned earlier, every token in a player's wallet belongs to him. Users can do whatever they want with their tokens. They can use tokenized items in games or products, as well as sell, trade, borrow, bid or simply display them.

In regular games, in-game items can only be used inside the game. For example, it is not possible to gather resources in World of Warcraft and use them to purchase a skin for Fortnite. In play-to-earn games, this is possible. The player can collect resources in League of Kingdoms, sell those resources, and use the resulting cryptocurrency to buy something completely different in another game. Value inside the game can move to different areas, and this is all because gamers have full ownership of tokenized digital assets.

What is the business model of play to earn gsmes

The Play-to-Earn business model is based on the concept of an open economy and provides financial freedom to all players. In many ways, it is similar to the business model of Free-to-play games - play for free.

The business model of free-to-play games allows gamers to play the game for free without any financial obligation. Gamers can pay for any upgrades in order to speed up their progress or get special items.

Some of the popular games are actually available for free. Among the biggest games on the market are games like League of Legends and Hearthstone. However, each developer has their own ways to get users to pay for additional features. These free games have generated billions of dollars in revenue for their creators. So the free-to-play business model is relevant, and developers have learned how to monetize free-to-play games.

The Play-to-earn business model is similar to Free-to-play in many ways. Often, Play-to-earn games use mechanics seen in free-to-play games while still allowing gamers to earn money or valuable digital assets.

In the Play-to-earn business model, developers reward players for putting time and effort into the game. For example, in Axie Infinity, players earn Small Love Potions (SLP). Players need these tokens to breed new Axies, but players can also sell these tokens to other players on the open market.

Essentially, Play-to-earn games should also be free. However, this is not always the case. For example, in Axie Infinity, players first need to purchase three Axies before they can fight in Lunacia, the world of Axie Infinity. Sorare also requires players to first invest in player cards before they can earn cards in weekly challenges. Games like Chainz Arena and League of Kingdoms are completely free, but game mechanics and restrictions force gamers to invest in the game. So even if the players earn something in the game, they also have to pay for improvements.

The advantage of the play-to-earn business model is that the player has some value to sell. Even when the player needs to pay in order to start playing, these purchased items can always be sold again. Every card in Sorare can be sold, just like every Axie.