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HomeGameFiWhy current GameFi play-to-earn model is failing?

Why current GameFi play-to-earn model is failing?

GameFi play-to-earn blockchain games market crashed because of poor design and excessive traffic, which clogged servers.

Related: How metaverse Creates business opportunities in web3?

In the past 10 months, we have witnessed a bubble develop, reach its peak, burst, and cause a recession. Consider it the most recent blockchain failure. Another bust for investors has been the nearly four-year-old GameFi (Game Finance) market (blockchain games), a sector of the cryptocurrency economy. Since the beginning of the year, the value of Axie Infinity, by far the largest blockchain game, has decreased by more than 92%. Bitcoin is down almost 55% in comparison. If no one is going to plug themselves into the Axie game all day and try to make some money, cool graphics and buzz won’t survive very long.

The modern play-to-earn games powered by cryptocurrency are doomed to fail. The majority of play-to-earn games now available are supported by the irrational crypto market frenzy and are based on flawed economics. For the great majority of players, these games have little to no long-term value. Even if there were, the paradise presented in these games is a thinly veiled dystopia into which helpless people are being forced.

Play-To-Earn Games: What is it?

The trend known as “play-to-earn” or “P2E” aims to commercialize the act of playing video games by enabling users to profit from their gaming time and see a “return on investment.” This trend, in broad strokes, tries to “reward” gamers for their efforts by giving them things with perceived market worth, frequently NFTs, obtained through games. If you’re committed, you may play a game all day and earn real money by trading these items amongst users. In exceptional circumstances, players can earn several times the local market rate. 

This is not a brand-new occurrence by itself; portions of the player bases of World of Warcraft and other well-known MMOs have been doing this for years. Some players spend all day grinding to manufacture high-level things solely to sell them to lower-level players for real-world money, even though these games try to discourage it as much as possible. Similar to the present iteration of P2E, this can be feasible for their revenue for some top players with favorable local exchange rates. But the play-to-earn trend of today is very different. With rewards in cryptocurrencies and NFTs, a blockchain replaces traditional game servers.

The sale of items to players is the focus of these new games. Everything has been commercialized and is available for purchase. Not for the game itself, but for this is the main motivation to play. It’s challenging to find a solution to this problem.

A play-to-earn games paradigm, which represents the first iteration of blockchain gaming, has attracted a lot of interest. A new paradigm is, however, starting to take shape in this field. The play-and-earn strategy restructures priorities and aims to reach a larger audience while having a longer-lasting impact.

Play To Earn (P2E): A Real Alternative to a Work?

Numerous blockchain games are presently available, but only a select number of them have been able to create profitable games. Even before they are released, the majority of games fail, and those that do succeed frequently have a short lifespan and declining profitability levels.

Axie Infinity serves as a good illustration of how a play-to-earn game may gain popularity quickly and then lose it almost as quickly. The firm behind Axie Infinity, Sky Mavis, began development in 2018, but the concept didn’t gain popularity until 2020, when many users, mostly from emerging economies, recognized a chance to quickly make money. The game is a perfect example of the complete performance of the cryptocurrency gaming sector. Axe Infinity popularity continues to decline: 

Blockchain games, GameFi (Game Finance), play-to-earn games, P2E, Web3 Games.

One of the decentralized applications with the quickest growth is Axie Infinity. In 2021, a significant rise in users was noticeable, which was also the year the market experienced rapid expansion. The prices of its tokens and its NFTs significantly increased along with the growth in users. Prices of Axe Infinity tokens significantly fell in 2022:

Blockchain games, GameFi (Game Finance), play-to-earn games, P2E, Web3 Games.

Similar to its explosive growth, the game’s popularity also experienced a dramatic decrease. A $625 million hack of the Ronin Network (an EVM blockchain created exclusively for Axie Infinity) that took place in March 2022 was a significant issue that contributed to the widespread collapse. Another factor in the decline in popularity is SLP, the in-game currency, which is an inflationary token and saw a sharp decline in value after the 2021 player boom. Profits dropped as a result, and many players eventually quit the game out of frustration.

A similar issue plagues a lot of other P2E games: they are unable to keep their token prices stable when influxes of new players arrive. The next phase of Axie Infinity’s development is its switch from a Play to Earn model to “Axie Infinity: Origins,” which doesn’t use cryptocurrencies.

