What Is Play to Earn?
Video games have transformed the entertainment preferences of an entire generation. Since the introduction of Tennis for Two in 1958, gaming has taken the world by storm, with games like League of Legends, Fortnite, and Minecraft played by millions of gamers around the world.
In 2018, Reuters announced that gaming had surpassed other entertainment media such as movies, TVs, and music in terms of revenue, and this meteoric rise is showing no signs of slowing down. The Entertainment Software Association (ESA) estimates that 227 million Americans play video games—that’s around 66% of the country’s population. Spanning countless genres and devices, video games are a huge force in culture and entertainment.
Video game developers have built an enormous variety of digital worlds, deploying a multitude of game mechanics, visual aesthetics, and narrative experiences. Whether through a compelling story, pixel-perfect gameplay, or skill-based multiplayer dynamics, video games offer players highly engaging interactive experiences that are difficult to replicate through other media.
In the past few years, a new type of gaming experience has found traction within the blockchain ecosystem, known as “play to earn” (P2E). This emerging category of games offers built-in ownership of in-game currency and items enabled by cryptocurrencies and non-fungible tokens (NFTs), which hold a direct connection to a larger, interconnected digital economy with real-world value.
This article explores the impact of this fundamental shift to play-to-earn gaming on blockchains, with players tangibly rewarded for the time, effort, and money that they put into games.
Understanding In-Game Value
In-game value refers to the phenomenon of in-game items having real-world value. For a wide range of popular games, in-game value has become an unstoppable trend. In fact, traditional gaming economic models have proven that given the right context and environment, players will collectively give value to the contents of a video game, from gameplay features to both functional and purely cosmetic in-game items.
The robust marketplaces and increasing valuations of rare in-game items in games such as Counter-Strike: Global Offensive (CS:GO), Valorant, World of Warcraft, Genshin Impact, and many more showcase the growing trend of player-generated value within a wide variety of video games across multiple genres.
CS:GO is a popular, highly competitive multiplayer first-person shooter (FPS) game. In its traditional mode, players join a team of five pitted against another team of five. Equipped with a few select items that are equally available to all players, those with the best game-sense and aim precision rise to the top of the leaderboard.
Some of the most valuable cosmetic skins in CS:GO sell on out-of-game marketplaces for tens of thousands of dollars. Within the game platform, players can also buy “cases,” or loot boxes, that distribute an assortment of randomized in-game items. These items are purely cosmetic, but rare items are valued highly by the CS:GO player base.
Other video game genres such as massively multiplayer online role-playing games (MMORPGs) offer items that give players an in-game advantage. These games often employ a “pay-to-win” model, in which the players who spend the most money and time have the strongest attributes or most powerful items available in the game.
However, unlike CS:GO, MMORPGs for the most part lack a formal connection to the real-world economy—though they often have both robust in-game markets and unsanctioned marketplaces where in-game goods are exchanged for real currency. Unsanctioned trading is common, with players communicating outside the game to make peer-to-peer deals or using third-party websites, which facilitate transactions without the game provider’s approval. This can result in in-game punishments, with players taking on risk by engaging in this kind of behavior. Nevertheless, the demand is there, and many players are involved in these underground markets.
In “gachapon games” such as Genshin Impact, which incentivize players to continually spend real-world money on loot boxes in order to gain the best items and characters, in-game value makes up a considerable portion of the game developer’s revenue. The highly popular Genshin Impact’s gachapon model led to the game bringing in more revenue than any other game in its first year, demonstrating the power of in-game goods as value drivers—even for games without a built-in player marketplace.
Whether it’s a cool new skin for when players are destroying the enemy in a skill-based FPS, or attaining the strongest items through in-game MMORPG or gachapon loot boxes, one unequivocal fact is that the real value of these in-game items is created and perpetuated by players. By deciding to buy in-game items or loot boxes, players are assigning value to an intangible digital item in a very real way.
What Drives In-Game Value?
The concept of in-game value can often be confusing to non-gamers. Why do players value in-game items to such a degree?
One core reason is that social motivation such as peer competition and social interaction make up a large part of why players are motivated to play video games, alongside factors such as escapism and stimulation. Players often build communities around the games that best meet these intrinsic needs, creating value from the inside out.
