Play-to-Earn (P2E) games have been the new rage in the gaming and crypto worlds. P2E allows players to earn as they play the game. While that sounds great, a P2E founder now has to design both the Game as well as the economy that involves the players of the game.
The goal of this article is to dive into P2E games and the economics within them.
History and Evolution
Let’s start with a small story:
Rebecca Heineman entered what was probably the first-ever Esports tournament: The Space Invaders contest in Los Angeles. She entered not expecting to qualify for the “Top 100” let alone win the tournament. After a grueling few hours, she won the contest.
After she won the contest, Heineman was offered a consultancy job by the Electronic Games Magazine to help write a book called “How to Master Video Games”.
Ever since, earning through playing video games has significantly evolved from tournaments to Esports leagues, professional streaming, and building in-game monetary models.
MMORPG games such as Fortnite monetized cosmetic attributes such as weapon skins and pulled in over $2 Billion in revenue even when they added zero value to the characters or gameplay.
In games such as World of Warcraft (WoW), players would accrue value to their characters using their skills and efforts, and sell them externally on sites like eBay and Craigslist. Skilled players would make money by playing and increasing the value of their characters, and then sell it to buyers who’d rather spend money overtime on getting a powerful in-game character.
WoW frowned upon this behavior and would regularly ban such accounts.
This behavior of players and game design set the stage for the genesis of Play-to-Earn (P2E).
Game monetization now has evolved into in-game economies.
The P2E Market
The global gaming market is projected to reach $196 Billion by the end of 2022 and $340 Billion by 2027. The P2E gaming industry was already worth $3Billion in 2021 and is projected to value at $39.7 Billion
P2E Player Personas
Typically we see 2 personas of players in a P2e environment. These personas are not distinct but are two sides of the same coin. A successful P2E player is a combination of two personas:
“The Gamer” and “The Creator”
“The Gamer”
The Gamer persona of a player is constantly motivated by a set of emotions that is evoked by the objectives, constraints, strategies, and the player/environment of Gameplay.
The below image is a part of Quantic Foundry’s research that shows the different sets of emotions that motivates a player based on their actions and also who they are against.
Credits: Quantic Foundry
“The Creator”
The Creator is one that plays with the primary objective of achieving a financial goal. The creator will find the best ways to earn more money and compound value.
The goal of P2E games is to satisfy the objectives of both the personas within a player in the most efficient manner possible. To understand how to build a great P2E game one has to first understand the Elements of a P2E game. Let’s have a look.
Elements of a Good P2E Game
Primary NFT
The Primary NFT(s) is what represents the player of the game. Each wallet address can be mapped to a single Primary NFT (Ex. Avatar, Spaceship, planet, etc.) or many Primary NFTs (Ex. Trading and/or Playing Cards). The presence of a Primary NFT is rudimentary for a P2E game. It is the value accrual of the Primary NFT that makes P2E a lucrative alternative for gamers to move from non-blockchain games to blockchain-based games
Earnable Tokens (“Coins”)
Players must be able to earn a certain amount of tokens on achieving objectives in the game very much like non-blockchain games. Earning these Tokens/ “Coins“ are intrinsic motivators for players to move on to the next objective.
An earnable token must have the utility to exchange for an attribute or another primary NFT
Platform Token
The platform token is a good way to represent the game as a whole instead of an in-game utility. The platform token can also behave as a governance token for the project as a whole. The “Coin” can be used for in-game activities.
Attributes
Attributes may or may not Attributes may or may not be exclusive NFTs. Attributes can be add-on NFTs to the Primary NFT (Ex. Weapons to an avatar, Skins on a car) or they can be permanently attached to the Primary NFT (Ex. Cards).
Market
The market here is not to be confused with the Peer-to-peer Attribute or Primary NFT market. While having that is compulsory, a well-oiled and high functioning market must be present for the trading of the tokens (Platform & Earnable both).
Characteristics of a Good P2E game
We like to see this in two different portions:
1. The Game Design
2. Economics Design
The Game Design
We absolutely love Bryan Wirtz’s short article on the elements of a good game design. “All games have players, objectives, a system of rules, and feedback. All these together make a game a game”.
Objective
Although the clear objective for a player is to earn money, there must be an in-game objective. Axie infinity has “Battles” that need to be won, CryptoRaiders has dungeons to be “Raided”. A clear objective is required, which upon achievement, a player can earn the coins. A good game can also have a series of objectives leading to a larger objective (Ex. Win battles to move to higher levels)
Constraints
Constraints can come in many different sizes and forms. Early video games would have easy-hard modes, MMORPG games had matching players to similar levels, whereas a lot of P2E games have adopted the model of constraints through attributes. The attributes can make the player play harder levels and earn more money. The attribute levels coupled with avatar levels can be used as constraints for a player to grow in the game.
Constraints form the core for the monetization of the NFT attributes or the NFT avatar. Players increase the value of the Avatar with attributes that allow the avatar to power through levels with higher constraints and hence earn more money.