About previous GameFi efforts, the big projects in this area have also performed poorly, and the overall image is all too familiar. Projects are frequently trading far below their historical peaks. Many projects are also selling below their ICO prices, much to the dismay of investors. Following are the top ten gaming projects:

GameFi, play-to-earn games, P2E

Metaverse and blockchain games

Although many of them lack the related earning mechanics, metaverses are unquestionably a part of GameFi and are frequently wrongly connected with Play to Earn. Metaverses are not performing as well as they should while having fewer issues than Play to Earn games. However, there has been a lot of news this year about how different businesses are starting to incorporate into the metaverse (JP Morgan, Disney, and others). One of the key advantages of metaverses is that they may provide users with a variety of engaging daily experiences.

Metaverses, however, currently tend to be overvalued as projects. Decentraland and The Sandbox, the two largest of them, are valued at more than $1.1 billion and reached a peak value of more than $10 billion. In contrast to DeFi or Play to Earn games, their user base is considerably smaller.

The Sandbox and Decentraland presently vary around 650 daily active users (individual wallets engaging with platform smart contracts), and only during the height of popularity did this number approach 1,000–2,000. Real users are extremely harder to quantify, however, these numbers pale in comparison to well-known Play To Earn programs like Axie Infinity.

Blockchain games, GameFi (Game Finance), play-to-earn games, P2E.

Indeed, the implementation of metaverses is still in its infancy. Numerous worthwhile initiatives are still developing their products and planning their launches.

GameFi Trend for 2022

The largest GameFi trend of 2022, which started with the release of Stepn, is without a doubt Move to Earn. This game embodies every essential M2E function and has given its early players exceptionally good returns. The game was released amid a period of market decline, yet it was nevertheless able to demonstrate excellent growth in its early years. Stepn’s straightforward physics, which is simple for users to rapidly understand and begin earning money, may also be to blame for a sudden rise in popularity. Simply moving and exercising will earn players Green Satoshi Token, an in-game cryptocurrency. The game significantly influenced the uptake of GameFi and M2E in particular. There are several games today with practically identical mechanics, but only a select few have proven to be worthy rivals.

Blockchain games, GameFi (Game Finance), play-to-earn games, P2E.

However, Stepn has experienced a similar fate to Axie. NFT sneakers are required to begin utilizing and making money on Stepn, as making a profit depends on them. Of course, the cost of these sneakers and the project’s primary token both increased significantly before their recent popularity. The enormous influx of new users caused the in-game currency (GST) to swiftly lose value over time, though, and as a result, the price of the NFT sneakers also dropped.

Blockchain games, GameFi (Game Finance), play-to-earn games, P2E.

The Stepn model resembled a Ponzi scheme in some ways because players who joined before the trend’s end put a fair amount of money into buying NFT, but because of the sharp decline in GST, it was very challenging to recoup this money and turn a profit. This is a developing pattern that is connected to the in-game token hyperinflation that is frequently observed in initiatives like these.

Without a doubt, ideas like Move to Earn have the power to spark fitness revolutions. M2E was possibly within striking distance; only one app was able to connect with more than 1.5 million accounts. However, it has become evident that Stepn was more about money than fitness for the majority of customers. We can only hope that future “X to Earn” projects will include fitness-related ones.

Important GameFi problems

GameFi trends frequently shift when new gaming mechanics take the place of more expensive older games. The number of users is one of the most important measures of a new gaming project’s success (accounts interacting with smart contracts of the game). Every month, the old projects are replaced by new ones.

It is important to keep in mind that, unlike Axie Infinity, the projects that rank first in terms of user numbers may not necessarily have the highest market capitalizations. A few of them are more focused on user rewards of various kinds, including stablecoins than on their tokens. Many individuals are still dubious that blockchain gaming is anything but a Ponzi scam, though.

Play to Earn games lost popularity for a variety of reasons. The lack of a valid need for blockchain is one of the primary issues. Numerous initiatives may exist without being built on a decentralized network and, in essence, they are hardly any different from conventional video games. Blockchain could still make some game-related issues simpler, such as payment issues.

The similarity of many games to Ponzi schemes, where the income of early players is provided by an influx of new ones, is another issue. Instead of appreciating the gameplay, most consumers view blockchain games as a way to get money. Players begin abandoning the game in large numbers as soon as it stops being profitable, which results in an additional decline. Other issues are less important because they relate more to the projects themselves than to the P2E idea.

Future of GameFi play to earn blockchain games

Market declines are almost usually seen unfavorably, although they can also have advantages. One of these entails assisting in the removal of failing enterprises, which frequently make up the majority, from the market.

The decline of Play to Earn was just as significant as the rise. Similar things have happened and will probably happen with many other crypto trends, but in this case, they occurred in the middle of a market that was already in decline, which made them extremely untimely. Future developments in the gaming industry are probably going to include a lot of new and improved systems, including the Play to Earn idea among other burgeoning trends. The market’s activities will determine whether they are successful.

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Disclaimer: This blog is for educational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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