The video game industry experienced a radical change: the birth of metaverse (e.g. virtual worlds) combined with NFTs implementation, has made it possible to create new videogames similar to independent economic systems.
Axie Infinity and its play-to-earn model are at the forefront of NFT Gaming: it consists of a model that rewards people for playing a video game.
With over 1 million active users every day, the Axie Infinity project has exploded in popularity in emerging markets and it is showing the potential to be the engagement lever for the next generation of crypto users.
The Potential of NFT Gaming
The NFT market has great potential but remains unexpressed when limited to the pure trading of tokens, this happens in simple games or marketplaces for example. In these cases, the user experience is limited to the purchase of an NFT with the hope that it will be appreciated in the future.
In these uses cases, it is absent the interaction between the users and the application in which the NFT is incorporated.
On the other hand, with the beginning of 2021, the “Play to Earn” was welcomed in the world of cryptocurrencies. In fact, Axie Infinity, a project developed on Loom Network, a Layer 2 scaling solution for Ethereum, has paved the way for new applications in NFTs Gaming industry, introducing for the first time a deeper interaction between users and video game.
In particular, players can now earn money not only through NFT trading but also by playing, and this generated record numbers in the cryptocurrencies industry.
Growth on Ethereum
NFTs and Play to Earn have driven the growth of Ethereum transactions in recent months. Among the smart contracts that use more Gas on Ethereum in the last 30 days, in the first position there is Opensea – the largest NFT Marketplace platform on the market today – and among the top 10 there is the Ronin Bridge of Axie Infinity.
What is Play to Earn?
The term Play-To-Earn is a combination of two actions, “Play” and “Earn”, which means playing and earning money at the same time. The Play to Earn model has been around for a long time and for many players it is nothing new. The difference today stands for advantages introduced by the blockchain and the crypto market, which have improved the model:
1. NFTs have been incorporated into video games. This means that the items and characters of the videogame are NFTs and can therefore be uniquely identified within the game.
2. The concept of ownership has been improved. As a consequence of point 1, for each assets (e.g. character, weapon etc ..) there is a single owner recognized by the public address of the wallet including the NFT.
3. The video game becomes a source of income. Players can play and be rewarded with game resources (NFT, native tokens), win prize pools, exchange NFTs, create new ones. Some players even “employ” other players to play for them and share the rewards.
The rise of Axie Infinity
Axie infinity is a video game often compared to “Pokémon” in resemblance, but in this case the Pokémon are replaced by pets called “Axie”.
Over the past 30 days, Axie Infinity has generated revenue of $ 343 million. This result is even more impressive when you consider that it is second only to the revenues generated by the Ethereum blockchain.
Metaverse Business Model
Where does the protocol revenue come from? Axie Infinity tokenomics works with two tokens: a governance token (AXS) and a second token called the Smooth Love Potion (SLP) which acts as the in-game currency. In addition to these two tokens, there are the NFTs that represent the characters of the game, the land and the virtual items.
The main rules of the game are as follows:
- Players are paid in SLP for defeating opponents and participating in daily adventure missions.
- The characters – the Axie – can be “paired” to create new ones, which can in turn be sold to other players.
- All NFTs in the game can be exchanged in the marketplace: Axie, land and items.
In this way, every time a transaction is performed within the game – such as buying an Axie, selling a virtual item or pairing two Axies – the protocol requires a commission, paid in AXS and / or SLP,
The Gaming as a Job
Playing Axies Infinity is not free, in fact, to begin with, you need to make up a team of three Axies. This initial investment represents a entry barrier for most emerging country players.
To mitigate this barrier, an informal marketplace spontaneously arose in which Axie owners delegate their team to other players with a revenue share agreement.
According to some estimates, 50% of daily active users come from the Philippines, while the game is also catching on in other emerging markets such as Indonesia, Brazil, Venezuela, India and Vietnam. In these developing countries, players can double their income, improving their lives all thanks to the rewards of the video game.
Enhancing a videogame with blockchain
It emerges from the previous paragraphs that a traditional videogame could enhance its business, in terms of adoption and creation of new revenues, by incorporating NFT and / or fungible tokens in its own project.
For a project that has this purpose it is relevant to correctly define the set of reward mechanisms for the players and the economic rules of the videogame.
The rules must be designed in such a way as to facilitate the utilization rate of the protocol without causing a collapse in the price of the game currencies. To do this, a series of qeuestions should be addressed:
- Does the incorporation of fungible / NFT tokens bring benefits to my business?
- What videogame assets can an NFT represent?
- How will the rewards (eg a utility token / NFT) be paid out?
- How can players earn rewards?
- What deflationary mechanisms are in place to support the reward token price?
These are just some of the questions to address before implementing blockchain and cryptocurrencies in your project. It therefore becomes a priority to rely on industry experts to answer these types of questions to understand if, and in what extent, the videogame and your business can be enhanced.
The gaming industry has undergone a radical change thanks to the combination of videogames, blockchain and cryptocurrencies, giving life to the so-called NFT Gaming segment.
This segment, with the Axie Infinity project, is driving the growth of transaction volumes on Ethereum and is changing the world of work in some emerging countries, which see Play to Earn as an alternative source of income.
The implementation of cryptocurrencies and blockchain in a video game can be a lever to enhance your business and create new revenue streams. Before doing so, however, it is necessary to rely on experts to assess the feasibility and measure the long-term benefits from the incorporation of tokens into the video game, that must be greater than the associated costs.