This can be understood by looking at the example of a traditional sports game such as golf. At a base level, golf can be played alone. Get a set of clubs, find a course, and you’re good to go. This is single-player golf.
However, single-player golf gains additional dynamics in multiplayer mode. With a group of friends, golf becomes both a competitive and social experience. Each golf stroke is compared against the rest, par becomes the standard, and a skill hierarchy becomes apparent. Friends (or enemies) are made, a social hierarchy begins to form, and the game becomes increasingly important to the players as a meaningful way to spend their time.
Social status within the context of golf is signaled through items such as clubs and clothing, both accentuating and outstripping pure utility in terms of value. In single-player mode, only golf clubs that make a player’s shots better, more powerful, or more accurate are valuable. Now, those golf clubs are even more valuable given the addition of social dynamics and competitive gameplay. With this new dynamic, goods such as signed t-shirts and hats from the pros become a form of status with increasing social and real-world value.
This is incredibly common in popular professional athletics industries. From athlete-sponsored shoes to signed jerseys and in-game equipment, fans around the world find value in these collectibles, many of which offer no practical utility. Popular video games are experiencing this exact same effect, manifested as valuable in-game items and currencies.
As a collective, players flock to the games that best suit their needs, both in terms of entertainment and community. Whether it provides a fun competitive experience, offers a welcome distraction, or fulfills some other core need, in-game value is built by conjoining a game and its players. With their functional integration in the correct environment, player and game work together to build a robust foundation of in-game value.
However, very few games actually achieve this synergistic balance.
Imbalanced Power Dynamics: Controlling Value Creation
In the current model of the mainstream video game industry, game content is controlled by a single entity. This entity owns the development of the game, access to the game, and the features that are native to the game. This is commonly referred to as centralization—the concentration of control in the hands of a single party or a small group of parties.
In this context, the in-game value created from these online multiplayer games is mostly captured and moderated by game developers or publishers, though there are some instances where it is, to a limited extent, shared. Additionally, for all online multiplayer games, control over the value is inherently given to the game developer.
Closed Economies and Open Marketplaces
A clear example of this can be seen by comparing two popular multiplayer video games today: Valorant and CS:GO. Both are skill-based FPS games, in which all in-game items are purely cosmetic and have zero utility within the game itself. However, CS:GO players have greater opportunities to accrue value and benefit from the resources they put into the game due to the many open third-party marketplace providers and the native ability to sell items. In contrast, Valorant allows no third-party marketplaces for in-game items.
In CS:GO, well-designed game mechanics, a robust community of competitive players, and third-party-facilitated open marketplaces combine to build massive in-game value. Every in-game item has a market price, players are tangibly rewarded with item ownership, and the game developer benefits from continuous revenue borne from players’ enthusiasm for in-game items.
The importance of open marketplaces cannot be overstated. In closed systems without marketplaces, in-game value is limited to the initial buy price of a particular in-game item, as demonstrated by the example of gachapon games. A parallel example is a company selling rare and valuable shoes, but completely banning all third-party transactions. By opening up these items to free-market dynamics, robust economies based around community demand act as money multipliers. The game company assigns a set price just as it did before, but the player can now sell it on a marketplace for it to be traded numerous times back and forth.
Valorant uses a closed system, with items completely closed off from marketplace activities. There are zero avenues for trading, buying, or selling. Players can buy in-game points with real money for the chance to get items that can only ever be accessed on one account. No in-game economy is allowed to form—the mechanisms do not exist, nor can they exist unless the entity behind the game builds the functionality.
This puts a cap on the growth of in-game value from a free-market perspective. All Valorant items are statically priced, and in-game value never has a chance to grow as it does in a CS:GO marketplace. No matter how rare or valuable the item, players have no means to build upon the initial item release and create hierarchies of items with increasing values that ultimately benefit both players and the game developer.
In today’s video game industry, the centralized entities behind video games can remove a player’s ownership of an item or simply decide from the start to ban in-game item transactions, capturing initial in-game value for themselves and removing the potential for player-generated growth. Though players drive the bulk of the value within online multiplayer games, they have no control over the value of items or in-game currency themselves.
