Play-to-Earn: An Introduction to a Revolutionary Model

By Daniel Dal Bello, Director.
December 7, 2021–8 min read.

Hillrise Group
Hillrise Research
8 min readDec 8, 2021


To the everyday individual, the concept of playing-and-earning seem to be two mutually exclusive terms embedded in us from childhood. We are taught from a young age that a classroom is a place for learning, while recess is our time for sport and running around on the playground. Into adulthood, we carry the same protocol forward where we work during business hours and watch Netflix or maybe even go to the gym (👏) in our ‘free time’.

While the Play-to-Earn (P2E) concept could seem like a fad to some, there are strong fundamentals to back it up including player-to-player economies, metaverse development, diversity in NFTs, and revenue generation with cryptocurrencies. Furthermore, blockchain and gaming are the industries that have come together as the foundational support pieces to birth the model of Play-to-Earn into reality.

In this post we will introduce the Play-to-Earn model and discuss the impact it has had in the growing blockchain-enabled gaming niche.

Play-to-Earn has emerged amid the nexus of two behemoths, yet somewhat disconnected domains of blockchain technology and gaming. With blockchain tech, the emergence of cryptocurrencies has provided the opportunity to build in incentivization and ‘earning’ elements for users. While gaming on the other hand and in its various forms has always offered the ability for its audience to play and entertain themselves.

Diving deeper, each respective industry supplies the necessary ingredients for the other to progress — together they can be greater than the sum of their parts. From the outset, there are over three billion video game consumers globally — a massive global target market that comes with strong projected growth and a potential on-ramp for new users to the blockchain.

Distributed ledger technology meanwhile harbors the technological aspects on the backend, which enable the existence of in-game economies that reward players for their contribution to the ecosystem. Players among in-game economies generate value through their usage and skill, while the gaming platforms generally take a small portion of the transactions for their role in facilitating the economic interactions.

In terms of platforms, Axie Infinity is by far the poster child of the Play-to-Earn movement. It jumped into the mainstream scene in full force in the third quarter of 2021, with monstrous revenue figures (USD $342m in 30 days) and a monumental rise in its primary token $AXS.

Yet despite the relative infancy of the Play-to-Earn model, the successes so far speak loudly and paint a promising picture for further developments. It will undoubtedly be supported by the evolution of blockchain technology, as speed and gas fees continue to improve with scaling side-chains and layer-2 solutions.

In a product sense, the current marketplace offers a wide variety of games ranging from the wild and wacky outer space themes to the perhaps more familiar where you can be rewarded for tending to your in-game garden. Yet while any developer can make a game, the earning potential of it stands to be the unique value proposition that will help separate it from the rest of the crowd.

Notable Blockchain Games
Axie Infinity is a self-proclaimed digital pet universe with roughly 850,000 users over the past 30 days, according to DappRadar. The sizable community gets the chance to win battles, tend to land plots in the Axie metaverse, breed Axies (Pokemon-inspired characters), and use the Axie Infinity marketplace. While playing, users can earn $AXS and also $SLP (Smooth Love Potion), a currency used in the breeding of Axies.

Farmers World is a game where players can engage in farming-based activities like building cow sheds, chicken coops, and tending to crops. Farmers can mine or mint $GOLD (the native token), which they can use to protect their farms from wild animals, and monsters. Another in-game token ($WOOD) is used to upgrade tools and equipment, while livestock is also bred in order to participate in battles.

Alien Worlds is an NFT (Non-Fungible Token) metaverse where you can play with unique digital items, some of which include trading game cards. The planets in Alien Worlds are known as Planet DAOs, which incorporate innovations between the metaverse and the DAO concepts. Users can mine the cross-chain compatible Trilium ($TLM) in-game and use it for a variety of other functions like governance, staking, and purchasing NFTs.

Similar in concept to Zed Run, DeRace is an NFT horse racing ecosystem where users can wager and win by participating in many in-game activities. Some of these include breeding and trading NFT horses, competing in races, hosting races in hippodromes, selling their analysis and predictions, and participating in other incentive-based programs. This game is expected to launch early-2022.

Splinterlands is a digital collectible card game whose cards can be bought, sold, and traded freely on the blockchain. Much of the game can be attributed to the composition of the cards, which are broken up into two types called Summoners and Monsters. The magic forces that influence that game are composed of fire, water, earth, life, death, and dragon, while the rest of the action is determined by the stats and abilities of the particular card.

Four Components of the Play-to-Earn Revolution

The studio behind Axie Infinity (Sky Mavis) recently closed a $152 million Series B funding round, from notable institutional investors — including a16z, Paradigm, and FTX. According to the studio, their goal for utilizing this capital is to help create financial and economic freedom for participants in the Axie community.

