Play-to-Earn (P2E)

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What is Play-to-Earn (P2E)?

Play-to-earn (P2E) games built on blockchain technology have emerged from the decentralized finance (DeFi) trend in recent years. They promise to revolutionize the gaming industry by allowing creators and players to monetize their gameplay in new ways.

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Play-to-earn games reward players with cryptocurrencies and offer new ways of giving them ownership of in-game items using non-fungible tokens (NFTs), which function in an interconnected digital economy that converts into real-world value. These games feature different modes where players can earn or trade in-game rewards and collectibles for money.

Players in some countries have been able to earn enough money to make a real living. However, high volatility in cryptocurrency prices means this is not always sustainable.

Techopedia Explains P2E Meaning

Play-To-Earn (P2E)

P2E is a gaming model that combines blockchain technology and entertainment to offer financial incentives for players. In simple terms, P2E games offer players rewards in exchange for their in-game activities.

These rewards can come in various forms, including digital assets, cryptocurrencies, and non-fungible tokens (NFTs), which represent ownership of unique in-game items like characters, weapons, and land plots.

As play to earn definition implies, players can earn by completing tasks, winning battles, or through other in-game achievements. The assets earned are often tradeable on various platforms, allowing players to convert them into real-world money.

The rise of the P2E model has also introduced new concepts like GameFi, or game finance, which blends gaming with decentralized finance (DeFi).

However, it is worth noting that entry into play to earn games can sometimes require an initial investment, such as purchasing starter characters or assets, which can be a barrier for some players.

How Does Play-To-Earn Work?

Traditional games operate a pay-to-play model, where players buy a physical or online game to be able to play it. Some games require players to pay additional fees for in-game items or access to extra levels.

In play-to-earn games, players earn real-world value or financial rewards through gameplay. Here is how it works:

  • Players engage in P2E games, which often incorporate blockchain technology and cryptocurrencies.
  • By completing in-game tasks and challenges or achieving certain milestones, players earn in-game assets, such as NFTs and coins or tokens that are native to the game, or existing cryptocurrencies, such as Ether (ETH). These digital rewards hold real-world value and can be traded, sold, or converted into fiat money.
  • Players can sell in-game assets directly or exchange them for cryptocurrencies on internal or external marketplaces.
  • Cryptocurrencies earned can be transferred to cryptocurrency exchanges and traded for other cryptocurrencies or converted into fiat currencies.
  • Some P2E games also allow players to stake their in-game assets or participate in decentralized finance (DeFi) mechanisms to earn additional rewards.

Remember, the specifics of how each P2E game operates may vary, but the underlying concept revolves around players earning real-world value through their in-game achievements.

This model is enabled by blockchain technology, which provides a secure, decentralized ledger to track and validate the ownership and value of the cryptocurrencies and in-game assets that players earn.

P2E Games are Expanding Crypto Adoption to a New Audience of Gamers: Aleksander Leonard Larsen, a co-founder of the popular P2E game Axie Infinity, said in 2021 that around half of its active players had never used a cryptocurrency application before.

Traditional vs. Play-to-Earn Games

Traditional games operate on a centralized model where the game’s assets, such as characters, skins, and weapons, are controlled by the game’s developers and cannot be transferred outside the game environment.

In these games, players spend money on in-game items or experiences that remain within the game’s ecosystem. This often results in a “sunk cost” for the player as these investments do not offer real-world value or return​​ and cannot be recovered.

However, the integration of blockchain technology into games has led to the birth of a new category in gaming known as Play-to-Earn (P2E). This model represents not just a change in how games are played and enjoyed, but also in how value is generated and distributed among players.

For one, P2E games utilize blockchain technology to decentralize ownership and control of in-game assets, allowing players to truly own their in-game items as NFTs. Furthermore, it secures transactions and ownership through blockchain’s inherent security features.

P2E also enables players to earn real-world value through gameplay. Players can then trade, sell, or utilize their assets across different blockchain gaming projects, thereby creating a vibrant and economically viable ecosystem​​.

