Play-to-earn: How gaming’s revolutionary new business model works

Play-to-earn (P2E) is a new business model capturing the games industry’s attention - but how does it actually work from a systems design lens?

Khaled Alroumi
ironSource LevelUp
Published in
12 min readOct 7, 2021


In the past few decades, we have witnessed seismic changes within the video game industry, most notably the arrival of completely new business models. Where pay-to-play once held dominion, the landscape was transformed by the free-to-play phenomenon, and now we have play-to-earn.

Business model transitions for video games

What is a play-to-earn game? How does it add value, as compared to the free-to-play model? And what will make a play-to-earn business model work for the developer and consumer? It’s time to take a tour through this brave new world.

The Main Properties of a Play-to-Earn game

For the purposes of this article, when I refer to play-to-earn games, I’m talking about games that have two important features:

  • Players can generate income from playing.
  • Assets in the game can be resold and can be held by the player via a crypto wallet.

Play-to-Earn ‘Value Added’

Let’s look at two characteristics that are at the core of any free-to-play model, where I believe a play-to-earn model could have a natural advantage.

Player acquisition cost: A play-to-earn game should be able to achieve a lower customer acquisition cost than a free-to-play game, since once you build a game that can provide an income for players, those players will flock to it by word of mouth. We have seen this with the game Axie Infinity, especially in the Philippines. Most Filipinos know about Axie Infinity, yet the game’s developer hasn’t spent much on marketing there. Players can earn an income playing this game, and good news travels fast.

This effect could be amplified by the relatively meagre competition in the P2E space at the moment: P2E is still a relatively new kid on the block. Fundamentally, it stands to reason that the prospect of actually earning to play a game holds a particular type of allure that a free-to-play game simply cannot compete with, since, after all, a F2P game can only offer ‘free fun’, not hard cash. The developer of a P2E game will not need to spend as much on player acquisition once they’ve got the game’s unit economics to work — that is, the mechanism by which income is generated for players.

Free-to-play: Your game can monetize well > Now you can outbid your competitors through marketing channels.

Play-to-earn: Your game provides an income for players > News will travel fast and players will come to your game.

Player spending and asset ownership: The second area where play-to-earn has the edge is in player spending and asset ownership. Play-to-earn games potentially have the power to be immune to the stigma that big free-to-play spenders (un-affectionally referred to as ‘whales’) sometimes endure when they spend thousands of dollars on a game without actually owning the purchased assets.

In addition, play-to-earn games can inspire a new level of high spending from players because they are likely to view their expenditure differently: they are no longer making a frivolous purchase for fun, but are making a serious investment.

Free-to-play: If spending money doesn’t give me ownership of an asset, then I’ll view my expenditure as mere leisure.

Play-to-earn: If spending money gives me an asset that I can then trade or sell, then I’ll compare my spending within the game as an investment opportunity.

The Pillars of a Play-to-Earn Game

Ok, so we’re convinced so far. How do we design a functional play-to-earn game? I would suggest that they stand on the same three pillars that any free-to-play game has. These three fundamental factors determine whether a F2P game will stand up in the market.

Marketability: This is a measure of how appealing a game is to an audience and how big that audience can be. The more marketable the game is, the lower the user acquisition cost will be, and the larger the potential market could be for the game.

Monetization: This is a measure of how likely the users are to make a purchase and how much they are willing to spend per purchase. The more monetizable a game is, the higher the revenue will be, assuming the developer can keep the players engaged.

Retention: Retention is a measure of how likely players are to stick around playing that game. The higher the retention rate, the more opportunity any game has to monetize its users, since those players keep coming back, day after day.

Now, a play-to-earn game needs all three pillars, balanced just as carefully… and a few more besides. The play-to-earn market is still in its infancy but I suspect that other, additional ‘pillars’ will come into play.

Pillars of f2p and p2e games

Economic Sustainability and Player Earning Power: This measures the stability of a game’s economy and hence the prices which can directly affect the earning potential of players. If the game’s economy is stable and players can earn money, they will come to play, stick around and invest in the game.

Minting Power and Marketplace Trading Volume: P2E games offer a new avenue for monetization; minting power measures how much a game can charge for freshly issued NFTs (non-fungible tokens). The more a company can charge for a fresh NFT, the higher the revenue potential of that game.

