How did we get here?
If you ask a kid what their dream job would be, some might say an astronaut or a policeman, but I’d argue that there would be a substantially larger amount of those who’d answer a professional gamer or a streamer. In the good old days of arcade games, gaming was perceived as another form of entertainment that could be consumed by those who didn’t just want to sit in the movies and gobble mountains of popcorn.
Video games had one distinct difference over the movies. You could influence what happened on the screen. This form of entertainment turned out to be so engaging, that the worldwide video gaming industry is valued at over $150 billion (compared to $136 billion film industry and $23 billion music industry).
With advancements in technology, video games are among the first to adopt the new technological innovations to offer gamers even more wholesome experiences. Eventually, gamers were able to play video games from the comfort of their sofa and didn’t have to scramble for quarters after they lost their last health point.
After smartphones and tablets came out, even more people started gaming on their daily commutes (hopefully on public transport, and not while driving), toilettes, at family dinners, business meetings. Your younger relatives, who could barely put together a sentence, started asking if you have the latest battle royal game installed on your smart device. Needless to say, gaming became mainstream.
Is P2E actually new?
Kind of, but not really. When MMOs started becoming popular, and players were able to trade items between accounts, seemingly worthless digital items started holding some value. Players might be able to get the common boring sword from a starting quest, but to get the flashy and excitingly overpowered flaming laser katana, they’d have to finish a difficult quest that requires high-level party members and expensive gear. Not to mention, flaming laser katanas are much scarcer than boring swords.
Game developers can either run their own marketplaces, like Steam marketplace, where they can take a cut out of market transactions, or outsource that work to players who find creative ways of creating a currency inside the game.
One such example would be CS: GO case keys – an item, that can be purchased directly from Valve in-game or from other players through the marketplace. Counter-Strike: Global Offensive (often abbreviated to CS: GO) is a tactical first-person shooter game developed by Valve Corporation, where players can customize the looks of their weapons with weapon skins that can be obtained by opening lootboxes.
These skins can be traded among players or bought and sold through the Steam marketplace. Many CS: GO skins, especially more prestigious ones, were priced in keys which were universally accepted as a currency because you were guaranteed to find another person who would be willing to trade their skins for your keys and vice versa.
CS: GO trading became so lucrative that Valve decided it would restrict the tradability and marketability of case keys, so they wouldn’t become a popular item of exchange between money launderers and scammers. Those actors don’t just perform illicit activities but decrease the player experience as a whole by abusing the game economy.
The main difference between different in-game trading economic systems is the difficulty of converting the video game currency into real-world currency such as USD, EUR, GBP, JPY, RMB, etc. While it can be difficult to cash out of a closed system (there are 3rd party websites where you can sell CS: GO skins for gift cards or PayPal balance, but players need to trust those intermediaries not to run away with their items), interoperability of cryptocurrencies makes such transactions much simpler, because it’s really easy to create a new liquidity pool on Uniswap where players can trade their in-game items for ETH or USD pegged tokens. There are also NTF marketplaces like OpenSea for selling non-fungible tokens.
How does P2E work?
Most of the games that are nowadays regarded as P2E utilize some sort of a blockchain that allows transactions of non-fungible tokens (NFTs). These games come in all shapes and sizes: from Pokemon-inspired Axie Infinity, trading card game Splinterlands, Minecraft-inspired metaverse The Sandbox to racing game REVV Racing. Why do these games need the blockchain? The majority of the player’s resources and items are actually tokens on the blockchain that represent a specific item, character, or resource. Most of these games utilize a combination of fungible and non-fungible tokens as a part of their overall experience. Some of these tokens can be sold directly at (centralized) crypto exchanges for other cryptocurrencies or fiat.
Some games might place level or perk restrictions, so only some characters are able to perform certain tasks. Let’s say you want to craft a Level: 10 sword, which requires a Level: 20 blacksmith perk for crafting, and a Level 10 Warrior to wield it.
If your party has a Level 10 warrior, that needs new gear, but you don’t have the blacksmith of sufficient level, you have to contact another player, who might be able to craft the desired item (or simply buy the desired item in the marketplace). Different players want to play as different characters, that have different perks and resource requirements. Some might need iron ore to craft new equipment, others might be looking for some rare ingredients for their magic potions. Some might be proficient in archery, others in magic, and third may be specialized in crafting items.
With a standardized unit of exchange, it’s easier for players to value, price, and exchange their resources with one another. If you want to build a new castle, you can buy required materials, like wood, stone, and iron, from other players that have either mined them by hand or invested in a mine/sawmill, to make the process of gathering resources more efficient.
This directly contradicts the freemium monetization model, where players need to buy premium currency, that is used for speeding up progression in the game, directly from developers.
In essence, imagine your avatar being a part of the digital metaverse where it can provide services in exchange for tokens, that are used in exchange for other goods and services in the game itself, creating a completely new economical ecosystem (different tokens have different use cases, so make sure to familiarize with specific game’s ecosystem and how their tokens are intended to be used, before purchasing them). Another appealing characteristic for many players might be the option of re-selling your collection, should you decide to stop playing a certain game (and perhaps want to buy some high-level items in another one). Interoperability between economies of different games seems like the first step on a stairway to video game metaverse.
All in all, Play-2-Earn seems like the next logical step in the evolution of video game monetization. While Freemium monetization models prey on those, who spend enormous amounts of money on a seemingly endless game, P2E tries to reward players for the time they spend in the video game with items, that hold real value, because they can be exchanged for other things.
With the ever-increasing digitalization of the whole world, many players from emerging countries find the P2E model lucrative due to poor local currency strength compared to more developed countries. Instant connectivity of the internet allows trading between players that live at different geographical locations, and while $5 USD/hr may be considered a very low wage in the US it might be considered pretty decent in some other countries.
There are many stories on the internet, where gamers prefer to grind in-game currency, paying a hefty commission on converting to fiat and still having a decent payday. Another example is the dude, who bought two houses with proceeds from playing Axie Infinity. But let’s not forget that the essence of playing games is having fun while playing them, and that’s something that got a bit forgotten when freemium and microtransactions came. Earning should be a side product of having fun, not replacing it.