Investigating The Marriage Of Crypto And Gaming In High-Risk Play-To-Earn Economies

Blockchain-based play-to-earn games like Axie Infinity can make for lucrative businesses thanks to the hype around NFTs and virtual worlds, attracting millions of players and billions of dollars from investors to the industry. In Axie Infinity, users buy virtual, blob-like creatures (with varying attributes) as NFTs, or non-fungible tokens – digital assets whose owner is recorded on the blockchain – for anything from tens of dollars to hundreds of thousands.

“It’s not just a game anymore. It’s more like an ecosystem,” said Jarindr Thitadilaka, a 28-year-old from Thailand who’s made as much as $2,000 a week playing Axie Infinity since last year. “You can even call it a country, right?”

Players spent $4.9 billion on NFTs in games last year, representing around 3% of the global gaming industry. Although demand has cooled since its peak last November, gaming NFTs have still racked up $484 million in sales so far in 2022. Investor interest in NFT-based games has also ballooned, with projects attracting $4 billion of venture capital funding last year, up from $80,000 in 2020.

Thitadilaka in Thailand decided last July that he wanted to make more money than he could by simply playing on his own, so he and his friends decided to form a “guild”. They allowed their NFTs to be used by people who wanted to play Axie Infinity for free, without investing in an asset, and took a cut of any winnings in return. This model is commonplace across play-to-earn games. Thitadilaka said his guild, GuildFi, grew into a network of 3,000 Axie Infinity players who split their earnings with the asset-owners 50:50. Thitadilaka now runs GuildFi as a full-time job and the company has raised $146 million from investors to date.

However, legal experts warn there is no safety net for players who effectively invest in risky assets, leaving them highly vulnerable should a project fail or the market for the assets dry up. As global regulators seek to get to grips with cryptocurrencies themselves, there is little oversight of NFTs or the relative niche offshoot of play-to-earn games, which typically use in-game crypto tokens that can then be cashed out into traditional money.

“Storing any value in projects like this is risky,” said David Lee, cryptocurrency associate at London-based law firm Fladgate. “The earning in play-to-earn, blockchain-based games is often through rewards paid in the native token of the project.”

(All information was provided by Reuters)