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Play-to-earn: Inside the crypto gaming industry's funding boost

Play-to-earn: Inside the crypto gaming industry's funding boost
Axie Infinity is one of the most successful NFT gaming platforms. Photo: Axie Infinity

The workplaces, jobs platforms and social media of the future could be couched in online gaming, where monsters and their accessories can be traded for tokens and new communities are built on the blockchain.

A new frontier in gaming is emerging through crypto technology, with a lucrative principle behind it.

Based around the concept of play-to-earn, player-owned ecosystems in gaming is one of the fastest-growing sectors in the world of crypto, and is raking in funding. Some predictions put the metaverse — a virtual-reality space in which users can interact with a computer-generated environment and other users — at a $250bn (£183.8bn) to $300bn market cap by 2025.


With play-to-earn, gamers participate in the development of games, earning money simply through playing them.

Traditionally, businesses have developed through pay-to-play structures with revenue being brought in from players buying games as well as in-game purchases.

Blockchain has taken this to the next level, with gaming companies creating a metaverse with in-game items, such as characters and accessories, represented by non-fungible tokens (NFTs). These NFTs are hosted on the blockchain.

Read more: Non-fungible tokens: What are NFTs and why are they creating such a stir?

Users mint, purchase and sell items, with the game creators taking a small commission from trades.

NFTs generate rewards of in-game cryptocurrency tokens which can be moved to exchanges and sold for other tokens such as bitcoin, ethereum or fiat currencies such as the dollar or pound.

The tokens derive their value from their usage in gameplay.

Sometimes referred to as "GameFi", platforms work to turn regular users into decision makers. It is essentially a player-owned economy in the trading of NFTs. Systems are implemented through governance tokens, which give the player the power to take part in the games’ development and fund allocation in a transparent system. Players can also receive a share of the game’s revenue.

Watch: What are the risks of investing in cryptocurrency?

In recent weeks, blockchain-based game Axie Infinity has been propelled to the top of the NFT market, having seen its native crypto token rally by 2,100% since the beginning of July. It now boasts a market cap of $7.5bn as of October with more than 2 million monthly active users.

In the game, players can buy, breed and play monsters called Axies against each other to win in-game currency. These are called small love potions and can be traded for fiat cash. Axies are NFTs and can be bought and sold across exchanges outside of the metaverse.

In order to battle within the game, users must own at least three of these creatures. These are sold from around $200 and have gone for as much as $130,000. The platform takes a 4.25% cut for every in-game transaction and there are fees for breeding new characters.

Read more: Blockchain and NFTs: How to make sense of crypto terminology

The game is currently one of the top revenue-generating protocols in crypto, second only to ethereum, with more than $850m in revenue generated from in-game transactions over the last 12 months.

It has also garnered some serious backing. Earlier this month, Axie Infinity announced it had raised $152m at a $3bn valuation in a Series B round of funding led by VC firm Andreessen Horowitz alongside Paradigm, Accel, Samsung Next, and FTX.

As an example of a decentralised system where almost anyone can cash in a token, it recently became popular in the Philippines, as users began to live off the play-to-earn model. Some players make between $200 and $1,000 per month, while others have made more depending on when they invested.

Following Axies’ success many other developers launched into the market. Early adopters making significant profits have prompted speculation, with many gamers looking for their next big win.

Other games that have seen some success include Gods Unchained, a trading card game built on ethereum; CryptoBlades, a game that “revolves around the acquisition of legendary Blades and powerful Heroes to wield them,” and Splinterlands, another collectable card game.

Who are the funders?

Recent indications that this is a sphere in the midst of taking off include Berlin-based Bitkraft Ventures, one of the biggest investors in game and esports, launching a $75m fund for blockchain gaming and digital entertainment investments. The fund has already closed six investments and plans to invest in 25 more companies by the end of 2022.

Polygon, an NFT platform, also said in July it would offer up $100m for gaming projects.

On a smaller scale, firms such as Westridge Markets this week also took a $2m punt on platform PlayDough Technologies. PlayDough is simultaneously an investment firm creating a portfolio of gaming NFTs and a remote gig economy network allowing users to use its collection to generate yield for themselves and the firm.

Read more: How a bitcoin court case in Japan may create crypto millionaires

“There are some extremely strong trends in the market,” said Westridge Markets founder Shamyl Malik, citing gaming, the metaverse, DeFi and collectables as areas of huge potential growth.

Malik’s firm has been tracking gaming for the past two years, only recently taking a more active approach.

The involvement of bigger, more institutional players in the market also promises to improve the quality of games, says Malik, as Japanese video gaming company Taito has taken an interest in NFT gaming, and Atari — one of the pioneers of the gaming industry — is getting into NFTs with Atari Blockchain.

Malik thinks the funding is evidence that this is one thing which thrived during the pandemic which is here to stay.

“A lot of people link the growth of the industry to the pandemic and the fact that people are working from home, but it’s not going away,” he said.

Watch: What is bitcoin?