The Death of Play-to-Earn: Addressing the Elephant(s) in the NFT Room

• Experts have pointed out problems with the Play-to-Earn approach.
• Most projects have been overhyped and have under-delivered.
• Some experts propose a more mature and sustainable approach to NFT gaming.

In 2021, blockchain games have become the main attraction in the crypto space after Axie Infinity became a massive sensation. Its huge success was something that everyone – crypto supporter or otherwise – could not shrug off. Even Philip La, the product chief of global hit Pokémon GO, has later on become part of the Sky Mavis roster.

Fast forward to 2022, and the game is floundering – daily average users (DAU) has plummeted from almost 3 million to less than 600,000; the floor price of Axies is less than $4 when they were around at least $400 during the game’s peak; the price of AXS is now less than $20 from its all-time high (ATH) of $160. Then there is the issue of the $600 million hack.

Other NFT games experienced a similar narrative. Some game developers even resorted to abandoning their project given the current market sentiment.

These events have prompted many people to question the feasibility and sustainability of the nascent game model. Is Play-to-Earn (P2E) really dead beyond resuscitation? What were the holes in the plan that weren’t addressed by pioneering projects? Where does the NFT community go from here?

Pyramid Scheme With a New Packaging?

Most P2E concepts have been dismissed as pyramid schemes. To bring the uninitiated up to speed, a pyramid scheme is an investment model that relies on money given by new recruits to provide profit to older investors. So, instead of delivering a product or service that will rake in money, investors have to rely on registration or entry fee paid by new members.

According to Frank Muci, a fellow at the London School of Economics, Axie Infinity is an example of a pyramid scheme since there are no “structural sources of demand” for the game’s utility token Smooth Love Potion (SLP).

Muci remarked:

By and large, no one is playing for the fun of it. Instead, people in developing countries just log on day after day and grind for hours because their outside option is even worse, for now.

Last year, Axie Infinity experienced a situation that was barely under control. From an even ratio between the SLP tokens minted to those burned, the amount of SLP in excess production ballooned at a rate that caused massive outrage and panic. Sky Mavis, the company that developed the game, came up with multiple solutions, to no avail.

According to Muci, Axie Infinity and the rest of the blockchain gaming space have to first address the issue of making their respective game fun, instead of coming up with another avenue for people to make money by recruiting more people to play the game.

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To be fair, Sky Mavis echoes the same sentiment. Philip La said in a tweet:

Pixelmon is only one of the many P2E projects that have lost the interest of the NFT space. Even Axie Infinity is struggling to bring back its initial appeal to the masses despite the spate of game and marketplace updates that the team has released over the last year.

“The P2E model started to become non-viable in less than a year,” Dinev pointed out. “Once the initial enthusiasm wore out, the game rewards fell down a cliff.”

The Right Approach

On a more positive note, most developers in the P2E sector are starting to shift to a more sustainable economic framework. There are, of course, other blockchain games that are being created by highly decorated game developers such as Illuvium and Star Atlas (NYSE:ATCO).

As some experts have explained, blockchain gaming is a nascent sector in the crypto space, and P2E is rather part of a comprehensive trial-and-error process by most companies. One thing is certain: the blockchain community is one step closer to perfection.

“There is no right answer, but this does not mean blockchain games are doomed, or that having blockchain add-ons will doom a game,” Dinev concluded. “There is plenty of interest and value to go around, while tapping the potential of both the booming traditional gaming market, and blockchain space.”

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