{"id":5719,"date":"2020-06-27T13:26:54","date_gmt":"2020-06-27T17:26:54","guid":{"rendered":"http:\/\/cointelegraph.com\/magazine\/?p=5719"},"modified":"2020-07-16T15:02:47","modified_gmt":"2020-07-16T19:02:47","slug":"play2earn-blockchain-gaming-economies","status":"publish","type":"post","link":"https:\/\/cointelegraph.com\/magazine\/2020\/06\/27\/play2earn-blockchain-gaming-economies","title":{"rendered":"Play2Earn: How Blockchain Can Power a Paradigm Shift in Building Game Economies"},"content":{"rendered":"
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For the past decade, the dominant business model in the gaming industry has been Free2Play.<\/strong> <\/span><\/p>\n

This model entails giving the game\u2019s base experience away for free and then monetizing the player base through ads and in-app purchases, referred to as \u201cmicrotransactions\u201d.<\/span><\/p>\n

Over time, this model has become increasingly adversarial towards players, employing predatory monetization schemes and catering to \u201cwhales\u201d instead of the average user. Despite its voracious nature, this business model has been enormously successful, helping to build a $159 billion dollar industry that’s now more than twice the size of the global movie and music industries combined.\u00a0<\/span><\/p>\n

This tremendous growth really took off in 2007, when the iPhone was released and smartphones started to become ubiquitous. Today, mobile gaming alone is a $77 billion industry, representing 48% of the total gaming market.<\/span><\/p>\n

Predatory monetization<\/span><\/h4>\n

Mobile games in particular apply certain monetization tactics to psychologically manipulate players into buying \u201cbundles\u201d of game items. Players are given a selection of purchase options, usually ranging from $1.99 to $99.99, which include loot boxes, character boosts, and in-game currency that will help them progress faster and stand out more in-game.<\/span><\/p>\n

Despite prices being arbitrarily set by the developer, the larger bundles are typically advertised as providing three-to-five times the value for purchasing in bulk. They are marketed aggressively through push notifications and at strategic points during character progression.<\/span><\/p>\n

This model eventually devolves into a \u201cPay2Win\u201d environment where those with the most disposable income, called \u201cwhales\u201d, will have an objective advantage by buying their way to superior gear and faster progression time. The best items are usually only available through randomized purchasing via loot boxes (with a <1% chance to drop), which lends itself to whales acquiring them immediately.\u00a0<\/span><\/p>\n

That leaves the majority of players disadvantaged, as they either cannot afford or are unwilling to pay for that luxury, and will require several weeks or months of grinding to get the same gear for free.<\/span><\/p>\n

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\"Blockchain<\/a><\/p>\n

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According to a Facebook Gaming <\/span>report<\/span><\/a>, 61% of gamers say they have felt post-purchase regret after making an in-game purchase. While Free2Play has proved to be successful in helping propel the industry forward the past decade, we\u2019re entering a new era where gamers will increasingly reject predatory monetization and start to insist that top grossing game developers deliver some of that value back to the players.\u00a0<\/span><\/p>\n

A new business model called Play2Earn aims to directly address this spending disparity. In this model, open market dynamics allow game assets to retain value, better aligning incentives with players. Savvy developers are choosing to empower players to trade their assets, giving them a superior sense of ownership and control.<\/span><\/p>\n

All monetization is not created equal<\/span><\/h4>\n

It\u2019s not accurate to paint all Free2Play games with the same brush, and certainly some games approach monetization far better than others. PC games that serve the esports market are <\/span>not immune from this<\/span><\/a>, but they certainly are better than mobile-first games, in that the purchases are usually cosmetic in nature only.\u00a0\u00a0<\/span><\/p>\n

Overall though, this is a huge problem that has gotten worse as the industry has grown. While the typical game studio maintains a limited profit margin, monetizing ads and the in-app purchases, the most successful ones don\u2019t even need ads as they are wildly profitable with the bundle-style monetization alone.<\/span><\/p>\n

Games like Call of Duty, Clash Royale and PUBG MOBILE are generating tens of millions of dollars in revenue each quarter. Most games fail to ever achieve this level of breakout success, but the ones that do become cash cows for many years. It\u2019s common for them to release content quarterly, giving players enough content to consume to keep them minimally engaged and continuously spending, but the experience doesn\u2019t change in any material way. (Looking at you Pok\u00e9mon Go).\u00a0<\/span><\/p>\n

There\u2019s certainly nothing wrong with wanting to create an extremely profitable game company, but there\u2019s a big opportunity for top grossing games to experiment with new business models. Of these tens of millions of dollars each quarter it\u2019s reasonable to have some of that value flow back into the game\u2019s economy where it can work its way back into the hands of the players that helped generate the most value.\u00a0<\/span><\/p>\n

At the same time this could create deeper layers of engagement, as players are directly incentivized to crank out daily quests and build up an account for the long term. Rewarding users who create a lot of value will pay dividends in the long run.\u00a0<\/span><\/p>\n

\nCreating earnings opportunities for players in addition to just spending opportunities can help to establish more sustainable digital worlds that have flourishing auction houses and robust secondary marketplaces.<\/span><\/i>\n<\/p><\/blockquote>\n

This is in stark contrast to focusing on squeezing the pockets of vulnerable players as much as possible before their inevitable churn.\u00a0<\/span><\/p>\n

A new model that emcompasses many of these principles and represents a paradigm shift in how the economics of a game can function is becoming known as Play2Earn.<\/span>\u00a0<\/b><\/p>\n

The Play2Earn model and walled gardens<\/span><\/h4>\n

Play2Earn focuses on maximizing player engagement over profit. Boiling it down to three key principles, Play2Earn means:<\/span><\/p>\n

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  • Providing skilled players ways to earn as a reward for being highly engaged with the game. Usually in the form of in-game currencies that have open market dynamics.\u00a0<\/span><\/li>\n
  • Enhanced ownership of digital assets. Players own and are able to trade and monetize their assets.<\/span><\/li>\n
  • Transparent and participatory in-game economies. Game developers allow and encourage building additional experiences on top of the game\u2019s core experience.<\/span><\/li>\n<\/ul>\n

    The gaming industry consists primarily of walled gardens and closed-loop ecosystems. Players spend money on in-game currency and items which they do not truly own and often cannot redeem for real world value. Players derive enjoyment from a particular game for a few months, but eventually they churn and move on. When that time comes, they cannot liquidate the rare items they spent months grinding to acquire. They are stuck in that game\u2019s walled garden and are effectively dead assets.\u00a0<\/span><\/p>\n

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