Overview

Blockchain gaming is a relatively new and exciting development in the gaming industry. Many believe that the impact of Web3 technology on gaming will be as big as that of smart phones, if not greater.

One of the key aspects of blockchain gaming is the use of cryptocurrencies and non-fungible tokens, which turn the pseudo-economy of a game into a real one. This means that in-game items like skins, characters, weapons, and virtual money that are tokenized using blockchain technology gain real economic value and can be traded seamlessly between players.

In this article, we'll take a closer look at some of the most popular blockchain gaming models.

Play-to-Earn

Play-to-Earn is the most popular economic model in Web3 gaming. In fact, most of the models in the space are variations on play-to-earn. The model came into prominence with the rise of Axie Infinity, a game that became a cultural phenomenon in many parts of the world. Basically, play-to-earn titles reward players with tokens for interacting with the game. Players can cash out these tokens on the open market for other digital assets or fiat currencies.

After Axie Infinity became a raging success in the later part of 2021, we saw hundreds of games come out with their own twist on play-to-earn. Almost every new game that came out with a P2E model instantly received a lot of attention from the Web3 market. This is because players were earning a ton of money playing these games. However, most Web3 games required players to buy some in-game items to start playing, and as a result of massive interest in the earning aspect of the games, the price of many of the assets was getting sky high. Players were investing as much as $1000 to start playing a simple auto-battler game. But, obviously, not everybody was capable of spending a thousand bucks on game assets, and that’s when guilds started popping up.

P2E and guilds

As we mentioned earlier, not everybody was able to spend thousands of dollars on game assets. But people were certainly interested in earning money with P2E games. Sensing an opportunity in the market, some Web3 entrepreneurs started a guild, which operated as a meeting point for investors who owned game assets but didn't have the time to use them and players who had time but no money to buy the game assets. These organizations allowed investors to rent out the assets to interested players for a share of their game earnings. Again, the guild business was hugely successful; organizations like Yield Guild Games were becoming some of the most influential entities in the industry. However, the success of guilds largely depends on the success of "play to earn." But as we know now, the play-to-earn model was bound to fail.

Drawbacks

One of the primary drawbacks of play-to-earn titles was that players were not really interested in the games themselves but rather in their earning aspect. While this did not appear to be a problem in the middle of a bull run, ask yourself what would happen when players suddenly stopped making any money with these games. The answer is simple: they leave. This is because players were not into the game in the first place, they were not playing these titles for fun, they were playing them to earn. Another drawback of using financial incentives to attract players was that it made many developers lazy. They knew that the quality of the game doesn't matter as long as the players are able to make money with it. This is also the reason why the space was flooded by trash games that were openly mocked by traditional gamers. Pretty soon, the party was over. Many P2E game tokens lost 99.99% of their value as the market crashed in early 2022. It became clear to many builders in the space that they could no longer rely on just financial incentives to make their project work, and they started to experiment with other economic models.

Play-and-Earn 

In the aftermath of the downfall of early p2e titles, it became clear to Web3 developers that they couldn’t solely rely on financial rewards to bring players to their game. So they took the approach that has successfully worked for Web2 games for the last 30 years. That is to create games that are so good that players would play them naturally and provide financial rewards and digital ownership as an added bonus. This model is now known in the industry as "play-and-earn." While the term is nowhere near as popular as "peer-to-peer," many upcoming games in the space are picking up the concept behind it.

Battling the Ghost of P2E

In some sense, play-and-earn is the ideal gaming model for Web3. However, it’s still under progress at the moment. Games are still looking for ways to encourage players to keep their assets in the game’s ecosystem and not instantly cash them out, which is a really, really hard problem. We believe no matter how good a game one creates, a certain segment of the players will still prefer to cash out some of their winnings from the game, and that’s fine. So what Web3 game developers can actually do is incentivize players for staying in the ecosystem through increased financial rewards with activities like staking. Another method could be to deeply integrate skill progression and token holdings. If you remember some old-school titles, players would need to collect and maintain a certain number of in-game points to make progress in the game. The same thing can be replicated with Web3 games. However, to make sure that this technique works as planned, Web3 game developers need to ensure that they create a game that’s fun and challenging enough for the players to keep wanting to play and make progress in its ecosystem.

Free-to-Own 

The free-to-play model was popularized by Limitbreak’s co-founder, Gabriel Leydon. Although the model is really only used by one project (Leydon’s NFT collection DigiDaigaku), it has still managed to gain a lot of attention in the market. Here’s the key idea of this model: A project gives away a bunch of NFTs for free to committed members of its community. These NFTs then work as generators of more tokens that will serve as in-game items in the fully developed game. This way, the early community members become devoted evangelists of the game and are not as motivated to sell their holdings.

There are two key reasons why members who received the NFTs initially for free will not cash out at the drop of a hat: firstly, they haven't made any financial investments, so they are not in a rush to cash out, and secondly, the value of their NFTs is likely to increase once the core game comes out. However, the biggest reason behind the popularity of F2O and DigiDaiGaku is the marketing chops of Leydon and his team. They have positioned F2O as a potential replacement for not only play-to-earn but also the freemium model of Web2 gaming. However, only time will tell if this model works out or not. At the moment the project is going quite strong - their freely distributed NFTs are trading for 11 ETH ($18000 atm).

Play-to-Own

Play-to-Own is the newest model on the block. Basically, in P2O titles, players can earn ownership of in-game assets by playing the game. These assets can include items, characters, or other valuable assets that can be traded on the blockchain. The concept was first popularized by Upland, a real estate strategy game. In some ways, the model is pretty much identical to Play and Earn. The core tenet of a play-to-own model is to create a truly fun and enjoyable game that the players would want even without receiving any financial rewards, and provide digital ownership over their winnings as an added benefit. As you can see, the difference is only in the words used for both models; the core concept appears to be the same.

In Closing

Blockchain gaming is a rapidly evolving field, and the different types of models that are used to determine how players participate and earn rewards will continue to evolve and change over time. However, regardless of the model that is used, the goal of blockchain gaming is to create a fun and engaging experience for players while also providing opportunities to earn rewards, and that’s what is truly revolutionary about this emerging industry.