Crypto games are online games that use blockchain technology to create virtual currencies. They're similar to other types of games in that players compete against each other by completing tasks. But unlike most other games, crypto games are based on real-world assets, such as gold, diamonds, and oil. Players earn these assets by playing the game and then converting them into cryptocurrency. The value of these assets fluctuates depending on supply and demand.
The questions arises, what are crypto games, or what is crypto gaming? Do gamers like to earn crypto, and how can you earn in crypto video games?
The global video game market topped $195 billion in 2021. As more players worldwide become fully immersed in online gaming worlds, it’s natural that cryptocurrency will play a larger role.
A handful of games already integrate crypto directly into their gaming economies.
Play to earn or P2E, games reward players by paying them in cryptocurrency or digital tokens based on how much they achieve or play the games.
By earning cryptocurrencies, gamers can profit from their skill or enthusiasm for gaming. But players, before taking the plunge, it’s good to understand the pros and cons of crypto gaming.
Traditional games are centralised, which means all items and experience (XP) gained while playing cannot be used in other games. Crypto gaming changes this by introducing blockchain technology. Players can now use their rewards and items across different crypto gaming projects.
Crypto gaming also offers a way for players to earn money. This is called a play-to-earn model and players can do this in a variety of ways. Take Axie Infinity, for example. Users can buy characters called Axies, level them up, then sell them at a higher price. Players can also battle with their Axies to earn SLP and AXS, which are Ethereum-based crypto gaming tokens.
This introduces a whole new element to the industry – the idea that gamers can earn crypto while gaming. Worldwide Asset Exchange found this is a welcome development, as three out of four gamers wished they could use their currency on other platforms. But is it just gamers playing?
Who is playing?
Although research into crypto gaming demographics is lacking, it’s clear the main target users are gamers. Crypto payments gateway Triple A reported that millennials are the largest age group, with 38% of crypto gamers aged between 21 and 38. Out of all millennials who own cryptocurrency, 55% were already gamers.
Asia-Pacific is a major player in this industry, with 22.6 million gamers holding cryptocurrencies. This was followed by 5.9 million gamers in Europe and 5.8 million in the Middle East and Africa. Surprisingly, North America had the fewest crypto gamers, numbering just 3.3 million.
This data is very similar to the broader gaming market. Asia-Pacific countries dominate the top five gaming markets ranked by revenue, according to Statista.
Sergey Kopov is the chief executive officer and founder of 0xGames, a blockchain game development company that has worked on multiple titles. He hopes crypto gaming will attract wider interest from gaming’s 3.24 billion worldwide user base.
"Crypto games mainly attract not gamers, but people who want to make money on this new hype. However, this is temporary. Soon, crypto games will be exciting enough to compete with classic games on the game-play field, so they will be able to attract the attention of gamers.”
The Philippines has emerged as a crypto gaming hub. The country’s economy was hit hard by the Covid-19 pandemic, but some residents found a new way to make money. A " target="_blank" rel="noreferrer noopener">documentary on YouTube followed Filipinos who were earning an income through Axie Infinity, proving that there is a stream of money to be made by investing time in these platforms. The documentary also challenged the crypto gamer stereotype. It featured a mother, a recent college graduate, a cab driver and an elderly married couple – all crypto gamers.
Successful crypto games
It’s no surprise that Axie Infinity became popular in the Philippines, because the game has Asian roots. Trung Nguyen, based in Vietnam, founded game start-up Sky Mavis, which launched the Ethereum-based game. Sky Mavis’s valuation is currently sitting just below $3bn as of December 2021, a remarkable figure given the company had only just raised $152m from crypto investors in seed funding in October 2021.
Despite the valuation, Axie Infinity is only the second most popular crypto game, beaten by Alien Worlds, which attracts more than 1.16m monthly users, almost double that of Axie. Saro McKenna is the co-founder of the game and comes from a corporate finance background; she spent 10 years working in the industry. McKenna also holds an MA from Oxford University.
Although Alien Worlds is more popular than Axie Infinity, the in-game currency tells a different story. As of 27 June 2022, the Axie Infinity token (AXS) was priced at $16.13, down 14% in a recent 30-day peroid. It is sitting below Decentraland and The Sandbox at number five when ranking all gaming cryptocurrencies by market capitalisation. However, Alien Worlds (TLM) is far below it, with a price of just $0.02.
How does crypto gaming work?
Traditional games already possess many elements found in crypto alternatives. Players can use fiat currency to buy in-game money, they can collect items and level up their characters. So, what attracts investors and players to crypto gaming?
Ownership is part of the reason that crypto gaming has taken off. Unlike traditional games, their crypto counterparts give players tenure over what they collect through blockchain technology. Players can own their in-game items, trade them or even sell them. Whether it’s a Splinterlands creature card or a purple Axie with green thorns, the marketplace dynamic has attracted players.
