Long before esports—the competitive video gaming industry—was widely recognized as a legitimate profession, popular play to earn games such as ‘Diablo II’ (2000) or ‘Runescape’ (2001) established fully-fledged digital economies in which the best players could earn a living simply by being good at the game. Indeed, one of your co-authors, Moritz Baier-Lentz, was able to fund his undergraduate and graduate school by completing in-game tasks and selling the associated prizes for real money—at one time, more effectively than any of the game’s 13 million active players.
However, the early 2000s were a ‘Wild West’ of digital assets, virtual ownership, and online identity—and video game marketplaces and transactions were never completely legitimate or secure, making stories like this one more of a case study in deft individual entrepreneurialism than a viable professional pursuit.
The massive expansion of the gaming industry, based on centralized value systems
Today, about 3 billion people worldwide play video games, and a whole infrastructure has developed around professional gaming, providing enormous chances and money for elite players. The absolute best of them are classified as athletes, earning salaries as team members, sharing in tournament prize money, and demanding expensive sponsorship deals. Others monetize their live broadcasts by gaming on audience sites like Twitch or YouTube Gaming.
According to BITKRAFT Ventures, video games have grown to a $336 billion business, including a diverse range of software, hardware, and intellectual property. As gaming has evolved to become the world’s biggest media category, surpassing linear television, on-demand entertainment, cinema, and music, it has acquired specific features. Notably, practically all economic activity associated with play to earn games is centralized, giving creators and publishers complete control over everything that occurs inside their play to earn games.
The financial reason for this is to collect the billions of dollars created by the sale of in-game content, digital objects, and subscriptions—but it also means that the great majority of players have little opportunities to participate in the value without professionalization.
This traditionally custodial model of ownership and profit sharing has survived as the business has grown—but it may be about to undergo a paradigm shift with the introduction of so-called play to earn games. This sort of video game enables players to ‘really’ earn and own digital assets, which they can later sell independently of the game.
Play-to-earn may put gamers’ digital identities, assets, and ownership in their hands.
If people are to devote significant time, attention, and personal resources to digital environments, it is critical to create faith in the permanence of their digital presence and goods—as well as their economic resilience. Early implementations demonstrate that this is indeed possible using blockchain technology, which can assure digital trust and decentralized storage of value through cryptography.
Blockchain technology is already being used in a wide variety of industries, ranging from banking to art—and video play to earn games are no exception. Play to earn games depend on blockchain technology to create wealth, including in the form of non-fungible tokens (or NFTs). A non-transferable token (NFT) is a digitally protected claim of ownership for a single, non-transferable digital asset. In practice, NFTs may take on a variety of forms inside virtual environments, including people, goods, land, and ornamental customization elements such as digital apparel. Individuals ‘earn’ the most precious things by doing very well in the game and may then sell them for real-world money on their own terms.
The actual revolution is in the decentralized integrity and security of these digital goods, which may now transcend a company’s or even a government’s conventional proprietary, custodial ownership and discretion. For instance, rather than depending on the permission or regulations of publishers or other third parties, in-game resources from pay-to-win games may be freely traded on markets both inside and outside the game.
Numerous communities have cropped up recently, demonstrating the potential for play to earn games to help develop a new economy. Notably, the computer game ‘Axie Infinity’ demonstrates that this is more than a pipe dream. The popular play-to-earn ecosystem has grown from 4,000 to 2 million daily active users in a matter of months, with particular traction in the Philippines and Venezuela. For participants in nations such as these in the Global South, the money they may make in the digital realm is significantly more than the revenue they can earn in their local physical economy.
Additionally, ancillary scholarship platforms,’ such as Yield Guild Games, that enable and educate players in emerging economies to participate in play to earn games, have attracted significant investment and grown to be billion-dollar businesses in a matter of months, eclipsing the value of many of the most popular video games. By globalizing the market for game-based non-financial transactions in this manner, play to earn games and their associated platforms demonstrate frictionless economic opportunity and meritocratic participation across regions. It is 2021, and the planet seems to be flatter than it has ever been. Click here to read about Uncommon NFT games tricks and tips to know.
For the time being, it’s worth highlighting that play to earn games do not naturally and completely remove the centralization inherent in games: they still need the publisher’s power to define, issue, and regulate the asset that ultimately becomes an NFT. Rather than that, the greatest promise of play to earn games is in their ability to decentralize marketplaces for the creation, ownership, and exchange of digital assets, as well as the potential created when these marketplaces are connected to the traditional economy and fiat currencies, allowing players to convert their digital time, effort, and earnings into physical disposable income.
Owning and participating in critical components of these new worlds generates significant financial benefits for those who believed; many of whom will be from developing economies that jumped on the opportunity when it presented itself.
For gamers, the play to earn games concept may provide a novel and flexible method of earning money. However, it also represents some of the dangers inherent in the digital economy, which risks generating “people as a service”: employment insecurity, insecure connections between enterprises and employees, and a lack of social safety nets. Given the existing disproportionate representation of freelancers in the creative sector, these are all factors that policymakers must address.