In the summer of 2021, a new gaming movement made its way across Southeast Asia. The story of the NFT game Axie Infinity’s meteoric rise that year was especially evident in the Philippines, where market conditions fueled its success. Home to a tech-savvy demographic where there are 1.4 mobile devices per capita, the Philippines has an online gaming market set to reach US$1.52 billion by 2025.
Axie Infinity’s appeal in the country, as one of the most prominent use cases of the GameFi movement, demonstrated that real-world earning potential coupled with a casual gaming environment was a lucrative combination. The financial benefits could go a long way if Filipino Axie Infinity players send more than $2 billion (approximately US$36.9 million) to the country.
But a year later, after user confidence was shaken following the $600 million hack of Axie Infinity, the game’s entrenched power structures and long-term economic viability have raised broader questions about the promise. to play to win (P2E). After peaking at over 2.7 million players in January this year, Axie Infinity’s popularity has plummeted and it now has fewer than 750,000 active players.
So what went wrong with Axie Infinity and P2E, and if we take another step back, what can we learn from other Web2 fan experiences, like fantasy sports, to reshape the GameFi ecosystem for the better?
The P2E economy is ultimately based on the commercialization of the gaming experience. Those who have been in the gaming industry for decades will be familiar with the powerful economic opportunities that come from strong communities inside and outside of gaming. The supply of monetized collectibles, avatars, and in-game experiences will always be in demand as long as users recognize their value.
This begs the question: How many people are here to buy in-game assets? and play and how many people are here only sell in the hope of making a profit? When the dynamic tips towards the latter, the balance of supply and demand collapses, leading to a market completely filled with other sellers operating under the theory of the biggest fool. The current state of Axie Infinity’s economy has even led critics to charge that the title has exploited the narrative of financial empowerment in underserved economies.
Joining the game in the hope of making a return (and a profit) becomes especially tricky once inflationary NFT (non-fungible token) prices, cryptocurrency price fluctuations, and transaction fees are factored in. . As of March 2022, the average cost of a single Axie was approximately $37, which means building an initial team of Axies could cost a user upwards of $110, a totally unaffordable investment given that the average daily minimum wage in Philippines is approximately 10 US dollars. Research has also shown that many academics (new users who rent in-game assets from individuals or gaming guilds as part of a profit-sharing model) are actually earning less than the daily minimum wage in the Philippines.
If Axie Infinity has taught us anything, it’s that winning is one thing, but it can’t be all. Ultimately, if we take it as one of the first milestones in the long journey ahead of GameFi, it’s clear that we, collectively as an industry, need to go back to the roots of gaming as a whole. In recognition of this, Axie Infinity is gradually incorporating mechanisms to drive an ideological shift towards gaming.Y-win to rebalance the current dynamic between players and vendors within their ecosystem.
The introduction of Axie Infinity: Origin (Battles v3), which was announced earlier this year, involved the introduction of new gameplay mechanics such as the use of runes and charms to improve Axies performance. These would be created by spending SLP and the game’s other off-chain currency, Moonshard. As these items disappear and are refreshed after each season, players are forced to hold onto and use in-game currency, effectively stabilizing the price of SLP as a token-burning mechanism, to keep their players competitive. equipment. Whether this will ultimately and significantly change user behavior is up for debate.
Interestingly, we’ve seen the same parallels in the Web2 fantasy sports ecosystem. Daily fantasy sports, for example, face similar challenges where high earners “game” the system through calculated moves mapped out in spreadsheets while having the funds to maximize multiple entries within a contest. or tournament. The economics of inequality here, where the majority, 80%, of players are doomed to lose money, has meant that the playing field is far from level.
While daily fantasy sports share synergies with sports betting, entrants seasonal fantasy leagues finally make it as the next phase in your love for a specific sport, as well as a social connection with your friends, instead of purely gain. Identifying and capitalizing on the sweet spot that allows players to tap into their love of the game and the community around it is what ultimately drives the P2E dynamic away.
In light of the parallels, the intersection of sports and crypto has grown rapidly, with sports franchises and leagues getting involved looking to strengthen their fan engagement efforts. In fact, Deloitte estimates that NFTs in sports are expected to generate more than $2 billion in transactions this year, double the figure in 2021. However, moving beyond collectibles to utility and gamification , fantasy sports could provide a clue as to how Web 3.0 can significantly enable a fairer gaming experience while avoiding the challenges P2E has seen in the past year.
Switch to a new model
If we combine gaming, crypto and sports, there is an opportunity to switch to a new model, one that promises a greater focus on the fundamental principles of gaming as a whole. To attract these players, we must prevent them from being easily swayed by the next title or platform that comes their way. This points to the need for mechanics that allow a greater bond to form between the player, the community around them, and the environment itself, allowing for more persistent engagement and long-term loyalty.
This attachment is especially prevalent in the world of sports, where an ecosystem of fan experiences has grown into memorabilia, video games, entertainment and, most of all, fantasy sports. Here, the attachment that sports fans have translates into a whole new avenue to extend the game, where they become active participants in building their own teams and not just spectators from afar. As a result, fantasy sports have skyrocketed the value of sports leagues and franchises, from a hobby where fans follow their favorite team to an all-encompassing passion where fans have a core interest in every game.
With this in mind, a new generation of NFT games is pioneering a new economic model that could be described as play-to-play.own self (P2O) to fix some of the early P2E bugs. These games are designed to be fundamentally more accessible to new players with mechanics like free game modes and fungible tokens to mitigate user retention issues seen in Axie Infinity and other P2E games. This ensures that new players are getting into the game for the right reasons, whether it be for the game or as an extension of the esports fan experience, while also allowing them to benefit from the accessibility and equal opportunity it offers. Web3.
In the context of fantasy sports, P2O promises an environment where players have an equal opportunity to purchase an athlete token and truly own the teams they build. The satisfaction is less in financial incentives, but more in mastering the game itself, leading to new ownership models.
It goes without saying that the Asia-Pacific region represents a significant user base, home to more than 1.5 billion gamers, representing more than half of the global gamer population. Whereas P2E primed gamers with the idea that they could actually own self assets in the game, we believe that we as an industry can go even further by empowering them to own the gaming experience like an everything. P2O also reinforces the fact that game assets have intrinsic utility: beyond their monetary value as something to trade and sell, they allow gamers to be part of a community that celebrates a sport’s fan culture.
Whether it’s basketball, soccer (or soccer in the US), cricket, or anything else with a ball, sports will be the route to Web3 for would-be P2O players from all over the world.
Rekindle the spirit of community
P2E was a critical first step for the blockchain gaming ecosystem that has come a long way since the early days of CryptoKitties. While it can be easy to fall back on profit opportunities, Axie Infinity’s struggle to move on to play and win shows that it’s important to get the economy right from the start. After all, the Web3 movement is driven by the participation of many, and what better way to defend that than true ownership? Without a doubt, collectively taking charge of your gaming experience is much more enriching than remaining indebted to the profits and game dynamics decided by a few.