Will NFTs and “play-to-earn” transform the video game economy?

Will NFTs and "play-to-earn" transform the video game economy?

There’s no need to wait for the arrival of the metaverse to see the video game, blockchain, and cryptocurrency sectors intertwine. Convergence is already at work, through NFTs. This gave birth to a new model, “play-to-earn”, and an industry that is sometimes very lucrative… for some players, for new players (markets, guilds, crypto wallets, etc.), but not yet for the big names in industry waiting to see, haven’t found the right formula or remain skeptical.

In the first nine months of 2021, 20% of funds raised in the video game sector went to projects related to blockchain and NFTs according to Drake Star Partners. The game Axie Infinity generated revenue of 485 million dollars in just two months this summer, according to data from Bloomberg. Will that be enough to convince traditional publishers to get in the game?

What new uses does blockchain bring to video games?
The most common use case is to include NFTs in the game. “This is what we find in 90% of cases. Then we talk about play-to-earn or blockchain gaming”, explains to Digital Factory Sébastien Borget, operations director of The Sandbox and president of the Blockchain Game Alliance, which gathers more than 250 members (Ubisoft, Atari, Gameloft, investment funds, etc.). But the use can also be limited to converting cryptocurrency into game currency or, on the contrary, go to the end of the concept and make a game
decentralized based on A to Z on the blockchain.

By authenticating digital assets and linking them to their creator and owner, NFTs add a new dimension to collectibles. We’re going some way from renting to owning virtual assets, which allows trading of what players acquire in the game. Transactions in virtual assets were not born with NFTs as there are other ways to manage them. Valve has allowed this on Steam for years.

What’s new is that this can be done seamlessly on third-party marketplaces. Until now, they were either controlled by the editor (like skins in A counter strike), or were part of the black market. In reality, the publisher – as we saw with Ubisoft’s NFTs – can very well set up control mechanisms and limits on NFT trading. There is also an a priori interest in protecting your brand. It is difficult for a large publisher to pay for complete decentralization. Behind the displayed desire of “Give control back to our players”the explanations of Nicolas Pouard, VP in charge of the strategic innovation lab at Ubisoft, summarize well the problem of publishers in relation to NFTs: “We want to keep the experience for our players, not for speculators, and we want to reward the most loyal players”.

In theory, it would also be possible to use your NFTs in environments other than the original game, but in practice this seems very complicated to implement as the art directions, technologies and even the design of the elements themselves vary greatly. from game to game. Finally, it is possible to associate dynamic metadata with NFTs, for example statistics of players who have owned this object over time.

Let’s face it, many players would rather resell their dematerialized games than have NFTs. The transition to the dematerialized effectively deprived buyers of physical goods that they could borrow, trade, and resell at their leisure. “You have to start somewhere, we started with property”answers Nicolas Pouard.

How to play Axie Infinity

What is play-to-earn?
NFTs launched a new model, play-to-earn, including the Axie Infinity game developed by the Vietnamese studio Sky Mavis, laid the foundations. Principle: Instead of encouraging players to spend money to advance in the game, the game encourages them to advance in order to gain monetary benefits.

“The logic is that players can create value by creating content, being present in a multiplayer game, animating the community, etc. And this can be rewarded in cryptocurrency or NFT,” Explain Nicholas Pouard. For Sébastien Borget, it is a new form “an open economy subject to supply and demand, which transforms wasted time into an economic unit, and can even create new jobs. There are people in The Sandbox who earn 10,000 euros a month building virtual worlds.”

So in the Philippines, where 40% of Axie Infinity players live, the game has become a real business for part of the population. On average, players would earn $400 a month, claims the manager of one of Axie Infinity’s main “guilds,” which manages 5,000 players and takes a commission from their earnings.

Again, this type of phenomenon is not new. MMORPGs are the basis of the birth of this economy. IThere were already people doing this in India cultivation on World of Warcraft replenish your ends of the moon”, recalls Sébastien Borget. With NFTs, creators only hope to increase it. “Cesos have mastered this economic aspect. Now there are investment funds that buy NFTs, then pool them and exploit them with the help of players to generate predictable income. Before this was impossible, because the publishers, centralized, refused in their general conditions for players to resell assets.

