Play-to-Earn is a losing game with a focus on money, say critics

Play-To-Earn (P2E) gaming, once blockchain gaming’s most promising format, is currently suffering from a crisis of confidence.

The emergence of the P2E area is due to a convergence of many different trends. Cryptocurrencies exploded in popularity in the early 2020s. With its presence in the mainstream, many players entered what had previously felt like the wild west. The corresponding increase in NFT gave the space the technology to push earnings and fundraising in new directions.

DeFi platforms have also increased the utility of in-game currencies and items, as they can be traded and used outside of the game. But today P2E seems to be in a very bad way.

Some of the industry’s brightest stars have serious ill health. Axie Infinity, long the world’s most popular P2E title, is one such example. According to ActivePlayer.io, the last 30 days have only seen about 430,000 players. Which represents the game’s worst month since October 2020. The game’s native token is also down about 93% from its August 2020 peak.

Play-to-Earns look like Ponzinomics, say critics

One of the space’s fundamental problems is that many P2E players logged in to make money. When the probability of a good return disappeared, so did many of the players. When you remove the earning potential, many games aren’t that fun either.

Damian Bartlett, Team Lead for W3E, the world’s first Web3 LAN gaming tournament, wants to see great blockchain-based games that offer the same quality experience as their Web2 predecessors. “I see many players agree with my own views. We want fun games and the ability to own our own assets that we would buy anyway on our favorite traditional games. P2E has put speculative assets in focus, and the game itself is often a secondary priority . Many of these games DAOs and therefore proposal votes are dominated by the will of a few whales. Not the majority of players. It just leads to a cycle where everything is about money and the cryptocurrencies associated with the games.”

“A good Web3 game will simply be a fun game that people play regardless of assets, some NFT assets they can buy if they choose and the ability to buy in and sell out without the complications of unstable game currencies devaluing everything. “

However, perhaps the industry’s fatal floor was the format itself. Many P2E titles are structured in ways that resemble colorful, fun Ponzi schemes. (A Ponzi scheme collapses when the operator is no longer able to attract enough new investors to pay returns to existing investors or when too many investors try to withdraw money at once.)

The industry wants a more sustainable model

Frank Ma, CEO of Ultiverse, is one person who believes the format was doomed from the start. “It is not based on a legitimate business model, but rather on the constant recruitment of new investors. The scheme does not generate returns through any form of productive activity, but rather through contributions from new investors. It is a zero-sum game, where the gains of early investors come from the losses of later investors. So it eventually collapses, leaving the majority of investors with significant financial losses.”

For the industry to continue to grow beyond Play-To-Earn, Ma believes there are a few obvious priorities. Education is one of them. There are not enough “old school” players who are familiar with Web3 or blockchain technology. And when they are, the technology’s benefits are often poorly communicated.

“Offering in-game items or other rewards for engaging with Web3 features can be a powerful motivator for players,” he says. “For example, offering in-game items that can be traded on a blockchain marketplace can be a way to introduce players for the benefits of Web3.”

Better UI, please

Another is the widely recognized UI problem. Many Web3 games have a steep learning curve that can be off-putting to new players. Finally, says Ma, we need better game integration. “Instead of making standalone Web3 games, web3 games need to work with web2 studios, IPs, and collaborate.”

Players discover the fundamental weakness of many Play-to-Earn titles. While quitters have discovered they may have made a mistake, Web3 community members who played for other reasons have grown weary of defending a defenseless system.

The widespread disillusionment means players are looking for better titles. This migration will likely lead to better economy and playability in the game. “The overall web3 game industry has gravitated towards a sustainable in-game economy,” says Boyang Wang, founder of P12, a web3 game infrastructure project that aims to make game creation accessible and the game economy sustainable.

As web3 players become more educated about the flaws, ponzi-like Play-to-Earn models are no longer as enticing. “P2E therefore tends to be increasingly unconvincing to players since the source of financial gain from gambling is undefined and losses can be exponential in collapse.”

Blockchain games are still growing

2022 was arguably Web3’s worst year to date. The market crashes and known cases of bad behavior put much of the industry on the back foot. During its rise to the mainstream, much of the Crypto ecosystem had forgotten how to defend itself, so when the repeated crises hit, much of the industry was blindsided.

Blockchain games have largely avoided the worst criticism. By 2022, according to DappRadar, games accounted for almost half of the activity on the chain. Whether it continues to grow in 2023 depends on one big question: can Web3 make great games?