Play-to-Earn (P2E) and Web3 Game Models

TL;DR: Web3 gaming introduces the Play-to-Earn (P2E) and Play-and-Own models, where players can monetize their time and own in-game assets, unlike traditional Free-to-Play (F2P) models, which don’t offer true ownership or earning potential.

Play-to-Earn (P2E) Model

The Play-to-Earn (P2E) model allows players to earn cryptocurrency or NFTs through their gameplay. In P2E games, players are rewarded for winning battles, completing missions, or accomplishing specific tasks. These rewards often hold real-world value and can be sold or traded on external marketplaces, providing players with an opportunity to generate income while playing.

Key Features of P2E Games

• Earning Mechanism: Players earn tokens or NFTs for participating in gameplay, completing challenges, or progressing through levels.
• True Ownership: In-game assets like weapons, skins, or characters are represented as NFTs, giving players true ownership that can be monetized.
• Marketplace Trading: Earned tokens or assets can be sold on decentralized marketplaces, creating a player-driven economy.

Example: Phantom Galaxies

Phantom Galaxies offers a play-to-earn model with multiple ways to earn in-game assets. Players can acquire ASTRAFER tokens and NFTs through gameplay, missions, and owning Planets. The game's economy is supported by diverse revenue streams, including NFT trading and renting Starfighters. This approach rewards player engagement and attracts both gamers and investors.

Play-and-Own Model

The Play-and-Own model focuses on giving players ownership of their in-game assets, even if earning cryptocurrency isn’t the primary objective. In this model, assets like weapons, characters, land, or items are represented as NFTs, and players have complete control over how they use, trade, or sell these assets.

While players may not earn tokens as frequently as in P2E models, their owned assets can appreciate in value over time, allowing them to sell or trade them on secondary markets. This gives long-term value to the time and money players invest in acquiring these items.

Key Features of Play-and-Own Games

• Asset Ownership: In-game items and assets are owned by players as NFTs, which can be freely traded or sold on decentralized marketplaces.
• Asset Appreciation: As the game’s popularity increases, so might the value of rare or highly customized NFTs, offering financial benefits to players.
• Monetization Through Ownership: Players can sell, trade, or rent their NFTs, giving them multiple options to monetize their digital property.

Example: Illuvium

Illuvium offers a robust play-and-own model that includes diverse earning mechanisms. Players can acquire in-game assets and tokens through activities like capturing creatures, mining, staking, and tournaments. The game features multiple revenue streams, including land ownership and a play-to-airdrop campaign. Its marketplace, IlluviDEX, facilitates secure transactions. Illuvium's multi-token system, supported by liquidity pools and staking, creates a comprehensive economic ecosystem that rewards players for their time and skills, appealing to both casual and serious gamers.

It is considered more P&O than P2E as while it does include earning elements, its core design philosophy aligns more closely with the Play & Own concept, emphasizing player ownership, game enjoyment, and a sustainable economic model over short-term earnings.

Web3 Free-to-Play (F2P) Model

In Web3, F2P games maintain the accessibility of traditional free-to-play models, allowing users to join and play without an upfront cost. However, these games also introduce blockchain-based assets, such as NFTs and tokens, providing a level of ownership and economic opportunity for players, even without paying initially.

Key Features of Web3 F2P Games

1. Free Access: Players can start playing the game for free, just like in traditional F2P models, making it accessible to a broad audience without requiring an initial investment in NFTs or tokens.
2. Earn NFTs or Tokens: Instead of buying NFTs upfront, players can earn them through gameplay, such as by completing missions, leveling up, or achieving certain in-game milestones. These NFTs can represent characters, skins, weapons, or other valuable assets.
3. Optional In-Game Purchases: While players can earn NFTs, there are still opportunities to purchase additional NFTs or in-game tokens to enhance their experience. However, unlike Web2 games, these purchases give players true ownership of the items, which can later be traded, sold, or used in other games.
4. Play-to-Earn Features: Even though the game is free to start, Web3 F2P games often incorporate play-to-earn (P2E) elements. Players can generate real-world income by earning cryptocurrency or NFTs, creating economic incentives for continued play.
5. Asset Ownership: Players own any NFTs or in-game tokens they earn or purchase, which gives them the ability to sell or trade these assets outside the game, providing financial opportunities even in a F2P environment.

Example: Gods Unchained

Gods Unchained is a good example of a Web3 F2P game. Players can start for free and earn in-game NFTs as they play. Players are given free cards initially and can earn additional ones through gameplay. While the game encourages players to purchase card packs, the cards are represented as NFTs, meaning that once acquired, the cards belong to the player and can be sold or traded on NFT marketplaces like Immutable X.

Conclusion

Web3 gaming introduces the Play-to-Earn and Play-and-Own models, offering players real-world ownership and earning potential that was previously unavailable in traditional Free-to-Play games. While F2P focuses on accessibility, it lacks the ownership and monetization opportunities provided by P2E and Play-and-Own games. As Web3 continues to evolve, these models will create more dynamic and player-driven ecosystems, where gamers are rewarded not only with entertainment but also with financial incentives and asset ownership.