This is where cryptocurrencies and NFTs become absolutely crucial in increasing player control and building a fair playing field for all video game stakeholders. In games featuring sovereign item ownership, the focus is not solely on a player’s ability to earn by playing games, but rather on spearheading collective player autonomy through permissionless marketplaces and verifiable ownership of digital assets—unlocking the unbridled potential of in-game value.
Building Player-Owned Economies Through Play to Earn
Many emerging blockchain-based games are working to give players verifiable digital ownership of their in-game items through NFTs and connecting in-game currency to real-world markets through tokens. These games are able to offer players a fair, unbiased, and tangibly beneficial gaming experience through permissionless, player-owned economies.
Through blockchains, games can become play to earn, with player-driven value accrual allowing for the birth of robust, unique, and formal economies. Though gameplay elements might still be centralized from a development standpoint, both in-game items in the form of NFTs and player marketplaces can be permissionless. In these open platforms, no entity can revoke the ability to trade items or take in-game items away from players.
Built upon transparency, decentralization, and collective decision making, blockchains and NFTs can act as a foundational starting point for new games to build from the ground up with these values in mind, or for existing games to begin moving towards a more equal and fair system—opening up opportunities for truly player-owned games.
Analog Examples: Trading Card Games
An excellent example of verifiable ownership can be found in trading card games (TCGs), such as Pokemon and Yugioh, which have valuable cards that are bought in what is essentially the real-life equivalent of loot boxes: card packs. Players who buy these packs randomly receive rare cards and become the sole owners and beneficiaries of the pack’s contents.
As Pokemon, Yugioh, and similar games such as Magic the Gathering gained prominence, both game designers and players benefited. Game designers profited from the initial sale and network effects of third-party marketplace activity, while players benefitted by receiving valuable and rare cards with the option to sell or trade. Unlike most digital items, from the minute a randomized card pack was bought by the player they had exclusive ownership over the item, with the ability to sell or trade it for real value. This model has resulted in sector-leading revenues for Magic the Gathering publisher Wizards of the Coast in 2021, and it remains successful for many collectible-based games.
NFTs offer this same unequivocal ownership but for digital items. By using blockchain technology to manifest in-game items as NFTs, players are empowered to benefit from their collective investment of money, time, and effort. In fact, blockchain-based TCGs already exist, with games such as Gods Unchained, Splinterlands, and more offering players unequivocal ownership of their cards.
With blockchain-based trading card games with NFT-powered cards, players not only have ownership of their in-game assets but also a direct connection to a larger economy. Enthusiastic community members are able to create marketplaces that have robust sources of liquidity and market pricing, ultimately catalyzing the rise of in-game value.
Socially-focused game genres such as MMORPGs can benefit immensely from the implementation of blockchain technology. Historically, these games have often had their own robust in-game marketplaces, where players buy and sell items for in-game currency that is earned through completing a variety of different game activities, such as killing monsters, clearing dungeons, finishing quests, and more.
Avid MMORPG players are often wholeheartedly dedicated to the advancement of their characters but are only rewarded for their efforts in-game. However, due to the importance that players place on games, under-the-table transactions are common, with players buying valuable items for real-world money on unlicenced markets, as there are no formalized ways to transfer in-game value to real-world value.
For MMORPG players, a game underpinned by blockchain technology could remove barriers and add additional functionality. In-game currency could be freely earned and sold in a global marketplace, allowing the best players to potentially even earn a livable wage by playing the game. Permissionless marketplaces mean that players’ in-game items, taking the form of NFTs, and fungible in-game currency will have a defined market value as long as there is sustained demand for these digital goods.
How NFTs Support Skill-Based Games
Players of skill-based games can also benefit from NFTs. Purely cosmetic items are undoubtedly valuable to other players, and a more formalized marketplace and economy can take these games to the next level.
Games such as CS:GO, which already have marketplaces that facilitate transactions between in-game items and the external world, can benefit from lower fees and more user-friendly experiences. Additionally, NFT ownership and transfer are possible without the participation of game development companies, helping build censor-resistant ecosystems based on verifiable ownership such as third-party marketplaces and new products using the same NFTs.
