Last week we dived into crypto gaming as we investigated Enjin, one of the leading projects in the sector.

Enjin shifted from a traditional company to blockchain organisation and has positioned itself as an integral component in the blockchain stack and crypto gaming industry going forward.

This, however, begs the question: Why will people play blockchain-based games in the future? This answer comes down to the model used by traditional games vs those blockchain-based.

Gaming Business Models

It cannot be argued that gaming has become a large part of many people’s daily lives and society in general. According to the gaming research company Newzoo, it is predicted that the number of people gaming will reach 3 billion by the end of 2023.

Source: Newzoo
The highest growth is expected to come from regions such as Asia-Pacific, the Middle East, Africa and Latin America. This is due to a few simple reasons:

  • Access to more affordable smartphones
  • Improved access to internet infrastructure
  • A growing middle class

It has been interesting to note that most of the games played in these areas are free-to-play games that generate revenue through advertising or selling in-game items. While America and China account for over half of the total revenue produced worldwide, it is expected that these revenues will continue to grow, especially in the mentioned growth regions, reaching over $321 billion by 2026.

Source: PwC’s Global Entertainment & Media Outlook 2022–2026, Media

The history of gaming is fascinating and definitely worth looking into. As the industry has matured and technology has allowed, the business model used in the gaming industry has changed over time. When consol gaming first emerged, you were required to purchase the console and physical games in-store. Once you owned it, you were free to play it as you wanted; there were no additional costs attached. This is often considered the golden age of gaming. The games were designed to be easy to learn but exceptionally hard to master; you had to put the hours in to be the best.

This model for home gaming remained consistent over many decades; however, one significant advancement changed all of it: the internet. Internet infrastructure improved, and for the first time sending large amounts of data in near real-time was possible. This, combined with the reducing cost of server space and increases in processing speed, the modern-day gaming industry was born and ushered in the age of massively multiplayer online games (MMOG). With this, we also saw that the traditional revenue model shifted to a free-to-play (advertising) and pay-to-play (sale of in-game items) model. This model has been massively successful for game developers and created some of the biggest gaming companies we know today: Epic Games, Ubisoft, Electronic Arts, Activision Blizzard and Nintendo.

These models have been successful; however, they haven’t benefited the players themselves as much as they should. We have even seen some developers deliberately impeding the in-game experience of those who aren’t willing to pay, and this has resulted in animosity towards this new model by some within the gaming community. Therefore there may be a better alternative, and this is where the blockchain-based play-to-earn model can potentially find a market fit and provide an advantage over what has been offered so far.


Play-to-earn offers an alternative to traditional models; nevertheless, it does come with its own unique drawbacks. At its core, the play-to-earn model rewards those who play the game with crypto assets or digital tokens. The amount they are rewarded can be based on the amount they play, what they achieve in the game or any other success metric that the developers decide on.

The play-to-earn model can fundamentally change how people interact with games on a day-to-day basis and encourage specific behaviours because there is a financial incentive involved.

Crypto games will function almost identically to their traditional counterparts; we don’t believe the gameplay itself will change or how developers differentiate their game through better graphics, UI or storyline. However, the ability to earn and mint in-game items such as NFTs will open up a new host of possibilities for developers and players alike. For the first time, users will be able to own their in-game assets and trade them as they see fit; this will be where blockchain-based gaming may win. Yet, creating a game tied to financial incentives can be challenging to get right, and we have seen this issue emerge in several early crypto games.

Gaming With Financial Incentives

There are currently over 1300 play-to-earn games spread across various blockchains. Each is unique in terms of gameplay and the financial incentives they offer. We have seen how successful some games can be; nonetheless, we have also seen how the economic model that made them popular in the first place can unravel and quickly become the cause of its fall from favour. One of the best examples of this is Axie Infinity.

Axie Infinity is a play-to-earn game released in March 2018 that rose to fame in 2021. The game’s design wasn’t very different to many that had come before; it had cute Pokemon-inspired monsters that you could collect and use to battle other players. Yet, the difference here was that these monsters were NFTs that could be freely traded and had value. Each Axie had different characteristics that made them more or less scarce and gave them different abilities when used in battle. You could use two tokens in the game: the native currency, Axie Infinity Shards (AXS) and the reward token, Smooth Love Potion (SLP). AXS could be used to purchase Axies on the marketplace and participate in governance; you also required AXS and some SLP when you wanted to level up or “breed” your current Axies. The system worked well for a while, and as more people started the play the game, the value of both tokens increased significantly. It even got to the stage where people in countries like the Philippines quit their jobs as they could earn several dollars a day playing the game, more than they would otherwise. Soon the idea of Axie Scholarships also gained traction as to battle, you required a minimum of three Axies which could set you back over $100 each, so for many people, the barrier to entry was too high. People started employing others to play on their behalf, lent them their own Axies, and paid them a potion of the SLP token they earned on a daily basis. This only spurred further adoption of the game; however, the economics of the game soon started to unravel as there was a demand and supply mismatch and the price of Axies and the tokens began to drop.

Axie Infinity has provided a great case study for many in the space, as never before has a play-to-earn game achieved such adoption and scale. You can see from the above image that a reflexive relationship existed between the two tokens and the demand from those playing the game. Once this relationship no longer held and with the added pressure of a looming bear market, the value of assets within the game began to fall. AXS and SLP currently sit 91% and 99% below their previous all-time highs, respectively. While this shows the volatility of these assets, it was also a significant moment for those developing play-to-earn games in the crypto industry as they need to ensure that their economic model is designed better and more sustainable.

While one also thinks that these play-to-earn games are exclusively found online, we also saw one of the first iterations of using it in a real-world setting over the past year with STEPN. STEPN positioned itself as a “Web3 lifestyle app” and almost immediately found traction. It attempted to change the way people were rewarded for living a healthy lifestyle. People were required to purchase an NFT sneaker from their marketplace, and once you held one, you could use their smartphone app to track your running and earn rewards in a “Proof of Movement” system or also known as move-to-earn. Each sneaker also had unique attributes that gave owners certain advantages, such as additional rewards or reduced “cool-down” time so you could earn rewards more often while running. As with many projects in the space, the market downturn hasn’t been easy on STEPN; coinciding with the service being banned in China, this has resulted in the dollar value of the rewards dropping, and many who were using the platform have since stopped. This pushes the price of many of the sneaker NFT’s down and can also enter a downward spiral. Nevertheless, STEPN has also served as a great example for real-world play-to-earn models.

Projects like Axie Infinity and STEPN have been pioneers in the crypto gaming industry and have provided priceless lessons to those who are building in the Web3 sector. Nonetheless, what is most exciting is that we have only seen the first few models of crypto play-to-earn emerge.

The Future of Crypto Gaming

The future of crypto gaming looks bright. We have seen considerable adoption of the model over the last two years, and more game developers are entering the space and creating a variety of games with a focus on advanced graphics and gameplay. This always bodes well for the industry. What will be interesting to see is how developers effectively monetise the games they create as the traditional model of absorbing the majority of the value changes. Many of the current blockchain-based games have used the tricks of the current pay-to-play model, which has resulted in many people just writing it off as a money grab in a new form. However, this animosity is just an opportunity for those developers who want to benefit their players and find a proper market fit. As with most things, it will be a blend of the old and the new.

Blockchain can provide a broader base for monetisation where all participants are rewarded more fairly. Developers will be able to take advantage of this and create new and exciting ways of interacting and encouraging the adoption of their games, where, we hope, true skill and mastery of the game are rewarded.

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This is not financial advice. All opinions expressed here are our own. We encourage investors to do their own research before making any investments.