The vast majority of people who put money into traditional computer games do it because they find the core gameplay fun. A smaller number are primarily motivated by a desire to collect assets (I’m looking at you, Pokémon players) or earn money (streamers and esports players). And if we exclude those involved in making or distributing games, almost no one invests money into a game expecting to make a profit.
Play-to-earn games that use non-fungible tokens (NFTs) to track in-game assets represent a profound shift in the gaming industry because they expand both the ways to engage with a game and the motivations to do so.
Consider player interaction with a game along two sliding scales:
- Motivation. Why do people engage with a game? They can have intrinsic motivations (“I enjoy this experience”), extrinsic ones (“I am making money from doing this”), or a combination.
- Engagement. How do people get their fun or profit from a game? They can get it from playing the game, from collecting assets, or a combination.
Four different groups are revealed when we plot motivation against engagement: hobbyists, professionals, collectors, and investors. These categories are not mutually exclusive. Most people will at least partially fall into 2+ categories. Let’s break down each.
Hobbyists
When we think of a traditional gamer, we think of a hobbyist. Hobbyists are people who play because the core gameplay is fun. Hobbyists don’t expect to make any money playing. In fact, they usually spend money on the game. Pure hobbyists are uninterested in collecting game assets like items, land, or pets for their own sake. They care how useful assets are or how much fun they are to use, not how rare or shiny they are.
There are many different reasons hobbyists enjoy playing games, ranging from proving they can win, to soaking in the atmosphere, to feeling they are growing in power. A single game may attract players with a completely different idea of why that game is fun.
Hobbyists in play-to-earn games
P2E is still in its infancy, and has far less money and talent going into game development than traditional gaming. As a result, some P2E games today feel excessively focused on the market and economy, to the detriment of the hobbyist experience. However, well-designed play-to-earn games can be just as fun as well-designed traditional games, if not more so. Winning real money is more exciting than winning in-game-only money. In the long-term, playing-to-earn may be more appealing to many hobbyists than playing traditional games.
Professionals
Professionals play a game primarily to make money. They may enjoy the game even more than a typical hobbyist, but playing the game is their full-time or part-time job. Professionals in traditional games fall into two major categories - famous players and grey-market sellers.
- Famous professionals include streamers and esports players. Streamers make money primarily from donations from their viewers. Professional esports players win prize money and sometimes receive a salary from a sponsoring organization. The top streamers and esports players in the world take home more than a million dollars a year. Unfortunately, traditional games can only support a very small proportion of successful streamers and esports players relative to the total population of players. This means that there is an enormous amount of time and skill required to make money in either category.
- Grey-market professionals include gold farmers or account boosters who sell in-game assets or services, typically against the terms-of-service of the game. These professionals don’t need to be top players or streaming personalities, just people with time to put into the game. However, the risk of being scammed or banned has kept demand for these professionals relatively low, preventing them from making much money.
Professionals in play-to-earn games
Traditional games can usually support very few professionals relative to the total player base. And competition for those few spots can be grueling. Play-to-earn games differ because the “grey market” of in-game sales is instead supported by the developers. The barrier to entry for professionals in P2E is much lower, and at least early in a game’s growth, a much higher percentage of the player base can be professionals. Any player who can buy the initial assets needed (or sometimes any player period) can start earning, without needing to create a twitch channel or get an esports sponsorship.
P2E also has several features that make it more appealing to professional esports players or streamers. There’s a smoother transition to high level esports play in P2E, as strong but not top players can still earn while they work to improve.
Streamers benefit in two ways. First, they can attract professional or wanna-be professional viewers in addition to hobbyists, and maybe even investors and collectors, broadening their potential viewer base. Second, P2E offers a variety of additional ways for streamer to monetize. Players can frictionlessly donate in-game items or currency. The nature of NFTs as individual items with a history also allows the streamer to sell, auction, or giveaway specific items they used during streams to fans or collectors who will pay a premium. And we’ll likely see many more methods developed in the next few years. For example, Splinterlands is planning an innovative model in which users can stake tokens on a particular player and earn based on that player's success, while the player earns a percentage of the total amount staked on them.
Overall, P2E games represent an improvement for all three types of professional players relative to traditional gaming.
Collectors
Collectors find it enjoyable to seek out, acquire, and hold scarce assets. Most collectors in traditional games are also hobbyists, but some are more motivated by the art, the lore, or just the challenge of collecting game assets rather than playing the game. Collectors often value “shiny” or “gold” assets due to their increased rarity even if there are no in-game benefits. They generally put a premium on a complete set of assets as well.
