Blockchain Play-to-Earn games like Axie Infinity have failed investors. What now?

Chalk it up as the latest blockchain glitch. The roughly four-year-old GameFi market, a sector of the cryptocurrency economy, has been another dud for investors. Axie Infitity (AXS) has lost almost all of its value, down more than 92% so far this year. By comparison, bitcoin is down around 55%. Cool graphics and buzz won’t last long if no one is going to plug into the Axie game all day and try to make a coin.

“It’s clear that the original mass market play-to-earn promise of Axie Infinity and StepN today looks like nothing more than a Ponzi scheme. The whole sector needs a drastic rethink,” says Oleg Fomenko, co-founder of Sweat Economy , which is another token-backed effort that tries to get people paid to walk, walk, jog, and be physical in general. He’s based in London. “There are still niches where a convergence of gaming and blockchain is beneficial — for example gambling and casino games. I think it’s going to take a lot more time and money than most people expect to develop the next wave of breakthrough projects in this area. I am bearish on playing to earn. What value does playing a video game create?”

Investors here must remember that the whole blockchain world is high risk and brand new. Most of these companies are less than five years old. It is much easier to lose money than to make money, especially for those who get the timing wrong. Blockchain project failure is not an option. It will happen. Jim Cramer may be choking on the market value destruction of Facebook due to the lackluster reception of his metaverse platform. But that doesn’t mean they’re miles off target. This is a new industry. It grows. Most projects are just going to fail. Axie Infinity may actually live to see another day, even as investors bail.

“With less focus now on purely earning rewards as an incentive to play, blockchain-based game studios are focusing more of their energy on building truly fun and engaging gaming experiences,” says Matthew Howells-Barby, CMO at Decentral Games in London – where you can play poker in the metaverse. “A lot of the hype has died down, but the games that still have active user bases have stayed alive for a reason. They’re actually really fun to play.”

Move on: A new way to play

If play-to-earn didn’t work, try plan-and-earn instead. It appears to be the next stage in GameFi’s growing pains.

“Play-to-earn clearly failed, as earning was the main objective and gameplay itself became secondary and in some cases almost non-existent. But play-and-earn can work, says Jack Griffin, vice president of studios at Smashverse, a blockchain fighting game full of bodybuilder-looking dudes and monkeys in boxing gloves. Griffin is based in London. Smashverse launches this month.

Play-and-earn is similar to the reward mechanisms of traditional internet games – players unlock rewards to help them progress in the game. The reward enhances the player’s in-game experience, makes them want to get to the next level, no different than an old-school action-adventure game on X Box. This means giving the player small and well-balanced rewards, which are paid in crypto-tokens issued by the game, which allow the player to invest in game objects that in turn help the player progress in the game. Game developers can also reward players with rare NFT “skins” or cosmetic items that reinforce player connection to their in-game characters, ideally designed to increase player stickiness and retention.

“I can tell you that many, many of our web3 community — 200,000 on Discord alone — are very excited about gaming and earn gaming,” said Timothy Biggar, chief marketing officer at UniX Gaming, a blockchain gaming guild that offers web3 gaming solutions in dubai. Biggar said Unix was working with GameFi play-to-earn players; realized that it didn’t work as planned, and has since shifted gears with a focus on play-and-earn.

The problem is that most players don’t care about earning potential. They just want to play the game. “It’s our job to help developers build and market their games, so of course we’re aware of what works, for our partners and the industry, but we don’t know what works and what doesn’t until they’ve been on the market for a while. Ultimately, it has to come down to your goals as a blockchain developer, says Biggar. “If you’re developing a game as a passion project, something for the ‘players’, your game needs to be as affordable and accessible as possible. Selling a limited number of expensive items and building speculative trading into your game is exactly what you should not be doing.”

This may have been what turned off investors to Axie Infinity, once the rock star of the GameFi investor universe.

No one is saying that Axie developers built a scam coin project. The consensus seems to be that they worked hard to build what was supposed to be a beta test of metaverse gaming. However, to monetize Axie’s in-game token, players needed new players to join because new players had to purchase Axie characters, a non-fungible token. When the flow of players decreased, the token’s price collapsed and so did a player’s earnings. It was like going from $15 an hour to $1.50. Axie’s amazing popularity also clogged the servers sometimes, leading to a poor player experience. People started bailing. Interest waned.

Theresia Le Battistini, managing director of play-to-earn project Fashion League in Zurich, says she thinks play-and-earn is where many of these games will switch to next.

“It will get better, but always and only if the gameplay can live up to the expectations and standards of traditional Web2 players,” she says. “Web3 games should not be made any differently than Web2 games. The earning part should be the cherry on top.”

It just looks terrible

GameFi looks bad because crypto looks terrible overall. And the play-to-earn market has crashed both due to poor design by the startups that created them and too much traffic clogging servers and relegating people to slow, stuttering games.

Aside from Axie Infinity, Illivium is down 93%, Sandbox is down 85%, and Decentraland is down 80% so far this year. It sounds terrible. But investors who have been buyers of these coins since 2020 are up thousands of percent. In early November 2020, AXS was trading at $0.18. It is now around $9.

According to DappRadar, GameFi currently represents over 50% of all blockchain activity, as measured by unique active wallets, representing users who have recently transacted within the ecosystem. GameFi is also expected to grow into a $50 billion market by 2025, according to research from Crypto.com.

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Despite the GameFi token carnage, player user numbers and retention rates have increased for many of the most prominent blockchain titles, according to industry research firm Footprint Analytics.

Existing GameFi revenue models include the developers earning a percentage of revenue from transactions, the development team pinning their hopes on the token they’ve earned, continuing to increase in price, or selling in-game digital assets (NFTs). Blockchain games must also have efficient tokenomics and security, and be fun to play.

“Many GameFi play-to-earn projects were simply not sustainable,” says James Seaman, a 35-year veteran of the games industry and CEO of California-based Hit Box Games. Seaman has his own idea … not just play-and-earn, how about play-and-own?

“GameFi must move away from play-to-earn to a more play-to-own model that is long-term in terms of structure and profitability. Games that have in-app purchases as well as the ability to own your own gear as NFTs and earn tokens during events and competitions that generate revenue for the game, he says. Hit Box’s new Swords of Blood game raised $1 million from a number of investors. The game was developed by former team members from the following franchises: Sim City 2000, Enigmatis, Rainbow Six, Prince of Persia, Nightmares from the Deep and Blade Bound, says Seaman. Players earn in-game currency and items and can unlock special upgrades, craft weapons and earn cryptocurrency.

“When the bitcoin market starts to turn back to 30k, you’ll see more investors go back to GameFi,” says Seaman. “My advice to game developers is to build your projects thinking about the future, games to own and not games to earn, and take a hard look at how the game will stand the test of time, whether in a bear market or a bull market. “

Game to earn was GameFi 1.0.

“These were traditional decentralized financial mechanisms wrapped in a game skin,” says Yaroslav Shakula, CEO of YARD Hub in Barcelona, ​​an investor in Web3.0 startups.

“However disruptive it was for its time, the play-to-earn model was probably doomed from the start. Play-and earn is closer to what we see as the possible future of blockchain gaming, as everyone in the market has already realized that the game should be engaging and interesting for players. It resembles traditional gaming models with its focus on gameplay combined with an opportunity to earn money for your skills and time. If the game is only attractive because of sky-high token prices, it has no future, he says. “This approach is sustainable only within a Ponzi-like paradigm that will eventually cease to exist.

*The author of this article is an investor in the Decentraland token.