A Brief Overview of the Play-to-Earn Business Model

While experts have predicted numerous trends this space will follow in the coming years, the most significant trend we are currently seeing is the adoption of the play-to-earn (P2E) GameFi business model. This gaming business model has brought together DeFi and gaming, leading to the cross-pollination of audiences from both industries, which are known to be quite vast.

If you’re a gaming or crypto enthusiast, there’s a great chance you’ve come across the phrase P2E or play-to-earn. While some of you might derive what this could mean from the term, others might still be aloof of the significance this phrase or business model can have on an entire generation of gamers.

In this article, I’ll be taking you through what exactly play-to-earn GameFi is, its benefits as an economic model, and the role it will play in the blockchain and gaming industries in the next few years.

With this business model, gamers can buy in-game assets such as weapons, skins, characters, etc., which will be in the form of NFTs they can own. Furthermore, they can trade these NFTs on the game’s native marketplace and earn money via this medium.

Usually, all these transactions will occur in the game’s native cryptocurrency, which can later be exchanged for other cryptocurrencies.

As you see, through GameFi, various spaces of blockchain come together on one platform and work together in synergy to provide users a seamless blockchain experience.

Facets of the Play-to-Earn (P2E) GameFi Business Model

There are numerous facets of play-to-earn games that facilitate the complete interaction between the players, developers, and the game. These aspects of the P2E business model are listed below:

Value Creation, Sinks, Distribution

The term value refers to anything that any entity within the game offers. For instance, an asset such as a weapon offers value in the form of a better chance of winning, the currency provides monetary value, etc.

Value creation is the process of creating and defining assets, currencies, NFTs, etc. which have a certain kind of value attached to them. This value is created so that people can leverage the assets to gain that value and progress in the game.

Value distribution refers to the process of distributing the assets and currencies amongst various players based on parameters such as games won, amount of currencies held, time spent in the game, etc.

Value sink essentially refers to a mechanism using which the value of an asset or currency increases over time, and it becomes difficult for players to purchase these assets, or acquire them. This can be done via regular burning of tokens, or by raising the value of assets as time passes.

Governance

Governance is essentially giving people a voice when it comes to the development of the game. While this might seem a little unnecessary and overbearing in the beginning, a good P2E game will have this feature because it lets people determine how the game should evolve and progress.

It depicts how strong the core philosophy of the developers is and creates a lasting impression on the audience/players who will keep in mind that they are being heard and hence invest more time/energy/money into the game.

Revenue Models

This facet describes how the gamers will earn money through the game. It is important to find the right balance so that the game is sustainable, while players don’t feel they’re being paid less.

Direct revenue is where people can invest in the game development process and later on get a passive income for the funds they gave initially. While this isn’t just for gamers, many gamers along with pure investors who see the true potential of a game invest in the development. Rental revenue is when gamers can lend their in-game assets or NFTs such as weapons, skins, etc. to other players for a nominal fee. This again can be leveraged by both gamers and investors who know which assets are worth how much.

Finally, investors or gamers can also use the assets themselves in games and even win them to earn rewards. This can be for people who are both gamers and investors.

These are the three main facets of the P2E GameFi business model.

Conclusion

This is the complete overview of the P2E GameFi business model. When we dive deeper into this subject, it is essential to understand that there are numerous factors developers need to get right to build a successful P2E game. Due to the increasing popularity of this space, numerous games are emerging; however, very few of them are effective as sustainable businesses or economies.

This is because the developers overlook a few parameters while building these games. These parameters determine if the game is eligible to be a P2E game or not. Without getting them right, one would not be able to create a sustainable play-to-earn GameFi platform.

So if you want to understand what these parameters are and how to measure them, check out the following article, where I answer the question Is your game qualified to be a P2E game?