Play-To-Earn: How NFT Videogames Are Providing a Side-Income To Crypto-enthusiasts

A couple of weeks ago, the cryptosphere was abuzz with the news of people in the Philippines supplementing their income (and in some cases being able to quit their jobs) owing to a blockchain-powered video game. Right off the bat, to me, this seemed like a heartwarming example of blockchain being a force of good. And my curiosity was piqued as for long videogame has been associated with wasting time or running one's cars into random people (while chasing Pokemons). A bit of digging revealed that the videogame in question is Axie Infinity. This blockchain allows players to earn income through nonfungible tokens (NFTS) and cryptocurrencies by breeding, battling and trading digital pets called Axies. Axies Infinity has a huge fan following in the Philippines with Indonesia and Colombia acting as other major sources of players. In the Philippines, the Axies infinity craze has created a localised innovation, the practice of NFT-lending to allow other players the chance to win their own NFTs. Now once the heady rush of feel-good is done, its time to dig in deep

What Is Axies Infinity?

Coin or video game? Actually, it's both; a case of the crypto world meeting gaming. As a videogame, it follows a pay to earn model. In its most fundamental form, the pay to earn model allows gamers to earn cryptocurrency tokens within the game, which can be traded on decentralized exchanges for hard cash. In the case of Axies Infinity, Axies are unique digital pets that can be bought and sold making them non-fungible tokens (NFTs). Axies Infinity has created a mini-economy of its own within the game or its virtual world (called Lunacia). Players can use their in-game tokens -- Smooth Love Potion (SLP) and Axie Infinity Shard (AXS) -- to buy land, farm, or breed Axies in Lunacia. Like the Axies Infinity (AXS) coin, these tokens also have a monetary value (or can be sold for cryptocurrency). The trade volume for SLP, Axie’s in-game reward token, is now so great that cryptocurrency exchanges BloomX and Binance P2P offer a direct swap between SLP and the Philippine peso.

Of course, the growing popularity of Axies Infinity (which supposedly derives its inspiration from Pokemon and Cryptokitties) has had a positive impact on the cryptocurrency coin prices as well, from the middle of June to mid-July 2021, the price jumped up more than 500% (from less than $5 in June to around $28 in July 2021). Of course it proceeded to have a Humpty Dumpty-esque crash and fell back to $15. As of September 2021, AXS had another sharp pullback (or a nosedive if you please).

Figure: AXS Price Action From Nov 2020-Sept 2021 (taken from Coin Gecko)

While the project has been around since 2017 and has a strong community, it has grown exponentially in terms of price and trading volume only in the recent past. In spite of its pullbacks and price volatility, AXS is being forecasted to see bullish price action.

So Should I Start Gaming For Pocket Money?

This was a question my friend asked me. And certainly, why not. However, there are some factors to be borne in mind if you want to strictly play video games for money. One of the biggest challenges Axies Infinity faces is its scalability as a result of being hosted on the Ethereum blockchain which has contributed to spiralling costs. In order to get started with the game, a player needs to own (or at least have access to) three Axies. While decent Axies could be purchased for $5-$10 till mid-August, rising transaction costs on the Ethereum blockchain means that now the minimum price for a half-decent Axies is $200. Experienced gamers suggest investing at least $1000 to put together a competitive Axies team to have a chance of recouping one's investment. So in about 12 months, the barriers of entry have gone up sharply. This is certainly a testament to the fast-moving and rapidly evolving nature of the NFT space. Of course, hardship is the mother of innovation. In order to lower the barriers to entry, an NFT powered rental business model has emerged, a profit-sharing model where Axie owners rent their NFTs to new players so they can play the game and start earning SLP without having to buy any NFTs or invest any money upfront. Earnings are split among the player, the NFT’s owner and the community manager – the latter being the one responsible for recruiting, training and mentoring the virgin player. The only upfront requirement of the new player is time, enthusiasm and a willingness to learn. So if digital pets appeal to you, there is still some scope for entering the Axies Infinity world. If not, there are other pay-to-earn games out there and as the NFT scene heats up, we can expect a greater choice of NFT games.