Earning money from gaming also entices players. Certain games have been criticised before for having a pay-to-play model, in which players have to invest money to get the best out of a game. Before crypto gaming, investing money would only improve your experience, such as being able to level up faster. Crypto gaming does the opposite: the play-to-earn model now allows people to make profits from their investment through crypto gaming coins. For some players in the Philippines, this has even enabled them to earn an income.
What are the risks?
Despite its advantages, crypto gaming does come with drawbacks. There are access barriers that affect some games more than others. Axie Infinity, for instance, requires players to have three Axies before playing the game. The lowest-priced Axies cost around the $100 mark, which means you must spend at least $300 before you can start earning. This high level of investment can put off the average player, as most traditional games do not cost more than $100.
There is also the risk of losing your tokens and NFTs. This can happen when you try to send them to a wallet that does not support the NFT type or if you fall victim to a scam. This is not unknown: in July, the founder of the crypto game Hedgie reported being scammed out of more than $1m in NFTs. Similarly, Ronin, the blockchain behind Axie Infinity, was victim to a hack that saw more than $600m drained from its funds.
This is an even bigger risk for crypto games compared to cryptocurrencies, because operators do not usually have to comply with certain standards, such as anti-money laundering, which can increase the risk of fraud.
As well as malicious attacks, players can also lose money through volatility. Crypto game tokens are susceptible to price changes, just like non-gaming cryptocurrencies, but some games limit how often you can withdraw tokens. This means that if a crypto gaming coin such as AXS falls (it’s currently around half the value it was in 29 April 2022, for example), players may not have time to cut their losses.
Combining two of the leading technologies also exacerbates a major flaw to which both are susceptible: gambling. Video games have started implementing a new feature called loot boxes, where players can pay to open a virtual box of random items. A report found that loot boxes are “structurally and psychologically akin to gambling”. Crypto games have embraced loot boxes as well. For example, Splinterlands allows you to buy packs of random cards. With gaming’s millennial user base, health experts are concerned that gambling is now part of everyday life for young people, and crypto gaming is only going to fuel this.
Top Gaming Tokens
The global gaming token market is worth more than $12.8 billion, according to data collected by CoinMarketCap.
These tokens may only have utility within a particular game or gaming ecosystem, but the top tokens also have significant real-world value. Here are the top three by market capitalization:
ApeCoin (APE) is the most valuable gaming token, with a market capitalization of $2.23 billion.
ApeCoin is the native coin of the Bored Ape Yacht Club, a collection of non-fungible tokens built on the Ethereum (ETH) blockchain. Third-party developers have incorporated ApeCoin into their games. For example, players of the P2E mobile game Benji Bananas earn special tokens they can easily swap for ApeCoin.
Decentraland (MANA) is the native token for Decentraland, a virtual world built on the Ethereum (ETH) blockchain. Users can buy and sell digital real estate, interact with other users and even play games in Decentraland.
Players use MANA to purchase Decentraland NFTs defining virtual land parcels or exchange them for other in-game goods and services.
MANA’s market capitalization is more than $1.8 billion.
The Sandbox is another metaverse, or digital world, running on the Ethereum blockchain. The Sandbox (SAND) tokens facilitate different gameplay transactions, including purchasing plots of digital land called LAND.
SAND has a market cap of around $1.6 billion.
How To Earn Money With Crypto Gaming
Crypto gamers can think of in-game rewards as small paychecks they receive for completing quests or other requirements.
Harry Turner, former hedge fund manager and founder of The Sovereign Investor, says in-game items such as weapons, armor, skins and other equipment can hold tremendous real-world value.
“By completing quests and collecting NFTs, investors can generate a profit through the sale of these items,” Turner says.
DMarket is just one example of an online marketplace for NFTs and other virtual in-game items, many selling for millions of dollars.
Zain Jaffer, founder and CEO of Zain Ventures, says similar to investors buying stocks, crypto gamers who invest early in a successful game will likely be the biggest winners.
In 2001, RuneScape players received digital Party Hats for free as part of the game’s Christmas promotion. Twenty years later, Jaffer says these party hats are now worth billions of in-game gold pieces. The most sought-after color of party hat sold for 57 billion gold pieces (close to $6,700), according to Runescape.
“It will not be surprising if history repeats itself, and early investors in crypto gaming platforms and currencies will be the ones to reap the newly real-world rewards,” Jaffer says.
Because cryptocurrency is relatively new and not well-regulated, criminals are always looking to take advantage of crypto gamers via hacks and scams. Just because a game’s underlying blockchain is secure doesn’t mean its engine or marketplace is secure. Digital wallets that store crypto gaming tokens can also be hacked or mishandled.
Earlier this year, hackers stole $617 million in Ethereum and USD Coin (USDC) from the users of the crypto game Axie Infinity. Axie Infinity is one of the most popular crypto games and had a peak monthly active user base of more than 2.7 million players before the hack. In June, Axie Infinity developer Sky Mavis said it would reimburse only about a third of the crypto its users lost in the hack.
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