Marketplace trading volume measures how much trading volume is happening in the game’s marketplace; the higher the volume, the higher the revenue potential when applying a platform fee on each transaction. If your game has the potential to earn a player a lot of money, that game can reasonably charge a larger fee for transactions made.

Perceived Longevity: This is an important one. Perceived Longevity is the measure of how players perceive the longevity of the game. The greater the belief players have in the longevity of a game, the higher and more stable the prices of NFTs will be. Players want to invest in a game that looks like it’s not going to be just a flash in the pan.

A closer look: Economic Sustainability and Player Earning Power

This is one of the new ‘pillars’ that developers need to consider, so let’s have a closer look. A sustainable game economy would generally have these three characteristics:

  • Stable prices, with limited volatility (seriously? in a crypto product?).
  • The ability to expand or contract, without spiraling out of control.
  • Developer control over certain economic values that act as an expansionary/contractionary fiscal policy.

Let’s carefully examine the economy of the current giant in the P2E market, Axie Infinity, and see how their economy fairs up.

Axie Infinity economic cycle

In a nutshell, Axie Infinity’s economy works like this: ‘Farmers’ grind SLP (the in-game resource) > ‘Breeders’ buy SLP to create new Axies (animals that are used in battles) > New ‘Farmers’ buy Axies to get into the game and farm SLP, to generate income.

For a deeper understanding of the economy of Axie Infinity, have a look at this excellent summary from DeFi Vader: Axie Infinity Part 1: Economics

This is an economy built on growth, which means that, in order for the game’s economy to sustain itself, an ever-growing player base is required to keep the demand and prices stable. That creates a heavy dependency on player growth. If the number of new players begins to decline, this can drive the prices towards a downward spiral.

So, how can Axie Infinity be adjusted to create a more “stable economy”? Multiple things need to be addressed, to keep it simple we will only look at two things here: the supply/demand equilibrium, and the source of demand.

Supply/Demand Equilibrium: An Axie costs a fixed amount of SLP (Demand) to be produced, and theoretically that Axie can produce an infinite amount of SLP in its lifetime (Supply). Assuming there is no mechanism to remove Axies from the economy, then we are looking at a Fixed Demand Quantity Vs. an Infinity Supply Quantity, when looking at it from a per unit basis. This will cause the price of SLP to eventually, inevitably, go down, since the demand cannot keep up with the supply in the long run.

Axie SLP generation through its life time.
SLP Minted vs. Burned

A fix for this is to limit the amount of SLP an Axie can create in its lifetime, either by giving the player an incentive to expend them at a certain point (Axie-burger, anyone?), or give them a limited productive life (Axie nursing home, anyone?).

Source of Demand: Diversifying the sources of demand would limit the dependency of the economy on a particular demand source. Having the demand come from new users is fine, but there should be demand coming from existing players as well.

Currently, Axie Infinity’s demand for SLP is mainly driven by new users coming in; if the developers were to add a demand for SLP from current users as well, this would limit the SLP price drop, if new user growth was to halt or decline.

How might this be achieved? What if the SLP can be used to reroll an Axie’s attribute/property at a very high SLP cost? Existing players would only buy and use SLP when the price was low, thus establishing a floor price for SLP.

Feature example to generate demand from existing players

Addressing these two issues would attempt to push SLP towards a more sustainable price point instead of a downward trending one, while limiting the dependency on new player growth and thus moving the overall economy towards a more sustainable state.

A closer look: Minting Power and Marketplace Trading Volume

Remember, Minting Power is the measure of how much a game can charge for a freshly made NFT. Of course, many factors play into this, but the loyalty of the players and how much they believe in the game and its longevity are the biggest factors. NFT issuance can take on two forms:

Limited supply NFT issuance: This is where the developer would set a limited number of the NFTs and players will only be able to purchase up to that limit. Typically, this method is used for collectable avatar pictures, virtual land sales and other non-essential to play items.

For this type of NFT issuance the developer will need to take care of two things:

  • Maximizing the revenues from the issuance.
  • Selling the limited quantity fairly quickly to signal that demand is high and this would play a role in subsequent NFT issuances.

Which is why a Dutch Auction is generally preferred for this types of NFT issuance.

Dutch Auction Price-Over-Time Curve

The Dutch Auction sets a fixed time frame where the price of the NFT would gradually drop as time passes and thus almost guaranteeing that the NFTs will be sold at a given time frame and participants would pay at the theoretical highest price they are willing to pay at.