Notably, despite their benefits, P2E games have significantly lagged behind traditional games in terms of quality and level of sophistication, including graphics, content, control system, and storyline. This has been one of the main adoption barriers to these crypto games.

What Role Do NFTs Have in Play-To-Earn Games?

Cryptographically unique tokens, known as NFTs, play a central role in how play-to-earn games work. NFTs are created by smart contracts that execute on a blockchain and establish the rules for the way digital assets operate. Blockchain-based games use NFTs to create unique in-game characteristics and items, from avatars and digital pets to virtual clothing, tools, and plots of virtual land.

The immutable nature of NFTs enables game creators to establish the uniqueness and rarity of each item or characteristic, which defines their market value. Once they buy or earn these NFTs, players have exclusive ownership rights, and they can sell or trade them in or across games.

The more gamers that join a play-to-earn game, the more these digital assets gain value as demand increases.

Play-To-Earn Marketplaces

In the traditional gaming industry model, a centralized publishing studio owns the game, access to it, and its development. The value of in-game assets is determined and captured by the publisher.

Conversely, P2E games typically operate an internal marketplace where players can trade their NFTs and cryptocurrencies with other players, and each transaction is recorded on the game’s underlying blockchain. Players can often trade them on external marketplaces as well, where their value is determined by broader market dynamics.

P2E marketplaces open up the games to robust community-based economies, increasing player control and creating a level playing field for stakeholders. The focus is not only on the gamer’s ability to earn rewards from gameplay but on player autonomy and verifiable asset ownership.

As NFTs can be used to verify the ownership of the items they represent, they are attractive to traders as an instrument to buy and sell to generate profits from fluctuations in their value rather than just as an asset used to play games. This has driven massive volatility in the cryptocurrencies and NFTs associated with P2E games as they have increased in popularity.

Potential Benefits and Challenges of P2E

Benefits Challenges
Opportunities to monetize gaming skills. Potential for regulation to disrupt blockchain and cryptocurrency operations.
Players create value for themselves as well as the game. Prevalence of scams and unsustainable in-game economies.
Ability to invest in virtual assets. Potential exploitation of players and developers placing limitations on earnings.
Tamper-proof blockchains reduce the risk of losing in-game collectibles. High cost of entry as the value of NFTs needed to enter games rises.
New gaming functionality enabled by NFTs running on blockchains. Scalability issues when game popularity grows rapidly.
Creation of new gaming communities and player-owned guilds. Loss of enjoyment in gameplay from striving to make money.

Examples of Play-To-Earn Games

There is a wide variety of play-to-earn crypto games, from adventure to card-based strategy, farming, role-playing, and racing.

Some of the popular play-to-earn game examples include:

  • Axie Infinity: A virtual world where players collect, breed, and battle Pokemon-like NFT-based creatures known as Axies.
  • BinaryX: A blockchain gaming platform developing strategy games such as CyberChess and Cyber Arena.
  • Galactic Arena: An online battleground that allows players to import their NFT characters from other games to join real-time player vs player (PVP) battles and place wagers on the outcome.
  • The Sandbox: A virtual world/metaverse where players can create, own, and monetize gaming experiences using its game maker, 3D NFT editor, and marketplace.
  • DeFi Kingdoms: A cross-chain fantasy role-playing game (RPG) with tokenized resources and NFTs integrated with DeFi protocols. Quests and duels give players opportunities to earn in-game tokens and prizes.
  • Planet IX: A sci-fi metaverse-based strategy game in which players acquire and cultivate NFT parcels of land to restore a fallen planet. Players can form territories, develop new technology, raid other players, and gain ownership of in-game corporations.
  • MOBOX NFT Farmer: A gaming infrastructure that identifies the best player yield techniques and provides players with NFTs that they can use in all of its ecosystem’s games.
  • Arc8 by GAMEE: An arcade gaming platform. Players earn tokens by beating their opponents in multiple skill-based video games.
  • Treasure DAO: A decentralized NFT gaming ecosystem designed to connect metaverse projects.
  • Tamadoge: A blockchain project inspired by the 90s Tamagotchi, which offers a few P2E games with users playing using their Tamadoge NFTs and the native currency of the Tamaverse, the TAMA token.