TL;DR: Game-Fi merges gaming with DeFi (Decentralized Finance), introducing complex tokenomics and economic systems where players can earn, spend, and invest in digital assets. Understanding these systems is crucial for maximizing rewards in Web3 games like Pixels and Off The Grid.

What is Game-Fi

Game-Fi (short for Game-Finance) stands at the intersection of gaming and decentralized finance. In Web3 gaming, traditional in-game economies are replaced with blockchain-based token economies, where assets like characters, weapons, land, and even in-game currency are represented as NFTs or tokens. These tokens hold real-world value and can be traded, sold, or even staked, blending the worlds of gaming and investment.

Key Components of Game-Fi Tokenomics

In-Game Currency

Game-Fi introduces in-game tokens as a primary medium of exchange. These tokens can be earned through gameplay, used to buy assets, or staked for passive income. In some games, multiple tokens are used to create a balanced economic system.

• Utility Tokens: Used for in-game purchases, crafting, or upgrading.
• Governance Tokens: Used for voting on game changes and decisions in decentralized governance models.

Non-Fungible Tokens (NFTs)

NFTs play a critical role in Web3 gaming. Whether it's owning land, weapons, or characters, NFTs give players full ownership and control over their in-game assets. These items can be freely traded, sold, or rented out to other players, creating a decentralized economy with real-world value.

Dual-Token Systems

Many Game-Fi projects use a dual-token system to stabilize their economy. One token is often used for utility and gameplay functions, while the other is reserved for governance or long-term staking.For example:

• Gameplay Tokens: These are earned during gameplay and can be used for upgrades or crafting.
• Governance Tokens: These tokens give players the power to vote on decisions and long-term development strategies for the game.

Types of Game-Fi Economic Models

Play-to-Earn (P2E)

In the Play-to-Earn (P2E) model, players are rewarded with tokens or NFTs for their time and skill in the game. These rewards can be traded for cryptocurrency, creating a real-world income stream for players.

Pixels Example:

In Pixels, players can own NFT land, grow crops, and trade goods in a farming ecosystem. The game’s economy revolves around PIXEL tokens, which are earned through farming tasks and completing missions. These tokens can be reinvested in the game or traded for other cryptocurrencies, providing players with real-world financial incentives while managing their farms.

Play-and-Own

In the Play-and-Own model, players own in-game assets as NFTs, even if earning cryptocurrency is not the primary focus. These assets, like weapons or virtual land, can appreciate in value and be sold or traded outside the game.

Off The Grid Example:

In Off The Grid, players own in-game items such as weapons, armor, and gear as NFTs. While the game focuses on dynamic storytelling and intense third-person shooter action, players can also trade or sell their NFT items on decentralized marketplaces. These assets can appreciate in value, especially if they are rare or custom-built.

Staking and Yield Farming

Some Game-Fi ecosystems integrate staking or yield farming, allowing players to lock their tokens in-game to earn passive rewards. This creates an investment layer where players can stake in-game currency or governance tokens to generate additional income.

Pixels Staking Example:

Pixels allows players to stake their PIXEL tokens to earn rewards or gain access to special game features. This adds an investment aspect to the game, encouraging players to hold tokens for long-term benefits rather than spending them immediately.

How Tokenomics Work in Game-Fi

Token Supply and Distribution

A well-designed tokenomics system controls the supply and distribution of in-game tokens. Limiting the total supply of a token can prevent inflation, ensuring that in-game currencies and assets retain value over time. Tokens are distributed through various methods:

• Earning through gameplay (e.g., completing missions or winning battles).
• Selling NFTs in-game or on external marketplaces.
• Participating in events or community-driven activities.

Burn Mechanisms

To manage the supply of tokens, some games introduce burn mechanisms. A portion of tokens used for in-game purchases or upgrades is permanently destroyed, or "burned," to maintain scarcity and increase the value of the remaining tokens.

In the Off The Grid Burn Mechanism, when players purchase or upgrade weapons, a small percentage of the transaction is burned, reducing the overall token supply. This ensures a deflationary model, where tokens become more valuable over time due to reduced supply.

Reward Pools and Liquidity Mining

In some Game-Fi economies, players can contribute to liquidity pools, allowing them to earn rewards by staking their tokens. This type of mechanism helps support the game’s economy by providing liquidity, while also offering players an additional way to earn.

Challenges in Game-Fi Economies

While Game-Fi presents exciting opportunities for players and developers, it also comes with challenges.

Inflation and Over-Supply

If too many tokens are introduced into the economy without proper balancing, inflation can occur, devaluing the in-game currency. This can make it difficult for players to profit from their gameplay, reducing the appeal of P2E models.

User Retention

Many Game-Fi projects face challenges in keeping players engaged long-term. Some players join only to earn rewards and leave once their profits decline. To counter this, developers need to balance earning opportunities with engaging gameplay and long-term incentives, like governance tokens or staking rewards.

Regulatory Concerns

With real-world financial value attached to in-game assets and tokens, Game-Fi projects may face regulatory scrutiny. Developers need to stay compliant with laws around taxation, financial transactions, and digital assets in various jurisdictions.

