The video game market is booming and it’s not likely to slow down anytime soon. Does blockchain technology have anything to add?

You no longer need to rise through competitive DOTA ranks or become a Starcraft master or even actually be a gamer to compete and earn money professionally.

The nascent GameFi explosion is using blockchain gaming and play-to-earn to change the way we play games. In many existing and growing games on the blockchain, players are rewarded in tokens for creating value for other players.

The cynic inside all of us might be a little confused and suspicious.

After all, it is complicated to explain how playing video games makes a user money out of thin air. From the outset, it isn’t exactly intuitive as to why video games would require blockchain integration. Yet thousands of people across the Philippines, Indonesia, and Venezuela are using the play-to-earn ecosystem of one such game, Axie Infinity, to pay their bills.

The virtual economy of Axie Infinity is proof in the eyes of many venture capitalists and gamers, that this model really could be sustainable.

While other Play-to-Earn games haven’t generated as much uptake, Axie allows video game developers to expand their tendrils into the blockchain space. Video games are constantly pushing a player’s limits through creative and ingenious design and gameplay.

For many people in the Philippines, Axie Infinity is (or was, depending on the AXS token price) a sufficient for earning a monthly income in a non-exploitative manner. Throughout the COVID-19 pandemic, Axie Infinity was an important source of income for different types of people across all walks of life. Top players raked in as much as $400 US per day  while the average user might have earned $400 US in a month. For many in the Philippines, this was sufficient for paying the bills and buying food; in fact in 2018, the average monthly salary was equivalent to $270 per month.

By May 2021, Axie Infinity’s head of growth Jeffrey Zirlin revealed that more than 60,000 people were playing the game.

“Axie is its own economy. It might have swings like any emerging market based on macro factors, but long long term we believe that our digital nation will experience high GDP growth which will spur our in-game economy,” Zirlin said at the time.

With multiple modes of gaming, Axie Infinity continues to innovate as a leader in the P2E space. But, other Play-to-Earn and GameFi apps are slowly gaining traction and growing, each with unique mechanisms for monetization. Investing in these games requires an understanding of their underlying economy, risks, and perhaps whether you even like the game. 

We like that our players know their Axies will exist on the blockchain, regardless.

– Trung Nguyen, Axie Infinity Lead Engineer

Axie Infinity

The world of Axie Infinity was crafted by developers who had a deep interest in play-to-earn video games. One of the main developers of Axie Infinity, Trung Nguyen was previously enamored with CryptoKitties, one of the first-ever blockchain games; here platers would buy, sell and breed virtual cats on the Ethereum blockchain. 

Nguyen and some of his friends began to dive deep into the CryptoKitties ecosystem, making their version of a Play-to-Earn video game. The beta version of the game was released in the middle of 2018, featuring creatures based on the amphibious, endangered Mexican axolotl, or Axies. 

Nguyen would then become the co-founder and CEO of the Vietnamese gaming company called Sky Mavis, involved in the development of the game. 

How to Play Axie

The Axies live in an environment called the Terrarium where they can be cared for, put into a team roster, and also engaged in battles. Of course, it also allowed for different Axies to breed, leading to infinite potential combinations. The Axies themselves are non-fungible tokens (NFTs) created on the Ethereum blockchain; each ERC-721 token represents one Axie with its one-of-a-kind traits. 

While Axie initially required a steep investment to buy Axies and form a team, community interventions allowed the community to lower the barriers to entry. Some people who own Axies can now “rent” them to newer players, earning a chunk of the renters’ winnings in the process. 

Where Does the Money Come From?

There are two different types of tokens functioning within this ecosystem called Axie Infinity (AXS) and Smooth Love Potion (SLPs). 

What Does AXS Do?

AXS is an ERC-20 governance token with a total supply of 270 million; it is distributed through playing the game or as staking rewards. As a governance token, the gamers themselves have a say in the development of the platform. The community treasury can then reward the users that participate in governance through staking. In addition, players can buy Axies through the Axie Infinity marketplace using AXS.  

The value of AXS hovered below $0.20 until its enormous rise in 2021, hitting highs of $150 in October.

It is still in the Top 100 of crypto tokens by market cap but (like almost everything else in crypto), the value of AXS has decreased dramatically since then.

What About SLP?

SLP is earned by playing the game; combined with AXS it will allow you to breed 2 Axies to make a new one. It takes 5 days for an Axie to reach maturity. At that point, you can use it within the game or attend to sell it on the marketplace. SLP has hit heights of over $0.30 in April of 2021 but currently sits at around $0.07. There is no cap on the amount of these tokens that can be issued.

