The online gaming industry is seeing an influx of Web3 gaming models, which are attracting a lot of attention from both gamers and investors.
In Web 2.0 games or freemium games, the value-creation of all economic activity was captured in a centralized model of ownership controlled by game publishers and developers, allowing players to earn value from the appreciation of demand for virtual digital assets. There was not enough space left for it. VDA) in a secondary market.
There was a rigid system of controls over a player’s downloaded content (DLC), authentication of ownership, and how digital assets in the game would function.
Enter ‘Play and Earn’ (P&E) games built on blockchain technology, in which a gamer gains ownership of a VDA, whether in the form of non-fungible tokens (NFTs) or game-based tokens. They grind into the game to increase the value of their VDAs through merit-based progression, after which they can be unlocked in the secondary market.
Some popular examples of such games are Decentraland, Axie Infinity and The Sandbox (SAND).
P&E has been a natural progression from Play-2-Earn (P2E) games as earnings were less concerned with playing and more due to the player initially investing money in buying NFTs. They will get returns only if future players also invest money in the game like this.
Therefore, the general consensus within the industry was to go back to first principles and merge Fun2-Play with P2E, and think of GameFi as a P&E opportunity rather than a P2E opportunity. The player is not coming into an investment plan and should not be subject to sub-par gaming experience.
Only if the game is fun, will it essentially be a win-win situation where gamers enjoy their time, get ownership of assets; While developers and publishers also benefit as these games can attract many first-time players and significantly expand the subscriber-base.
emerging challenges
Challenges are inevitable with any nascent model. The P&E ecosystem is also facing issues such as volatility in the price of digital tokens, high barriers to player acquisition, sustainable inflows and upfront capital investment.
Inflow is what gamers pay for the experience (in terms of currency or by purchasing virtual assets) and which covers the cost of game development. The outflow is what the operators take as profit from the game. In traditional games, outflows are prohibited for players.
P&E, however, being a significant component relies heavily on outflow of players, therefore, creating potential disruption, and attracting predominantly outflow type of players which poses a challenge to its long-term sustainability. Will present. The mass adoption strategies of P&E sports may face hurdles due to the upfront capital investment some of the games require right now. Players not only have to purchase NFTs in advance, but also pay gas fees to be paid to offset the computing energy required to process any transactions on the Ethereum blockchain.
gaming guild to the rescue
Many of the concerns about sustainable inflows and upfront capital investments can be resolved by the Gaming Guild, which is made up of investors, gamers and managers who purchase in-game items such as land and in-game assets in the form of NFTs, And then lend them. For new players who want to try out the new format while earning a yield by using those gaming assets in the respective virtual worlds. Guilds then profit from the player by sharing a portion of their earnings, as well as the rent paid to the guild. It aims to facilitate the participation of individuals and communities in P&E games without the need for capital upfront.
The P&E ecosystem should be developed with player-first design principles in mind, which have low entry costs and where play can be distinguished from investing as a precondition for spending or earning . P&E has the potential to transform from a financially incentivized game to a virtual ecosystem where people socialize, entertain and that allows permissionless creation to drive commerce at its core, protected by immutable digital rights.
Manish Agarwal is the Chief Executive Officer of Nazara Technologies, Gaming Chair of the Internet and Mobile Association of India and Convener of the Gaming Committee of Federation of Indian Chambers of Commerce and Industry (FICCI).