Strategy
A player must always have more than one way to achieve the objective. Linearity in gameplay removes any advantages for one player to win over the other player or the environment.
In P2E games, strategies can be determined by varying powers and types of attributes. Pitting one attribute vs another creates a large set of strategies that players can use to make their Primary NFT (Avatar) win against those of another player.
Feedback
Upon achieving different objectives using a/ a set of strategies, the players have to get rewarded with a proportionate number of coins.
The player then uses these coins to purchase attributes and then deploy strategies to move to the next level.
Economics Design
When one is designing a P2E game, the game design is one problem to solve, but robust economics is equally important. The “Gamer” persona of a player is more intrigued and entertained by the game design but the “Creator” persona of a player is motivated by the robust economics of the project.
Our favorite article on designing a P2E economy is Nat Eliason’s “274: Designing a Play-to-Earn Economy”
Using the learnings from the beforementioned article and studying different successful P2E games, we’ve created a guide for a founder to build or test their game’s economics.
Let’s understand the different loops mentioned in the infographic:
The Gameplay Loop
The gameplay solves the first goal of the player, i.e. to “Earn Money”. The player completes objectives in a game to earn the “Earnable Token” and exchange it for attributes that help them accomplish tougher objectives and in turn, earn more “Earnable tokens”.
The gameplay loop satiates both the “Gamer” and the “Creator” persona with emotional motivation as well as financial benefit
The Primary NFT Value Loop
To satisfy the second goal of the player there has to exist an asset that can compound in value. That can be achieved by the presence of the “Primary NFT” that can accrue in value. The value accrual of the Primary NFTs happens when the “Attributes” attached to the Primary NFT allow a player to achieve tougher objectives and hence earn more money.
The Primary NFT can be sold to buyers in an NFT Marketplace. The sale satisfies “The Creator” persona of a player.
The Platform Token Value Loop
While the above two solve the two major goals for a P2E player, there is a third loop that needs to help the investors of the project achieve their goals. If the project were to declare “Earnable Tokens” to represent the platform there would be two major issues:
i. No value-adding mechanism built into the “Earnable Token”
ii. Even if there were a value-adding mechanism built into the Earnable Token, the players would hesitate to spend an “asset” to acquire another
This brings up a need for a separate token that represents the platform as a whole. When this token is in the market there needs to be:
i. Healthy liquidity of the platform token
ii. A value-adding mechanism that needs to be built in to incentivize holding
This creates the value loop for the holders of the platform token
Additional Tip
it helps to keep the “Earnable Token” supply variable. The reason is to keep the price volatility low. This leads to:
- Easy onboarding for new players and allow them to play the game with ease.
- A removal of an arbitrage economy that devalues a Creator’s effort.
Ex. a player purchases the Earnable Token at a low price on an exchange, and purchases a high-value Primary NFT/Attribute to devalue the efforts of a “Creator”
Applications
Let us look at all the applications of the above characteristics and mechanisms in play:
| Axie Infinity | Crypto Raiders | Splinterlands | Sandbox | Star Atlas | |
| Primary NFT | Avatar | Raiders | Card | Avatar and/or LAND | Humans, Ships and/or Structures |
| Attributes | Add-on | Add-on | Attached to Primary NFT | Add-on | Attached to Primary NFT |
| Earnable Token | $SLP | $AURUM | $DEC | $SAND | $POLIS |
| Platform Token | $AXS | $RAIDER | $SPS | $SAND | $ATLAS |
Most of the games above follow a similar mechanics as mentioned in the guide above. Each has a distinct Primary NFT, Earnable Token, and a Platform token while having utilitarian attributes. These game economies have a great Gameplay loop, a way for the players to create value and sell their Primary NFTs, and finally a robust value loop for the believers of the platform.
However, Sandbox stands out. Sandbox is a P2E Metaverse-based game. They have managed to keep the Earnable and the Platform token the same. They’ve not attached a separate “Platform Token Value loop” to the Platform, but they have capped the supply at 3,000,000,000 SAND. The future scarcity of SAND combined with utility creates a value loop in itself. An additional value loop has been created by allowing investors to buy land (a limited supply resource) that can create demand with scarcity and also allow a revenue-generating mechanism (rent).
Second-Order Effects of P2E Economies
While P2E games have their economies running within the game, from a macro perspective, a “Creator Economy” emerges. When P2E games attain a critical mass of network effects within the players, a creator economy can evolve.
History can repeat itself like “World of Warcraft” where a set of experienced players can become creators. Specialized players can create great Primary NFTs with different attribute sets that upon purchase will help other players clear tougher objectives and earn more. The more complex the strategy set in the game, the more verticalized a creator economy can get.
Ex. There can be different specialized creators that can take a Primary NFT from Level 1to 10, while there can be another set that specializes in taking it from Level 10 to 100.
Metaverse-based games like “Sandbox” also allow external creators to plug in their creations as either Primary NFTs or attributes. This allows for great partnership opportunities between external creators as well as in-game creators.