This analysis was first published in SvD Näringsliv, in Swedish, on October 11th, 2021.
When crypto technology meets the gaming world, players turn into investors. A new trend has the potential to turn gaming on its head.
“When I started, I played almost four to five hours a day,” says John Ramos, a 22-year-old man from the Philippines.
It sounds like the kind of quote you’ve heard many times before from someone caught in a gaming addiction. But this is something else, and it ends differently than these stories usually do.
Ramos has turned gaming into a job. He has recently bought several houses with the winnings he has earned in the game “Axie Infinity” since he started last November. It’s part of a new phenomenon in the gaming and crypto worlds called “play to earn”.
Behind the game is the Vietnamese game studio Sky Mavis, recently valued at $3 billion – about SEK 26 billion – when American venture capital giant Andreessen Horowitz invested in them. This for a company only three years old. The growth has been fast – and is still accelerating. Revenue from in-game purchases inside Axie Infinity is projected to reach $1 billion in 2021, with 17 percent of that going to Sky Mavis.
The trend is in an early phase, but you can find it in Sweden too. Game developer Antler Interactive is working with blockchain company Chromaway on a game called “My Neighbor Alice”. It uses its own cryptocurrency, Alice, which launched publicly in March this year. Trading in Alice is already underway, but the game itself isn’t finished. It’s expected to launch sometime next spring.
Making money from playing computer games is nothing new in itself. But “play to earn” is different from e-sports and game streaming in that the game itself generates the revenue – not the viewers and sponsors around it. E-sports is closer to traditional sport in its business model. With play to earn, you play to collect virtual objects and cryptocurrency inside the game itself, but they can be traded on crypto exchanges outside it.
That may sound like a small distinction. But it turns the traditional business model of the gaming world upside down.
Normally, the revenue from a game flows directly to the studio that built it. Sometimes the money is shared with publishers who helped develop and market it. To simplify: the more people play, the more profitable the game becomes – regardless of the underlying business model.
With “play to earn”, you’re also playing games, but the difference is that the more people who join, the more valuable the things you own inside the game become. As a player, you benefit from the game’s success because the assets you’ve collected suddenly have more potential buyers. The most expensive Axie – a cartoon creature that looks like a cross between a cat and a fish – sold late last year for around $125,000, more than SEK 1 million.
The more players, the more people there are to trade with. From this perspective, it looks more like a cryptocurrency or a regular stock, where value is set by supply and demand. Drape this trade in a game, and you get a hybrid where players have a clear incentive to spread the game to others. They aren’t necessarily spreading it because it’s fun – they’re spreading it because they can profit from doing so.
This development is interesting and fast-growing, but it also carries an aftertaste of industries you might not want to be associated with. Recruiting new players to make your own investment more valuable looks a lot like MLM (multi-level marketing, where individuals sell directly to other individuals) and even has certain similarities to a pyramid scheme.
When you start playing computer games to make money, a lot of new questions appear. Is this entertainment or an investment activity? Does it look more like a casino than a board game? In an almost lawless frontier between gaming and crypto, we’ve only seen the beginning of this trend – and its problems.