The Current State of Play-to-Earn and Blockchain Games
The paradigm shift toward play to earn is already beginning within the blockchain ecosystem. In the past year, a rising wave of play-to-earn games have gained prominence. The most popular game in the context of economic growth is Axie Infinity, a trading and battling game based around adorable NFT fighters known as Axies.
True to the core values of blockchain technology, Axie Infinity aims to become increasingly decentralized. Sky Mavis, the entity behind Axie Infinity, has established plans to move towards community governance through the staking of its native AXS governance token. Major decisions surrounding the future of the NFT marketplace, the movement of treasury funds, and payment to Sky Mavis employees will be decided by a majority vote based upon on-chain governance.
In this system, the community receives an increasing amount of power as a collective as more AXS tokens are delivered to active players, giving decision-making power to those who are most invested in the game and pioneering the idea of a player-owned game.
On a gameplay level, players buy Axies from an open marketplace in order to form Axie teams, which can then be played in an adventure mode or pitted against other players. In return for their time playing the game, players receive Smooth Love Potion tokens (SLP), which are ERC-20 tokens that are intrinsically connected with the underlying Ethereum Network and the Ronin sidechain. These tokens can be directly sold or used to breed Axies, which can be sold for value based on their stats and the current state of the metagame.
Axie Infinity players are directly rewarded for their participation in the game, gaining daily SLP rewards as they play. Verifiable ownership of Axie NFTs means players can retain some value from the initial cost of entering the game, which fluctuates based on the market. If they choose to breed their Axies, they can then sell or retain these new Axies, and potentially profit based on the Axie rarity. Axie Infinity is currently the most widely adopted play-to-earn game in this rapidly growing industry. In fact, a large number of people within the Philippines actively play the game for its monetary rewards.
A variety of blockchain projects have come up with their own spin on the play-to-earn concept. Trading card battle games such as Gods Unchained bypass the need for fungible tokens like SLP by allowing players to win randomized digital card packs by playing. Players can then sell valuable NFT cards on the market, earning rewards for their time and effort.
This is why blockchain gaming and play to earn are, for the most part, synonymous terms. Nearly all blockchain-based games are play to earn because they all offer verifiable ownership of in-game items and currencies that have real-world value. Any genre of game can be adapted to this format. Axie Infinity, Gods Unchained, My DeFi Pet, and more have simply given the world a first taste of what play-to-earn gaming looks like.
It’s important to remember that decentralized governance is not a guarantee. Players must understand that the verifiable ownership of digital assets is only one piece of the puzzle—at the base level, these games give players access to open marketplaces and assign real-world value to in-game items. When it comes to controlling these in-game assets from a gameplay and utility standpoint, blockchains, both in culture and technology, offer a good starting point for not only player-owned economies but also for communal governance that facilitates truly player-owned games.
The Role of Chainlink in Play-to-Earn Gaming Economies
As the industry-standard decentralized oracle network, Chainlink offers a variety of services that further a fair, reliable, and more interactive playing field for in-game value creation.
Using Chainlink VRF in Blockchain Gaming
Consider an MMORPG in which a loot box has a 0.001% chance of dropping the game’s most powerful item to date. If a player or game developer could manipulate the random number generator (RNG) used to distribute this item, the sense of fairness that underpins strong communities and values would be undermined.
Chainlink Verifiable Random Function (VRF) offers blockchain games a tamper-proof and publicly auditable form of randomness that restricts the potential for manipulation by any entity and helps ensure the chance to open a loot box and receive an extremely rare NFT game item is equally fair for all participants. Chainlink VRF generates both a random number and cryptographic proof off-chain, then delivers both on-chain where the cryptographic proof is verified on-chain prior to the acceptance of the random number by the consuming application. By using this mechanism, gaming platforms can become more equitable and protect their integrity.
Axie Infinity used Chainlink VRF to give players verifiable assurances that the traits of Origin Axies—which impact their real-world value through varying rarity, utility, and desirability—were generated in a provably random manner.
Any randomized event that has even a small impact on the end result, such as the RNG that determines damage output and the winner of a player-to-player battle, can benefit from the transparent randomness offered by Chainlink VRF. As a core part of many video games, tamper-proof and verifiable randomness is necessary for fair and fun gameplay—especially in play-to-earn games where everything has a tangible monetary value.