Needless to say, the attraction of institutional investors bodes well for future iterations of the Play-to-Earn model. However, Axie also has the numbers to back up the interest, with $342 million in revenue throughout August that dwarfs those of other highly popular platforms and applications like PancakeSwap or Uniswap.

Diving deeper into the fundamentals, one foundational piece of this success can be attributed to the tokenomics of Axie Infinity where the allocation of Play-to-Earn represents 20% of the entire $AXS supply. This serves to facilitate a reciprocal relationship where the players are incentivized, while they add value to the game, and catalyze a compounding effect throughout the ecosystem.

Since there is an inherent profitability component of playing these P2E games, there becomes a need in the marketplace to produce the highest quality (and profit-yielding) games. A new concept of IGO (Initial Game Offering) has now emerged and is being championed by platforms like Seedify who are a blockchain gaming-based incubator. DeRace, a portfolio company of Hillrise Ventures, took the honor of being the first IGO on Binance.

Metaverses are virtual environments that come in the form of augmented or virtual reality spaces. Splinterlands (built on the Hive blockchain) is one dynamic example, which has seen Axie-like explosive growth through its offering of digital land ownership.

Land composes the base asset-architecture of many metaverses and is available in the form of NFT tokens. So since metaverses are the main environments, on which highly profitable P2E platforms are constructed, then it stands to reason that the land within it will have value. These in-game assets are critical foundational structures for developing a compelling metaverse environment.

Another analogy for land in the metaverse would be that of virtual reality real estate where users can build, utilize, add value, and of course profit from. The Sandbox and Decentraland are two prominent examples of these virtual worlds.

From a gaming standpoint, many games offer both a player vs. environment and player vs. player mode.

Lunacia (the Axie homeland) is even broken down into specific ecosystems including Savannah, Forest, Arctic, Mystic, and Genesis. The endless variety for this metaverse (and others like it) is bound to keep users attentive, adventurous, and eager for more.

In-game land, characters, weapons, and even pieces of gear (wearables) contribute to the diversity of NFT assets available. This innovation has paved the way for increased control of in-game assets since the NFT attached to them enables them to be uniquely owned by the individual. This true digital ownership is one of the fundamental underpinnings of the success and value proposition of blockchain-enabled gaming.

In the case of Axie Infinity, perhaps the most compelling NFT is the Axie itself. The player needs three of these NFT monsters to get started, and they fall in the range of $200-$300 each. Genetic algorithms of the Axie are very particular and mimic those of human DNA, storing information about the composition of characteristics.

The fact that Axies (and other NFT monsters like it) are so ‘real’ has an interesting dynamic that P2E has also given the NFT landscape. Mainly that it has brought out a living and regenerative element in the NFTs themselves, that were previously relegated to a kind of itemization.

Regardless though, the sheer diversity of NFTs that can be obtained within P2E has the ability to benefit all parties involved. Within the Axie landscape to date, hundreds of millions of dollars have been spent trading in-game NFT assets.

The strength of blockchain in building vibrant decentralized networks has created a perfect fit for player-to-player gaming economies, as opposed to those facilitated by centralized entities that would be merely focused on extracting fees.

This has enabled huge P2E communities to develop in countries like Vietnam, the Philippines, India, Venezuela, Brazil, and Indonesia. A ripple effect has also occurred through this where players in developing countries like these are now able to generate livable income.

Yield Guild Games (among many other “Guilds”) is an Axie Infinity ‘scholarship profit-sharing program’, which serves to fund users the upfront capital to begin playing the game. Having third-party entities (especially investment-related ones) directly support these player-to-player economies has the opportunity to open up many positive paths forward as this space develops. Guilds go much deeper than this high-level commentary. They are somewhat investment funds themselves in many cases, having access to early-stage funding rounds and discounted in-game NFTs.

Growth Potential of the Play-to-Earn Model
Though there is much excitement and hype around this niche (and for good reason) the future of P2E will ultimately be determined by the development of this new market. How will Axie Infinity play out long term? What is the next Axie?

Revenue-generating capacity with countless in-game NFT-based assets will allow a constant flow of creativity to be harnessed.

Meanwhile, the massive target market of gamers will stand to benefit from increased economic incentives.

Player-to-player economies, as the lifeblood of the games, are set to grow resulting in a positive inflow of value for the overall ecosystem.

Hillrise Group supports ambitious Web3 startups with early-stage venture capital and fundamental research.

Hillrise Ventures has made investments in the P2E ecosystem and has exposure to several names highlighted in this post.

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Hillrise Group
Hillrise Research

Hillrise Group is a blockchain-native venture capital and consulting firm supporting emerging Web3 startups.