Why All Play-to-Earn Games Are Dead and Dying

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Coinmonks

7 min readApr 27, 2022

Play-to-Earn was supposed to be revolutionary. The time we spent gaming was to be valued monetarily and players now have direct ownership of their in-game assets. With all the money that has poured into the sector over the last year, its rather unexpected to now see it in such a lamentable state.

What I’m about to touch on does not detract from the advent of ownership through decentralization. It will however call into question the viability of games focused on rewarding players monetarily.

Almost all major Play-to-Earn games out in the market have hit near rock bottoms.

Pegaxy’s VIS collapsed by 99.2% trading at 0.002 cents, down from its ATH of $0.251 cents.

Axie’s SLP collapsed by 96.15% trading at 0.014 cents, down from its ATH of $0.3642 cents.

Bombcrypto’s BCOIN collapsed by 96.22% trading at 0.31593 cents, down from its ATH of $8.3669.

Gods Unchained’s GODS collapsed by 88.14% trading at 0.9529 cents, down from its ATH of $8.0372.

Why did this happen and how did we get here?

The Problems

Money is Always Leaving the Game

A game gets traction, it steadily gains popularity and money starts flowing into the game. At the early stages of the game, money inflow outstrips outflow. Eventually, money inflow reaches its peak and money outflow (players cashing out) begins to outpace money inflow. Token prices fall, resulting in a falling ROI, leading to fewer players seeing the game as an attractive investment opportunity.

A death spiral emerges.

When the sum of money outflow is greater than the sum of money inflow, we know that the total sum of money within the ecosystem of a game is reducing. With less money in the ecosystem, token and NFT prices inevitably fall due to the lack of demand. Compounded by the never ending inflationary pressure of a infinite supply of tokens and NFTs, can you begin to see the problem?

2. Focus is on Earning

The problem is in the title. Play-to-Earn, when really, it should be Play-and-Earn. A Freudian Slip that underpins the ethos and the approach of the community, where the focus is primarily on the Earn aspect rather than the Play aspect.

As it stands, Play-to-Earn games are widely seen as a get rich quick money making scheme. Consequently, the space is littered with whales, guilds and spendthrift crypto millionaires pumping into games and dumping as soon as they reach their desired profit target. What makes matters worst is the fact that there are scores of games to choose from that allows them to hop from one game to the next as soon as one becomes less profitable.

So long as the focus is on the Earn aspect, we can’t expect there to be a game that is sustainable over the years. As much as the game matters, a growing and sustainable community plays a vital role in the longevity of any game. When games are so financially driven, its unlikely to spawn a thriving community.

3. Scholarships

This is going to get a lot of hate solely because it is the single greatest money making feature for both investors and players. Notwithstanding, its time we had a conversation about this.

Scholarships are unnecessarily speeding up the destruction of already vulnerable game economies.

While scholars help those without sufficient capital to access a game and permit those with capital to utilize their capital without having to spend too much time on the game, the concept of scholarships underpins the EARN mindset in the community.

Scholars have no skin in the game and therefore have no reasons to re-invest their earnings or any form of capital into the game. Their only objective is to play the game, earn tokens and cash out as soon possible to make their weekly or monthly salary. They contribute to an oversupply of tokens on the open market, a higher minting rate and a net outflow of money from the game. Just as with investors, they jump from one game to the next, but with even more ease than investors as they have no capital locked up within any given ecosystem.

On the whole, the scholarship system may seem attractive at the outset to entice more players into the game, but it also leads to the earlier demise of the game.

Would a game suddenly be sustainable without scholarships? No. But its economy would be hell of a lot more balanced.

4. Funding Model

The mode of game building in the Play-to-Earn space is drastically at odds from the traditional gaming space. Where a game would usually take 3–5 years to develop, we now see games popping up in a matter of months.

This is in due part to the funding model of most Play-to-Earn games. Having first raked up sufficient funding from an initial token or NFT release, funds are then utilized to start developing the game. The game is then released to the public in stages. Early investors (more so in the crypto / blockchain space) are however quite demanding, being used to high returns in short periods of time.

The funding model and the actors involved have unavoidably dictated the pace of game development and necessitated premature releases of games that lack sufficient gameplay and mechanisms to regulate and modulate the economy built around the game.

Its not the lack of gameplay that‘s an issue (although some might disagree), it is the lack of utilities for the dev team to deal with the economy built around it. Each game creates an economy around it that is highly sensitive to variables such as the total supply of tokens, inflation rates, burning mechanisms, liquidity, etc. Without a full functioning game, devs are left without the proper tools to effectively manage the economy.

5. Market Manipulation

Most Play-to-Earn tokens have low liquidity and shallow market depth and just as with any small cap, this usually results in higher volatility and higher susceptibility to manipulation.

At the time of writing:-

Pegaxy’s VIS has a 24h trading volume of $276,460

Splinterland’s SPS has a 24h trading volume of $806,943

God’s Unchained’s GODS has a 24h trading volume of $6,584,888

This makes tokens vulnerable to manipulation via coordinated pump and dump events. Any such events could cause token prices to fall and make it difficult for the token to revert to an equilibrium that is consistent with the price of the NFTs for the game and the rewards earned, thus creating a death spiral.

We occasionally see minor pumps once a token enters a death spiral brought about by either new developments in the game or a new supply of money coming in. However, old money tends to sell off on these pumps to recapture loss gains or to break-even.

Does Play-to-Earn have a future?

I believe it does, just not in the way that we imagined it to be.

The most important aspect that needs to be resolved is the preoccupation on the Earn aspect of games. As with successful traditional games, we need to move towards creating an intrinsic motivation to play the game, either because the game is fun, the game is challenging, or its simply a good way to pass time or make friends. Something substantial that keeps people playing the game, earnings or no earnings. Earning should merely be incidental to the player having fun and playing the game.

To be fair, the space is evolving. Games such as Axie and Pegaxy are moving towards a skill based game-play. However, this doesn’t mean a decoupling from the Earn aspect does not have to occur.

The games we play ultimately create no value in the real world and will therefore not spontaneously create monetary value for the player.

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Why All Play-to-Earn Games Are Dead and Dying

Why did this happen and how did we get here?

The Problems

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Written by Ashwin Lim