Supplying Games With Data Through Chainlink Data Feeds
Blockchain games can use Chainlink Data Feeds to build communities around in-game items in the form of dynamic NFTs and create unique in-game situations based on real-world events.
Imagine a game that features in-game items that automatically change based on pre-set conditions. For example, a base cosmetic weapon skin that changes based on specific gameplay stats, such as how many goals a player has scored, or how often a character has died while using the base weapon.
In this example, the weapon skin changes to become completely unique to a player’s specific set of stats. The more a player is defeated and loses, the less impressive and valuable the skin becomes. The more a player succeeds and wins, the more impressive and valuable it becomes. Chainlink Data Feeds make it easy for on-chain NFT game assets to be connected to a game’s backend system or network to fetch player information in a way that is tamper-resistant, cost-efficient, and transparent.
Chainlink Data Feeds can also be used to make NFT valuation data accessible to smart contracts, unlocking utility on other blockchains. For example, a player with a $10,000 item could use it as collateral for a blockchain-based decentralized finance (DeFi) loan in a way that is completely tamper-proof and automated—something that would never be possible with current video games and in-game items. One example here is JPEG’d, a decentralized lending protocol that mints native stablecoins collateralized by an underlying NFT with the support of Chainlink Data Feeds.
Reliable Automation With Chainlink Keepers
Any successful game needs to be seamless in all of its functions, with players expecting reliability in order to maximize their gameplay performance. Blockchain game developers require tools to help them boost performance and overcome some of the limitations presented by blockchains, such as smart contracts requiring a trigger to execute.
Chainlink Keepers can provide reliable automation for critical value-supporting functions, such as making sure the start and end of game rounds happen on time. If rewards are distributed based on a particular game result, Chainlink Keepers can automatically trigger a smart contract to reward the respective winners, furthering crucial service reliability that keeps players engaged.
The upcoming release of the Cross-Chain Interoperability Protocol (CCIP), an open-source standard for blockchain interoperability, will unlock the potential for expansive video games that leverage NFTs, cryptocurrencies, and community governance by allowing these games to bridge their data and assets across blockchains in a seamless manner.
From moving NFT game assets across various blockchains and bridging NFTs between different games on a variety of underlying networks to syncing game states across chains and facilitating cross-chain NFT marketplaces, CCIP has the potential to make it simpler for both developers and users to reside in a multi-chain environment.
This has the potential to create exponential growth of in-game value, competition, and adoption in a virtuous cycle, with interconnection across blockchain environments enabling game publishers to access a larger player base, which in turn lead to more social externalities that ultimately drive in-game value. Similarly, the advent of multi-chain marketplaces underpinned by CCIP can allow for more liquidity and better pricing for items, which also can contribute to more efficient gaming economies.
This potential increase of in-game value could then result in more competition between game publishers, who hope to capture a piece of the expanding market, and more adoption from players as new games launch. As more games are built and more players enter the ecosystem, increased social gameplay and the expansion of multi-chain marketplaces can again lead to further increases of in-game value—perpetuating this virtuous cycle of adoption.
The Play-to-Earn Paradigm Shift
The full potential of play-to-earn gaming has yet to be fully realized. The popularity of social media platforms for peer-to-peer information transfer saw self-made influencers, musicians, and streamers form entirely new economies based upon digital advertising, micropayments, and subscription models. Similarly, play to earn has the capacity to change the game for the video game industry by enabling entire new economies through collective decision-making and the verifiable ownership of digital assets.
With players able to share the value of their gaming time, the potential for play to earn is limitless, and NFTs, cryptocurrencies, and decentralized oracle networks are powerful tools that can offer more efficiency, opportunity, and structure to this new generation of video games.
These implementations are only just beginning. Though it’s impossible to know exactly what the future will look like, the core tenets of blockchain technology point to a growth in gamer empowerment through fairness, ownership, and markets open to all.
If you want to start building a blockchain gaming application today and need some type of external data or computation, refer to our documentation, ask a technical question in Discord, or set up a call with one of our experts. For more information about oracle use cases, check out our NFT and blockchain games webpage.