Earning money by playing games? What’s next? Courtesy of olieman.eth on unsplash.com

Gaming Guilds, Part 1: Overview

So it’s been a few months since I last posted something. What’s up with that? Well, I’ve just been stuck in the metaverse.

I’ve dedicated the last 6 weeks or so to diving deep into web3 gaming. I’ve made some really degenerate / uninformed bets and lost a relatively significant chunk of money, and made some bets that turned out relatively okay. Most importantly of all, I joined the team at Playground Labs in helping to build Kapital DAO.

What is Kapital DAO? Kapital DAO is a guild with over 50,000 community members and a great community of “scholars” who are sponsored by the guild in various play-to-earn (P2E) games such as Axie Infinity. If you’d like a quick overview of P2E games, I’ve written a short intro and a quick-and-loose framework to look at them here.

Let’s break down the statement I just said.

• Kapital DAO is a guild
• with over 50,000 community members
• and a great community of “scholars” who are sponsored by the guild
• in play-to-earn games such as Axie Infinity.

Let’s start from the end. If you read my overview of P2E games or have some previous knowledge, you may recognize that we’re talking about games where players have some sort of earning potential, usually in tokens or NFTs, from playing these games. The fact is, however, you often need to buy into the ecosystem to play these games. How does that buy-in work? Usually, you have to own some amount of native game tokens or own game-specific NFTs that you use to play the game. For example, an Axie is used in Axie Infinity to build your party and play. In the rest of our discussion, we’ll focus on use cases where NFTs are required to play the game.

Unfortunately, this may create a unique issue of pricing players out due to high prices for the buy-in, exemplified by high prices for a single NFT. For example, in 2021, a single Axie could easily cost $200–300. This restricts players with less capital from buying in and therefore limits the number of players that can be engaged in a gaming ecosystem. On the other hand, players who are able to buy into the game may start to find themselves buying better NFTs as they get better at the game, and end up owning NFTs that they will likely never use again in-game and collecting dust.

Let’s introduce a quick mental model at this point. Let’s consider an NFT an income-generating asset. This is because when you play a play-to-earn game that needs an NFT, your performance is usually tied to the NFT and your ability to earn is intrinsically tied to the NFT. So when you’re playing a P2E game, the NFTs you’re using are seeing some of that earning potential at work as they are actively being used. Let’s call that act of being used to generate income utilization. Let’s define utilization as the average number of hours played using the NFT divided by 24 hours a day–that means 0% utilization at 0 hours a day, and 100% utilization if you somehow play 24 hours a day and maximize it.

What happens to the aforementioned assets that players will never use in-game that might just sit around collecting dust? Those income-generating assets are now not going to see any of that earning potential at play and are therefore at zero utilization. We’ll call that a dead weight asset. That’s not good because now in this current state of the world, because you generally play with only one account and only use a limited number of NFTs per game:

• We’ve limited an asset-owning player’s potential income at whatever NFTs they are using at the moment and
• Priced-out players don’t have a chance at all of engaging in the P2E game’s ecosystem and earning income for themselves.

This is where guilds come in, so let’s jump back to the first three points. At a very basic level, a guild is a wonderful ecosystem of gamers, gaming enthusiasts, and asset owners.

How does it solve these issues? Through the concept of a “scholarship.” A guild effectively pools the resources of the community together to own a war chest of capital and NFTs that can be used in games. In the scholarship system, through some process (some janky and others technologically elegant) a P2E NFT is lent or delegated to a scholarship recipient–usually called a “scholar”–who is then able to play the game without having to put up the capital to buy in. The income that the scholar generates with those NFTs is then usually split between the scholar and the guild, oftentimes in a 50/50 arrangement.

How does this solve the two issues?

1. Priced-out gamers are able to access these in-demand games, and the P2E rewards supplement their day-to-day earnings. This is impactful because generally lower-income players are the most priced-out, especially in high-demand games.
2. Asset owners are now able to realize some value out of their assets in the form of income. This is impactful because the dead weight assets now have some level of utilization, and this new income stream incentivizes asset owners to seek out scholars to take on scholarships.
3. What’s even better is that this creates an entirely new market in which competition between guilds leads to pressures to differentiate themselves through value-add services or better splits for scholars.

In Kapital DAO’s example, the 50,000 community members each represent a gaming enthusiast who is interested in P2E gaming and a potential scholar.

And because of the collective nature of a guild, it hugely derisks buying assets for a new game and trying it out. Actually, because a guild needs to manage its treasury well it’s incentivized to diversify its portfolio and expand into new games.

This leads to an almost emergent benefit of guilds which benefit the P2E ecosystem:

1. Because the risk is spread out through the collective treasury of the guild, the impact of a (relatively small) speculative purchase of NFTs in a new or upcoming game is derisked, and therefore making it more palatable to experiment with introducing a new game to the ecosystem.
2. If a guild partners with a game early on, priced-out gamers are able to become early adopters of a game by utilizing the assets purchased by the guild.
3. As organizations that support their members, guilds are encouraged to support scholars and persuade asset owners to invest into their treasuries by finding the next big games that return the most value to both scholars and asset owners. This incentivizes guilds to begin investing in the P2E gaming ecosystems to make bets on what the next big games will be, and also incentivizes guilds to specialize into different types of games.

What does this mean in the bigger picture? At the end of the day, let’s consider who this impacts. Yes, for asset owners it may mean getting more value through their assets or being able to collectively invest in new games they might not have before. But the real value unlocked is for gamers, especially priced-out gamers. In the Philippines, for example, the minimum wage per month may net to $170–200 USD a month is supplemented by P2E earnings, which has at times exceeded $200–500 a month. With P2E, people doubled their income.

Note that these earnings we’ve discussed are simply earnings from base guild operations. There’s so much more about guilds we have yet to discuss, including how tokens play a part in amplifying these earnings and enabling community governance. And that’s just discussions on guilds today–we haven’t even touched the surface of what the future of guilds might look like.