Blockchain Games: Play-to-Earn (P2E) vs Play-&-Own (P&O)

How to build sustainable blockchain games

I’m a Product Manager working on Pokémon GO, with previous experience in product and marketing at Figure 1, Rakuten Kobo, and Facebook. (Twitter | LinkedIn)

This is the blog I’ll be using to help structure my thoughts around product, growth, crypto, tech, and games. Feel free to subscribe if you’re interested in them!

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Blockchain Games

Blockchain based games have been exploding lately with Axie Infinity leading the charge, others picking up steam, and many more unreleased games that players have already paid millions of dollars to mint NFTs for (e.g. Sipher, Colony Online). Just in August, Axie Infinity generated $364M in revenue.

The fundamental difference between blockchain games and traditional games is that players own the assets and resources they earn in the game, and can do anything they want with them, including buying, trading, or selling them. Any profits made can then be ultimately converted into fiat currency via exchanges.

Play-to-Earn Unsustainability

Inevitably, a fundamental challenge emerges in managing the economy for these games that can threaten their sustainability. As they become successful there will be players that join not to play the game, but only to earn money that they want to extract from the system, hence the popular catchphrase for blockchain games being Play-to-Earn (P2E) now.

If enough players in the game are P2E with the goal of extracting more money than they put in, the economy will eventually collapse with all resources and assets losing value. Essentially supply for in-game resources and assets created from gameplay, would be higher than their demand, so prices would fall accordingly.

For many blockchain games I would hypothesize that a majority of their players are P2E, so how have they not collapsed? The answer is growth. Since all players, P2E or not, need to invest up-front to start playing many of these games, growth of players will fuel the economy with money. This analysis on the Axie Infinity economy - Is Axie Infinity sustainable? - illustrates in detail how it works in that particular game.

Ultimately, if not addressed this becomes unsustainable - where new players are essentially funding profits for existing players. And if growth stops the economy falls apart. However, there are a couple solutions:

1. Ensure enough players want to invest more money into the game than they want to extract in the long-term

2. Inject money into the system via other means such as advertising

I’ll be focusing on #1 for this analysis. #2 could work too but has many other implications around potential misaligned incentives I may explore in another post (e.g. we all know how ad models with products like FB have turned out).

Introducing “Play-&-Own”

I’d like to introduce a new term to help describe these players who would want to invest more into blockchain games than they extract in the long-term. They are Play-&-Own (P&O) players who love to play the game for all of the traditional reasons people play games (e.g. fun, socializing, achievement, progression, immersion) and just happen to own their in-game assets and resources as well. In contrast to P2E players, their goal is not to maximize their profitability and extract money from the system, but to just play and enjoy the game. They look at their spending in the game similar to how traditional gamers spend in non-blockchain games.

Blockchain games will need to be able to have a certain ratio of P&O players relative to P2E players to be sustainable long-term once their growth plateaus, as P&O players are willing to invest money into the system to receive emotional value and P2E players will continue to extract money. The ratio of P&O:P2E required will depend on the individual games. Theoretically, you could have a relatively small population of P&O players that are “whales”, that spend enough to sustain the economy.

P2E vs P&O Narrative Challenge

One of the most difficult challenges in driving more P&O players is that blockchain games now have this narrative around them of P2E. Many people who may have played and spent money on a non-blockchain version of a game with no expectation of monetary ROI, are now going into a similar blockchain version of the game with a mindset of profitability. On the plus side though, the P2E narrative has also been one of the primary drivers of explosive growth for these games. This is why converting existing P2E players to P&O players is potentially more important than acquiring them up-front.

Acquiring and Nurturing for P&O Players

This is a new space so there aren’t any best practices, but these are just a few general ideas on how blockchain games could potentially increase the ratio of P&O:P2E players.

Increase Emotional Value

This was mentioned earlier, players need to want to play the game for the traditional emotional value they get from non-blockchain games, and not for monetary value. Simply put, the game needs to be awesome on its own. Players need to be be motivated to invest in assets and resources purely for the emotional value they ultimately receive for owning it. The specific emotional value tied to assets and resources can range greatly depending on the type of game but some typical ones include:

• Achievement & Progression: Working towards and reaching goals that provide a sense of achievement (e.g. Completing the Pokedex in Pokemon GO, Completing the storyline in The Legend of Zelda)

• Ego & Signaling: Being able to show-off and signal to others your achievements (e.g. Cosmetics in Fortnite, High ranking on Leaderboard)

• Competition & Mastery: Improving in one’s skills and being able to defeat others (e.g. PvP in Starcraft, PvP in League of Legends)

• Immersion & Role-playing: Feeling immersed in an enjoyable fantasy world (e.g. The SIMs, Animal Crossing)

Shift the Narrative

Currently, “Play-to-Earn” and other similar types of messaging are marketed with many of these games. This may need to change. There is of course the trade-off that this could reduce short-term growth, but it may be worth it for long-term sustainability. As mentioned before, the P2E narrative has players coming in with a profitability mindset which becomes hard to convert to a P&O mindset. A shift to a P&O positioning, marketing, and communication strategy could help change this so that even as players join the game they are more interested in the gameplay than earning.

Free-to-Play (F2P)

The act of having to invest a lot of money upfront to start playing a blockchain game naturally makes people have to go through an ROI analysis more so than traditional games, especially if the game itself does not look mind-blowingly fun and unique.

By creating a Free-to-Play game mode people can try the blockchain game before they have to invest money. Players will be able to play the game for fun like traditional games and build emotional attachment to the game itself without worrying about money. This makes them them more likely to become P&O players when they do eventually invest instead of P2E players, since they have been focused more on the emotional value of the game while they played as F2P players.

Conclusion

Purely “Play-to-Earn” blockchain games are unsustainable in the long-term. The blockchain gaming industry needs to embrace and evangelize a “Play-&-Own” narrative instead. They should focus on designing amazing games people want to play and spend money on, but just now with the added bonus that they will have ownership of and influence on the game… not the other way around.