The Blockchain Gaming Industry continues to grow despite several challenges, and multiple game makers see tremendous potential in the blockchain. It is why many investments are taking place in this arena, and numbers are beyond our imagination. In addition, play to earn games are trending as users are in love with playing these games. But there is a challenge that needs to be tackled with blockchain games, and do you know what it is?
How is the Play to earn model a significant problem for Blockchain gaming?
The number of players is slowly depleting for these blockchain games, and the player count is hugely dropping from some top blockchain games to the smaller ones.
For example, Axie Infinity has seen its player count from a high of 2.7 million in November drop below 1 million in May, and it is the largest blockchain game considered so far. The reason behind this drop is shocking to know. The play to earn model embraced by the blockchain gaming industry is a significant part of this problem, per a recent report released by Huobi’s research arm - the major crypto exchange.
So let’s understand why it is not working now when it worked the best way earlier.
To analyze this accurately, we must know how blockchain gaming functions or works. These blockchain games turn gaming into a great source of profit using non-fungible token (NFT) sales.
Such a model provides an advantage to the players to earn money, and these gamers can easily create in-game items having gameplay value that are pretty repetitive tasks for them. This model was working well, generating profits and entertainment from all perspectives till some time.
But all of a sudden, it stopped functioning effectively, and the numbers dropped. It failed to maintain that rapid growth despite the concept of play to earn and GameFi gaining that immense popularity.
As a result, the daily active players at the peak of 1.4 million last year's end have dropped to 1 million in May, and now the daily player number is relatively low and crashed by 30%. So what are the main factors that caused this drop? Why did gamers start dissociating from blockchain gaming when the mechanism was suitable? Let’s dive into the reasons or factors for this failure!
The Key Challenge to Blockchain Gaming is the Play-to-Earn model. How & Why?
- To make a true play-to-earn game, one needs to create real value, and the value exchanged for earning needs to have productive value.
- The major problem in implementing the Play-to-Earn model in many blockchain games is that the focus is on building the game’s economy more or less as a Ponzi scheme- a form of fraud.
What are the factors that caused the drop in Blockchain games?
There are two crucial factors that are preventing the adoption of blockchain games on a large scale:-
- The technical flaws behind the hypothetical pay-to-play-to-earn game model
- Certain technology risks surrounding blockchain gaming.
Because of this, gamers started associating blockchain games with Ponzi schemes and scams. Hence, many risks are involved through such scams & schemes in these games. As a result, there is a revolt against pay-to-play mechanism-based games in the gaming market.
Purchasable loot boxes being the choice is one of the reasons for this revolt among the serious gamers calling it pay-to-win. Hence, this is why only one of the six largest game studios actively pursues NFT-based games.
There is also another problem associated with blockchain games. The quality of these games could be better as they are poorly made. In addition, most of these games need more sustainable gameplay.
Both the developers and players prioritize the economic incentives from blockchain games rather than developers focusing on improving the graphics & gameplay of the games. How to sort this out? Now, what could be the solution to overcome these problems and challenges?
What are the solutions to overcome this drop?
The leading solution to overcome this is that AAA games must dominate the GameFi space developed by top game studios with outstanding graphics, playability, and rich narratives to become mainstream.
A significant portion of the enormous number of users crashing is due to the crypto crash leading to the player's earnings & spending drop by 50% through market capitalization of the game tokens. Axie Infinity, the largest blockchain game considered so far, started experiencing failure in its game economy.
There are two things involved in playing the Axie Infinity game. Firstly, one must buy three axies, more or less Pokemon-style monsters. These axies are to be collected, used to fight & bred to start playing the game. When the game's user numbers peaked, those NFTs had a very high $600 buy-in cost.
Secondly, one has to buy or make Smooth Love Potions (SLP), which are NFTs required for breeding to make better and more valuable axies. With the popularity growing for Axie Infinity, the business of grinding SLPs has risen, particularly in developing nations.
In those nations, the gamers would grind throughout the day, and to make SLPs, they search out & gather the NFT ingredients needed. Unfortunately, the game economy of Axie Infinity only works when the number of original player users starts growing, and if that doesn't happen, the NFT prices crash. It is a problem behind this and what was unexpected started happening.
Play to earn mechanics will not work in the long run for Blockchain gaming:-
There's a lot of money in the P2E model, whose tokens are valued at about $7.2 billion. However, Axie’s native AXS token making it the 42nd largest crypto by market cap alone, has a market cap of $3.7 billion, down about 90% from November.
Finally, investor markets, blockchain game development services, and blockchain game developers are moving towards an interesting new version known as free-to-play-to-earn (F2P2E), lowering the cost of entry. As a result, a vast amount of money is poured into blockchain gaming, and the quality problem will be sorted by including metaverse games.
Recently, a game called Grit, a new blockchain-based F2P2E model game, will soon be launched onto a major gaming portal - Epic Game Store. This game could decide the fate of the GameFi ecosystem, and the game is a AAA quality game that is more or less like an old-west-style battle royal game.
Grit has the capability and potential to kickstart blockchain games adoption on significant gaming platforms as it is the first-ever blockchain game launched on a central game platform like Epic. But it will not deal with the pay-to-play problem or the questionable economics or dynamics of the model discouraging core gamers.
So, the boom of play to earn has left many blockchain games, from more significant to smaller ones, on a junk pile as they depended on unrealistic tokenomics. This play-to-earn mechanism is killing blockchain games over time; hence, it is essential to focus on long-term sustainability.
Despite all of this, NFTs still have enormous potential in the world of gaming only when they are added in the right way. However, play-to-earn mechanics will not work in the long run as it is a mechanism of bribing where quality games may not be needed in the top place to convince people to play. Hence, any NFT game development services must consider the pros and cons of developing blockchain games.
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