With the advent of NFTs, play time is money. These irreplaceable tokens, on the other hand, are highly soluble in capitalism. And the gamification of the economy was succeeded by the financialization of the game.

Do the big publishers have projects?
Ubisoft pulled it off first, with the launch of its Quartz platform in December. Trial balloon seen as “the first step in understanding what blockchain can bring to our players, before we open the applications to a wider audience”, explains Baptiste Chardon, director of blockchain business and products at the publisher, which has a team of about fifteen people who have been working on this topic for three years. Ubisoft also supported Dapperlabs, Axie Infinity and Sorare with its Ubisoft Entrepreneurs Lab program.

Among the other three members of the “big four” of console and PC games, enthusiasm is relative. For the boss of Take-Two, “Not just because something is an NFT, that thing suddenly increases in value, and that value will increase over time.” the The CEO of Electronic Arts believes that “NFTs will be an important part of the future of the industry”but it is “really, really too early to know what form this will take”. And Activision Blizzard has not yet commented on the subject.

President of Square Enix, in its wishes for 2022on the other hand, he expressed interest in blockchain and “decentralized games”which should be a “main strategic focus for the beginning of the year”. In September, the head of Epic Games launched the exact opposite on Twitter so as not to touch the NFTs “since the industry is a tangle of scams, interesting decentralized foundations and scams”. As head of Xbox Game Studioshe “I think there’s a lot of speculation and experimentation going on, and it’s part of the making [qu’il] viewed today it looks more like exploitation than fun”. Finally, play-to-earn is being studied at Sega.

But the position that caused the most noise is that of Valve, which banned access to its Steam platform last October blockchain-based applications that enable or facilitate the exchange of cryptocurrencies or NFTs”. Which will not help democratize NFTs. Today, blockchain games completely escape from traditional distribution channels. Apple and Android app stores are also currently absent from the circuit, though according to Sébastien Borget “they think about ways to integrate, in a controlled way, games for money”.

Will video games democratize NFT?
Can video games accelerate the adoption of NFTs? The answer lies in the games themselves. It’s hard to imagine democratization without NFTs entering the hit game, and currently there is none. At the same time, hypercasual games show that it is possible to create success without investing huge amounts of money.

But to what extent does play-to-earn influence game design? “In the free-to-play model, the limitations are that new events are regularly created to revive the game’s economy with new assets. In a game for money, you have to make few assets and focus on their usefulness in the game. The gameplay must promote exchange between users. The developer no longer fully controls the game’s economy”summarizes Sébastien Borget.

Video game… or undercover gambling?
The sword of Damocles hangs over NFTs if they go mainstream: regulation. For Sebastien Borget, “IThe question is not if these games will be regulated, but when”. In Asia, things are already falling into place. End of 2021, South Korea banned Google and Apple from distributing play-to-earn games in their app stores because it considers them gambling. In August 2021. Philippine tax authorities impose on the players apply for tax payment on your earnings. It was to be expected.

In January 2019, the Belgian regulator (equivalent to the National Gaming Authority) already forced EA to stop selling loot boxes in Fifa Ultimate, as it considered them illegal bets, while at the time it wasn’t even about cryptocurrency. This unhealthy mixture of video games and gambling, already triggered by the inclusion of the “gacha” mechanism (buying virtual objects through a system with a random component, the result of which is partially related to chance) that gave loot boxes, further aggravates play-to-earn. And it angers many console and PC gamers who see it as a diversion from their hobby.

In fact, video games have democratized mostly cryptocurrencies. He says that 50% of Axie Infinity players had never used it before they started playing it Venturebeat co-founder of Sky Mavis. “Companies have learned to engage players in crypto games even if they don’t know anything about wallets and technical details. Today, business models are powerful and no longer necessarily dependent on bitcoin volatility. This major unbundling will continue”stated the president of Animoca Brands, who spoke at the same conference.

“Video game is an interesting learning vector for cryptocurrencies”, assumes Sébastien Borget. On The Sandbox, a million accounts are linked to a wallet.

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