The concept of the metaverse has exploded in popularity alongside play-to-earn games, as many of the most popular games are based on exploring shared virtual worlds. Users can interact in the metaverse with their NFTs as avatars, land parcels, and objects, and they can participate in PVP games in virtual spaces.

Cryptocurrencies are often highly volatile and can be susceptible to market manipulation, and face regulatory uncertainties. As such, it’s important to conduct due diligence when trading or investing in P2E coins and only invest what you can afford to lose.

How to Get Started With Play-to-Earn?

How to Get Started With Play-to-Earn?

Getting started with play-to-earn games involves a few key steps, from setting up a digital wallet to understanding the game’s economy.

Here’s a step-by-step guide:

  1. Set Up a Digital Wallet: To participate in P2E games, users need a cryptocurrency wallet, like Metamask, which allows them to store, send, and receive cryptocurrencies and NFTs.
  2. Acquire Cryptocurrency: Users need some cryptocurrency like ETH to be able to buy in-game assets or NFTs.
  3. Join a Guild for Minimal Investment: For those who wish to sidestep the upfront cost, gaming guilds are a good option. Guilds rent out their in-game assets to players who can’t afford their own, allowing newcomers to start playing and earning with lower initial investment.
  4. Learn About Tokenomics: Understanding a game’s tokenomics, or the economic rules governing its tokens, is critical. It helps players to learn how the game rewards players and the value of its tokens.
  5. Get Involved in the Game’s Economy: Play-to-earn games often feature their own economies, where you can earn in-game rewards or cryptocurrencies. Games like Axie Infinity allow players to battle, grow digital creatures, and earn through gameplay. Other crypto games might focus on yield farming or staking in-game assets to earn cryptocurrencies​​.
  6. Purchase Gaming NFTs: The majority of P2E games require players to acquire specific NFTs, such as digital pets or characters, which are essential for starting the game.
  7. Start Playing: After finishing these steps, players can hop into the game and start playing.

Are P2E Legal?

The legal status of P2E games varies depending on the jurisdiction and the specific characteristics of each game. These games, which allow players to earn real-world rewards through gameplay, often blur the lines between gaming and gambling, which makes them subject to a complex web of legal considerations.

For instance, in the United States, the legality of P2E games depends on several factors, including whether the game is considered gambling, which implicates state and federal laws.

Any real-money gaming, including P2E, intersects with multiple legal areas such as taxes, securities law, and anti-gambling regulations.

Globally, the situation is equally nuanced. The definition of what constitutes gambling varies from one jurisdiction to another, with some countries having strict regulations and others offering more leeway.

In general, games that involve staking something of perceived real-world value, like cryptocurrency tokens or NFTs, in hopes of winning more, could be classified as gambling if the experience aligns with local definitions of gambling.

Future of Play-to-Earn

Play-to-Earn has introduced a revolution in the gaming sector with its integration of blockchain technology, NFTs, and cryptocurrency rewards, as well as offering players the opportunity to earn real-world value through in-game activities.

However, the future of P2E gaming is not without its challenges and considerations. One of the main concerns revolves around the sustainability of such games.

The economic model of many P2E games relies heavily on continuous player growth and the sale of NFTs. Therefore, once player growth stagnates, the in-game economy can collapse, leading to potential financial losses for players and developers alike​​.

Moreover, while P2E games have been praised for democratizing the gaming economy by allowing players to earn through gameplay, there are concerns regarding the quality and depth of these games.

Critics argue that the focus on monetization sometimes comes at the expense of gameplay and narrative depth, which are crucial for player retention and satisfaction.

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Ruholamin Haqshanas
Cryptocurrency journalist
Ruholamin Haqshanas
Cryptocurrency journalist

Ruholamin is a crypto and financial journalist with over three years of experience. Apart from Techopedia, he has been featured in major news outlets, including Cryptonews, Investing.com, 24/7 Wall St, The Tokenist, Business2Community, and has also worked with some prominent crypto and DeFi projects.  He holds a Bachelor's degree in Mechatronics. Ruholamin enjoys reading about tech developments, writing, and nature-watching