Play-to-earn games have increased in popularity over the last few years as the possibilities surrounding blockchain technology have exploded.
Esports teams, such as Semper Fortis Esports PLC (AQSE:SEMP), are beginning to launch specific divisions and teams focused on play-to-earn games.
According to research from DappRadar, a global app store for decentralised applications, there are an estimated 1,000 blockchain-based games that have emerged so far.
That number however is a tiny fraction of the video games that exist, which comfortably exceeds one million, according to GamingShift, a game development blog.
How does it work?
As the name suggests, players can earn in-game tokens by playing games that can later be converted into a fiat currency.
Participation in these games helps contribute to the growth and popularity of the currency that is usually attached to the game.
For example, The Sandbox is a mobile blockchain game that has a currency, also named The Sandbox, which is issued to players for taking part in the game and helps towards building the eco-system created within.
How do developers and players make money?
For developers, making money from the games is pretty simple and is usually done in one of two ways, or both.
Firstly, new gamers will often have to purchase tokens or non-fungible tokens (NFTs) to participate in the game from the developer.
Axie Infinity, arguably one of the most popular games, requires new participants to purchase Axies, characters in the game, in the form of NFTs before joining, usually costing anywhere between US$10 and US$1,000.
The second way the developers can make money is through taking a transaction fee on the secondary market within the game.
Gamers can buy, sell and trade NFTs with each other, as well as use the in-game digital currency to purchase items within the realm.
Clearly, gamers can also earn money through buying and selling NFTs, but also through taking part in other elements of the game.
Using Axie as an example again, users can battle their NFTs against one another in Pokemon-style gameplay, with the winner earning Smooth Love Potion (SLP) tokens to use within the game or exchange into a fiat currency.
Who are the big players?
As previously mentioned, Axie is one of the largest games in the space.
Launched in 2018 by Sky Mavis, a Vietnamese video game development company, it is a ‘breed and battle’ game inspired by Pokemon.
Active users increased sixteen-fold from around 60,000 in April 2021 to around 1 million by the end of August 2021.
Its NFT marketplace, where all non-fungible in-game items are exchanged, has recently seen rolling trading volumes surpass $1bn, according to Semper Fortis.
The Sandbox, which is often compared to world creation games such as Minecraft and Roblox is also popular.
Players create worlds, arrange adventures, and create their own games which can all be monetised.
In the game currency, SAND, is vital to complete tasks and purchase LAND, NFTs that represent digital plots of land within the game.