The most famous collectors in gaming are players trying to “catch em’ all” in Pokemon. But even games with no in-game assets to collect have increasingly included achievements or Steam trading cards to appeal to this demographic.
Collectors are a particularly interesting category because only a tiny portion of this $370+ billion market involves gaming. Most collectors focus on coins, stamps, vintage cars, or the myriad of other collectible real-world items.
The development of NFTs has for the first time established scarce digital assets that people are interested in spending significant amounts of money to collect. NFT collecting is exploding, with over $2.5 billion in transactions in the first 6 months of 2021, an almost 20x increase from the first half of 2020.
Collectors in play-to-earn games
P2E games’ use of NFTs similarly enables games to offer scarce assets that are much more appealing to collectors than traditional games. Despite Pokemon’s popularity, hackers can easily create digital Pokemon, so Pokemon are not scarce (unless you are limiting yourself to ones you caught in-game). Real-world trading card games like Magic: The Gathering (...or Pokemon) are much more appealing to collectors because there are only so many cards of a certain type printed. Particularly rare cards can go for thousands of dollars. Play-to-earn games combine the scarcity of these real-world trading card games with a far more accessible and liquid market for trading them or simply showing them off to others via virtual NFT displays. This results in Collectors being MUCH more likely to put money into a P2E game than a traditional digital game.
Investors
Investors are similarly focused on assets, but their primary motivation is making money rather than having fun collecting. Investors value an asset based on a combination of its 1) appreciation in value over time and 2) ability to generate value when rented. While investing is very common in businesses and real estate, investors have almost entirely ignored in-game assets because traditional games make it difficult to buy or sell these assets for real currencies.
One rare example of in-game investors in traditional games are people who buy and sell Runescape party hats. These hats were originally released as a fun but worthless (they don’t provide any stats) item dropped during the 2001 Christmas event. Crucially, however, they were discontinued. The player base grew significantly while the number of hats actually decreased as hats were destroyed or accounts holding them were abandoned or banned. This scarcity has made the hats a collectible and publicly displayable status symbol. Some investors bought large numbers to resell later, as prices have steadily risen over the last 20 years.
Party hats becoming so valuable was not intentional. Traditional game developers don’t earn anything when rare items change hands on the grey-market - if the game even supports trading assets at all. As such they usually avoid making limited-edition tradable items to ensure players all have the chance to experience the content they create.
Investors in play-to-earn games
In contrast, developers of P2E games are highly incentivized to create scarce assets that appreciate in value - whether that be in-game currency or NFTs. Developers usually retain a significant amount of in-game currency as part of their compensation They also typically earn a significant fraction of their revenue through marketplace fees when NFTs are traded. And early adopters critical for wider adoption are often lured in with the prospect of rapidly appreciating assets.
As a result, play-to-earn games are built from the ground up to support trading game assets for real money. Representing assets with NFTs allows proof of ownership, trustless trading, and prevents exploits. Players can easily trade NFTs on both in-game exchanges and third party sites like OpenSea.
Most traditional games simply don’t provide in-game investment opportunities, and attempting to invest in ones that do is very likely to underperform investing in stocks, real estate, or a variety of other types of assets. P2E offers a unique appeal to investors in the gaming industry.
Implications
Compared to a traditional game, a P2E version can attract equal numbers of hobbyists, more professionals, many more collectors, and in most cases infinitely more investors. But the biggest draw of people and money to P2E gaming is not stamp collectors or stock analysts switching to game assets. It’s hobbyists who also like earning extra money, or collecting things, or investing in stocks/real estate/crypto. Most hobbyists will fall at least partially into one or more of the other three groups, and are thus likely to prefer P2E to traditional games given comparably fun options with easy onboarding.
Play-to-earn games' broader appeal thus translates to a deeper appeal. Many gamers will prefer a P2E game to a similar pay-up-front or free-to-play game. And they'll put more time and money into these games than they otherwise would. Although a P2E model doesn't make sense for all types of games, it seems likely that the P2E model will capture a significant slice of the total gaming market - and grow the value of that slice tremendously.
I'll leave you with a visual of just how large an opportunity that represents, and how fast the market is already growing without factoring in playing-to-earn...
This article was originally published on Playing2Earn.com