What Does Blockchain Have to Do With Any of This?

Through the use of the blockchain and smart contracts, Axie allows users and gamers to have a say in the developmental process. Effectively, the economy combines two different tokens along with NFTs which are highly sought after on major cryptocurrency exchanges and secondary NFT markets. 

Multiple Play-to-Earn Mechanisms

Player:
Once you own three or more Axies, you can engage in battle and start earning rewards within the game. With enough AXS and SLP, you can breed your Axies and even sell them on the secondary market or rent them out. However, there is a steep barrier to entry as the Axies cost hundreds of dollars apiece.

Scholar:
Veteran players and breeders will often run a scholarship, giving out a team and guidance to a new player. While the user can “rent” out these Axies to play and earn SLP, their manager will receive a cut of all the SLP that they earn. If a scholar receives 70% of the profit, they could make up to 120 SLP per day.

Breeders:
Some veteran users buy up and breed Axies, especially rarer ones, to generate more Axies that they can either sell on the secondary market or rent out through a scholarship.

Land:
Buying virtual plots of land serves as an economic investment within the game’s world. It will generate resources that can be used on the land and also for upgrading Axies. Different types of lands come with their own perks; it makes the most sense to buy land if you’ve already got a lot of Axies and resources.

The Play-to-Earn Landscape

There’s Axie Infinity, and then there’s everyone else.

While there are plenty of ambitious projects and virtual worlds, none of them have gained traction or kickstarted an in-game economy as popular as Axie. The Axie Marketplace alone has had almost $2.7 billion in volume from sales of Axies. But what are the other compelling Play-to-Earn games and ecosystems in the works?

There are similar games like Kryptomon, which bears many similarities to Axie Infinity as players can breed, sell and fight with NFT creatures. Other games are being developed using the Polygon and Binance Smart Chain. 

Meanwhile, open worlds like Decentraland are selling 3-D plots allowing for the independent development of games within the world. You can either develop your games or rent out the land you own to virtual tenants. These spaces allow for NFTs to be used across multiple games within the ecosystem. These worlds will require some incredible games to draw in a significant amount of players. 

Other decentralized autonomous organizations like Crypto Gaming United, amass NFTs from various blockchain games. Then, they can rent out the NFTs to different scholars, earning the community a chunk of the total value. 

While boredom and economic instability in certain countries managed to attract hundreds of thousands of users to Axie Infinity, it is unclear if any of these other platforms will do the same.  

Takeaways

Play-to-Earn games may create multiple decentralized virtual ecosystems.

Axie Infinity, despite being only a few years old, has matured into the leader of this space. The game involves users breeding, selling, and fighting using cute creatures modeled after the axolotl. Through its governance token, the gamers can actually dictate the path forward as Axie Infinity continues to expand and grow.

Players who have three or more Axie NFTs can battle with other players, receiving AXS and SLP as a reward. Later, these assets can allow a player to breed two different Axies, generating a brand new NFT that can be used in battle or sold. Since Axies can cost hundreds of dollars, newcomers can participate in scholarship programs.

Here, they rent a roster of Axies so that they may learn the ropes of the game and earn rewards through battling. Managers which give a scholar a team of Axies will reap a portion of these profits. This is fantastic for people who have lots of money but don’t want to spend too much time playing the game.

Should you invest in the burgeoning crypto gaming scene?

It is one of the riskier ecosystems in crypto. Right up there beside NFTs.

It might depend on whether or not you like the game. Put it this way: you’re more likely to do your due diligence and keep up with the news regarding something like the Axie ecosystem if you actually enjoy the game or the concept behind it.

For Axie Infinity, you can also buy AXS and SLP without actually playing the game. These assets, though volatile, have shown incredible growth over the past two years. As a player, it takes up a lot more time but can be an enjoyable experience. Finally, if you have a lot of money to invest, it is recommended to play the game and explore the ecosystem. If you like it, it will be worth buying some land and becoming an Axie breeder.

It is unclear if large worlds like Decentraland will ever make it big; I compare our fascination to the way we viewed virtual reality and augmented reality with rose-tinted glasses a decade or two ago. Without a killer adoption case, I’m not so sure it will take off. For other smaller games, it is a much simpler calculation; if you like the game or the developers or the art, buy into it and invest. 

Even if you don’t make a lot of money, you might have fun.

While some reviewers didn’t enjoy the gameplay, others reviewed it more positively.

Most mobile games aren’t incredibly exciting anyways, yet they’re good for killing a few minutes here and there. Axie offers you the ability to make some money while you’re killing time.