Unlimited supply NFT issuance: This is where the NFT can be minted unlimited number of times. Typically, this method is used for essential to play items such as characters, equipment and consumables.

For pricing this type of NFT issuance its generally better to use a mix of both:

  • Hard Currency Tokens: Such as Ethereum, Solana or other currencies that hard not tied to the game economy (Price does not get affected by changes in-game supply and demand).
  • Soft Currency Tokens: Such as in-game currency tokens that are tied to the game economy (Price gets affected by changes in-game supply and demand).

The hard currency tokens will serve as a stable source of revenue while the soft currency token will provide that flexible price that gets adjusted through supply and demand.

Example: if minting a character costs 1 Eth, and suddenly the demand for characters increased, the price of Eth will not change since the game’s economy is usually a drip in the bucket of the entire eth economy.

However, if minting a characters costs 1 “Blood Token” (a token created for the sole purpose of minting characters) then once the demand for characters increases then the price of “Blood Tokens” would also increase and thus it would move the supply and demand curve to an equilibrium.

At a glance, it may seem that the commission fee a P2E game gets from the marketplace would contribute the most to the overall revenues, but if we look at Axie Infinity’s revenue split, we see that NFT minting, taken in the form of so-called ‘breeding costs’, is contributing 85% of the total revenue.

Axie Infinity Revenue Split

It’s likely that this revenue split will not be constant across all play-to-earn games, especially in regards to the marketplace fee, since that depends greatly upon the type of product that is being traded.

To know how to maximize the revenue from the the Marketplace fee, Let’s examine how the fee is calculated:

Marketplace fee Revenue = Total marketplace volume * Marketplace fee %

But let’s use another formula for that:

Marketplace fee Revenue = Average purchase price * Purchase count * Marketplace fee %

In order to increase the marketplace fee, the sold products need to be:

  • Priced high.
  • Traded frequently.

So, when designing the game elements, its to good to keep that in mind, especially the frequency part. A consumable item that is frequently used and costs a lot to purchase is the ideal item to be sold in the market place to maximize revenues.

A closer look: Perceived Longevity

We now come to the sixth pillar of our play-to-earn model: Perceived Longevity. This factor can affect the prices and demand in that game today, which is why we are looking at the perceived and not the actual longevity of any given game. This is a nebulous but crucial characteristic in a P2E game; it’s the gaming equivalent of stockbrokers inspiring enough trust in their clients for them to invest… and invest big.

The perceived longevity of a game is mostly influenced by the dev team’s vision and how clear and well-informed their plan is in regard to keeping their game running for years or even decades. Currently, the unanimous answer to the longevity problem seems to be the conception of a ‘Metaverse,’ an evergreen playground with player-owned avatars and a constant stream of user-generated content, where players are able to use their NFTs in multiple ways. Many games on the market have gone down this route.

While this is clearly a viable option, it is possible that this idea will dilute the game’s NFT potential. This spatial, metaverse conception encourages NFTs that are purely cosmetic. Having a non-cosmetic NFT that is multifunctional and usable in multiple game modes in such a metaverse would seem to be a difficult design task to realize.

A different approach is what has made League of Legends (2009) and Counter-Strike (1999) relevant to this day. Both games are ever-evolving and constantly undergoing gradual changes, but both also remain true to their essence and have a thriving e-sports presence.

Now you may be thinking: how can the purchasing/selling of non-cosmetic NFTs be tolerated in an e-sports title? Isn’t that pay-to-win?

Live Sports and NFT E-sport structure set up

But let’s consider for a moment that this is how real-life sports work. If you look at NFTs as football players, then the idea of building a P2E game with e-sport potential doesn’t sound so crazy, especially since we are already witnessing these structures in games like our old friend Axie Infinity. There, Axie scholarships have appeared, where capital owners lend Axies to scholars, who in turn grind SLP and then share a percentage of it with the lenders.


This piece is an attempt to examine the systems and pillars required to create a sustainable play-to-earn model. I will be looking forward to see what products will come out after the Axie Infinity phenomena. I’m always happy to discuss any game design topics, so feel free to contact me.



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Khaled Alroumi
ironSource LevelUp

Game designer, interested about systems and economy design for games.