All earn and no play makes Jack a dull boy
The rise and fall of an industry that will only ever rise in order to fall once again.
At the beginning of 2022, the most popular play-to-earn (P2E) crypto game in the world, Axie Infinity, had a market cap of ~10 Billion USD. Heading into 2023, their market cap has dropped to roughly 640 Million USD. This is the result of it’s in-game currency, which holds the ticker $AXS, dropping from ~$100 to ~$6 in USD value. To put it bluntly, Axie Infinity is down bad. The P2E game that inspired much of today’s P2E industry, has lost over 90% of its value in a year. One could argue that crypto market conditions as a whole can explain this drop, but I would disagree. And I would certainly disagree with anyone predicting the value of $AXS to recover along with the rest of the crypto industry over a long term time horizon. Why? Because P2E is a fundamentally flawed approach to creating a game.
Play-to-earn is a term used to classify games built on the blockchain, where players actually earn tokens for time spent playing the game. They can then use those tokens to purchase upgrades in the game, or to cash it in for fiat money (i.e. USD) through an exchange. The companies behind these games have seen success in drawing in investors to purchase the tokens outright (decentralized funding), by spinning bold yarns electrified with hype-fuelled marketing.
The story is that players can earn a living playing video games and you get to reap the rewards. You buy their token, the game becomes very popular, players who are having so much fun buy the token to spend in-game, the USD value of your tokens goes up based on demand, and you make money. It all sounds foolproof until you ask the players what they think about it all? But you can’t, because players don’t exist for games designed to leech time and money from them in this way. Most of Axie Infinity’s player base is actually located in third world countries like the Philippines, where the small monetary incentives are incentive enough to sit in front of your computer completing a boring repetitive task all day. I simply know nobody who plays Axie Infinity for fun. And that’s why when the market crashed, they didn’t just crash along with it, they were exposed for having zero demand. Like every P2E game, they achieved this failure by forgetting one simple thing.
Games are supposed to be fun.
The people behind the most exciting and iconic games of all time understand this. They live and breathe it. They make games that players will love because they’re players themselves. They measure their success in play quality not tokenomics structures. They don’t have whitepapers describing how you will make money from playing, they have manuals describing how to play, because playing the game is an end in itself.
Creating a monetary incentive structure to play a game is at best a conflict of interest. At worst, it’s the same kind of ponzi scheme we’ve seen rise and fall over the past few years all over the crypto industry.
There are examples within the gaming industry where earning can be associated with playing, but only in the context that the earner has become a contributor, building levels or experiences for other players to enjoy. Not unlike in the real world where being productive for other people’s benefit earns you money. It’s great, and games that leverage the talent pool of their players by allowing for modifications and other iterations have discovered a cool model. But to earn money simply for playing? To build an entire game built around how people can earn? Neither sounds conducive to anyone having fun. Which sounds pretty dull to me.