Conclusion

Game-Fi is revolutionizing gaming by introducing decentralized economic models where players can earn, own, and invest in digital assets. Through Play-to-Earn, Play-and-Own, and staking systems, games like Pixels and Off The Grid allow players to participate in complex token economies, creating financial opportunities within virtual worlds. As more games adopt these models, understanding the underlying tokenomics will be essential for players looking to maximize their rewards and participate in the new frontier of gaming.

TL;DR: For Web3 games to thrive, they must balance sustainability, manage gas fees, and reduce transaction costs. These factors are crucial in shaping the player experience and the long-term success of blockchain-based games like Pixels and Off The Grid.

Game Sustainability

Game sustainability refers to the ability of a Web3 game to maintain a stable economy, engage its players, and avoid the pitfalls of inflation or player attrition. A sustainable game balances tokenomics, player engagement, and economic design to ensure long-term growth and retention.

Key Factors for Game Sustainability

• Balanced Tokenomics: A well-designed token economy controls the supply and demand of in-game tokens, preventing hyperinflation or over-saturation of assets.
• Long-term Engagement: Sustainable games create incentives for long-term player retention through ongoing content updates, events, and community-driven goals.
• Economic Stability: A balance between earnings (e.g., Play-to-Earn rewards) and spending (e.g., NFT purchases, in-game upgrades) ensures that players continue to invest in the game’s economy.

Example: Pixels

In Pixels, sustainability is achieved through balanced tokenomics that control the supply of PIXEL tokens and NFT assets like land and tools. By allowing players to stake tokens or reinvest them into farming upgrades, the game creates continuous demand for in-game currency. Additionally, the farming tasks and seasonal updates encourage players to stay engaged and invest long-term.

Gas Fees

Gas fees are the transaction costs associated with executing actions on a blockchain. In games running on networks like Ethereum, gas fees can be significant, affecting the overall user experience. High gas fees can make routine transactions—such as buying items, selling NFTs, or participating in quests—costly and discourage players from interacting with the game’s economy.

Factors Impacting Gas Fees

• Network Congestion: On busy blockchain networks like Ethereum, gas fees can spike during periods of high demand, making transactions expensive.
• Blockchain Choice: Games that operate on Ethereum generally have higher gas fees compared to those built on Layer 2 solutions or alternative blockchains like Polygon or BNB Smart Chain.
• Complexity of Transactions: More complex operations (e.g., executing smart contracts or interacting with multiple NFTs) often require higher gas fees.

Solutions for Reducing Gas Fees

• Layer 2 Solutions: Many Web3 games are moving to Layer 2 platforms like Polygon or Arbitrum, which offer significantly lower gas fees while maintaining the security of Ethereum.
• Alternative Blockchains: Games like Off The Grid are being built on networks like Avalanche or Polygon, where gas fees are lower, making the gaming experience smoother and more affordable for players.
• Batch Transactions: Some games optimize by batching multiple transactions together, reducing the number of high-cost operations players need to pay for.

Example: Off The Grid

Off The Grid operates on Avalanche’s GUNZ subnet, which offers low gas fees compared to Ethereum. This makes it easier for players to buy, trade, and upgrade their NFT weapons and gear without worrying about high transaction costs, ensuring a more accessible and fluid gameplay experience.

Transaction Costs

In addition to gas fees, transaction costs in Web3 gaming encompass other expenses like marketplace fees, withdrawal fees, and staking fees. These costs can affect both the profitability for players and the overall usability of the game. Reducing unnecessary transaction costs can significantly improve the economic flow of the game and increase player retention.

Types of Transaction Costs

• Marketplace Fees: Most NFT marketplaces charge fees on every sale or trade, usually ranging from 2.5% to 5% of the transaction value.
• Staking Fees: When players stake tokens in-game, they may incur small fees for locking or withdrawing their funds.
• Withdrawal Fees: Transferring earned tokens or assets to an external wallet or exchange often comes with withdrawal fees that can reduce the net profit for players.

Solutions to Minimize Transaction Costs

• In-Game Marketplaces: Games like Pixels offer in-game marketplaces, where assets can be traded with lower fees than third-party platforms like OpenSea or Rarible.
• No-Fee Staking: Some Web3 games provide no-fee staking options to encourage players to lock their tokens for long-term rewards without additional transaction costs.
• Optimized Blockchain Choices: By choosing blockchains with lower transaction costs, games can ensure that players don’t lose significant portions of their earnings to fees.

Example: Pixels Marketplace

Pixels offers an in-game marketplace where players can trade NFT land, crops, and tools with minimal fees. This helps players maximize their earnings from farming and resource management while avoiding the high fees commonly associated with third-party NFT marketplaces.

Conclusion

In Web3 gaming, game sustainability, gas fees, and transaction costs are essential factors that determine the success and longevity of a game’s ecosystem. Sustainable games like Pixels balance tokenomics and player engagement to create thriving economies. Games like Off The Grid, built on low-fee blockchains like Avalanche's GUNZ subnet, minimize gas fees and transaction costs to provide a seamless gaming experience. As Web3 games evolve, ensuring the right balance between profitability and accessibility will be key to creating lasting and engaging player ecosystems.