Coinsights #6: The Play to Earn Meta
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Play To Earn & Axie Infinity
Gaming is currently ~$150B industry and is projected to double that figure in less than 5 years. In addition, there are approximately 2.5B gamers worldwide, or a third of the world’s population! The sheer scale of the gaming industry makes it a prime candidate to propel crypto into the mainstream. But how?
The key to a well designed game is an engaging feedback loop of challenge and reward. As you get better at the game, the challenges should increase in difficulty but the rewards should also grow proportionally. A simple example is Pokemon: it takes much more time and effort to grow your Pikachu from Level 50 to 51 than it did to grow it from Level 3 to 4. However, the reward from growing your Pikachu to higher and higher levels means that it can learn increasingly powerful moves to use against other players!
Axie Infinity takes this same feedback model but adds a crypto twist: each Axie can be sold on the open market as an NFT on the Ethereum blockchain, creating a play to earn model. If a player is looking to get ahead in the game and don’t want to spend time growing their Axies, they can just buy one from another player. Some Axies have been sold for upwards of $600,000!
In addition, quests and other actions that you take with Axies generate SLP, another crypto token that can be exchanged for real money. The more experienced your Axie is, the more SLP it generates!
Axie Infinity took the popularity and game mechanics of Pokemon and added a critical web3 component: ownership. Imagine if the Pikachu that you spent days training was actually a liquid asset! In fact, Axie Infinity has proven to be a reliable source of income for many in third world countries, and 60% of its user base is in the Philippines. Playing the game has gotten so popular that the Filipino government has talked about taxing players’ earnings!
The Yield Guild Meta
One of the downsides of Axie Infinity is that it costs about $1000 to buy an initial set of Axies. In response, the Axie Infinity community introduced the idea of a “scholarship,” where players (the “scholars”) can borrow Axies and share the profits they make with the lender. The entire process of lending, earning, and profit sharing is enforced by a smart contract with zero human involvement! Since all transactions are recorded on the blockchain, all parties can ensure that they’re not getting cheated out of what’s owed to them.
There are entire companies built on top of this idea of scholarships, the most popular being Yield Guild. Yield Guild has built up a wide collection of not only Axies but also other NFT assets from other popular play to earn games, and takes a 10% cut from their scholar’s profits.
Yield Guild’s total treasury value as of September was ~$850M, and you can read more here to get a better idea of their economics.