NFTs are a development of blockchain technology that have recently gained widespread interest and crossover appeal to parts of mainstream culture. While their use cases are still relatively limited, two of the applications for which they have gained popularity are digital artwork and gaming. Thanks to NFTs’ unique combination of properties, they now underpin a growing number of play-to-earn (P2E) games, making it easier for gamers to earn significant income by playing their favourite titles.
What are NFTs?
Blockchain platforms like Ethereum enable users to create their own digital tokens for any use case. These tokens can be transferred and traded, and embedded in other applications using smart contracts – software that runs on the blockchain.
Many of these tokens fuel DeFi platforms, and are used as both payment currencies and governance tokens. For example, COMP, the native token of the Compound Finance ecosystem, is distributed as rewards for liquidity providers, as well as allowing users to vote on updates to the Compound protocol. There is a total supply of 10 million COMP tokens, and they are all treated exactly the same – one COMP token is worth the same as another, just like any $10 bill is worth the same as another. This property is known as ‘fungibility’.
Non-fungible tokens (NFTs) are also blockchain tokens, but are a little different. Instead of there being a large number, either a single token or a limited number are minted. And, while most blockchain tokens are highly divisible, often down to hundreds of a millionth of a token, NFTs are indivisible. In other words, tokens can only be owned by one person, and only in their entirety.
These unique, indivisible blockchain tokens have become a popular means of trading virtual collectibles. By linking a digital file or other information to each token, it’s possible for creators to prove they are the originators of an image or other item, and buyers to prove they are the legitimate owner, since token generation and ownership is recorded and cryptographically verifiable on the blockchain.
NFTs have enabled the digital art movement, with the celebrated CryptoPunks being an early example of images that are still actively traded. Other use cases include in-game items, which has also helped power the rise of play-to-earn gaming.
What Is Play-to-Earn And How Does It Work?
In the conventional economy, users have to buy games to play them. Even in a ‘Freemium’ model, they pay for upgrades. But crypto-economics turns all that on its head. In the blockchain gaming space, players are paid to spend time gaming. In fact, some earn a living from doing it.
The ‘play-to-earn’ model is possible because blockchain allows the value created in an in-game economy to be distributed efficiently back to players in a variety of ways. NFTs are one key means by which this is achieved. In-game items (inventory) and even users’ characters can be represented as NFTs. These items and characters can be created, developed, and ultimately sold on the open market – with the best, most experienced or strongest characters, and the rarest items, costing the most.
Additionally, play-to-earn games typically feature a native in-game currency token that is used to pay for items, and may be paid out to gamers. New tokens can be created in the course of playing the game, as rewards for users.
Some gaming characters and items have become so valuable that they are traded in their own right, by people who do not even play the games themselves. Axies, digital creatures from the game Axie Infinity, are one example, along with SLP – the native currency for the game (see below).
Popular Play-To-Earn Games
There are a growing number of play-to-earn games, but a handful have proven particulalyr popular. The best titles allow players to earn a significant income.
Currently the top play-to-earn title, Axie Infinity involves breeding fierce but lovable digital creatures called Axies, and pitting them against each other in combat. Every Axie has unique genetic code that gives it specific characteristics, which may confer particular advantages when fighting. When Axies are bred with each other, they pass some of their characteristics on to their offspring. There’s always an element of chance, giving the possibility of breeding a rare or powerful Axie – which will therefore be more successful in combat, and more valuable on the open market.
The game’s native currency is Smooth Love Portion (SLP), which is paid to players as a reward for player-vs-player combat, or battles against the computer. SLP is also required as a fee when Axies are bred with each other (hence the name). The more times an Axie is bred, the more SLP it costs.
Axies can be bought and sold on the game’s built-in marketplace, and SLP can be purchased on a number of global exchanges, including TimeX.
The Crypto Prophecies
Trading is a popular past-time in the crypto world, and The Crypto Prophecies is based on speculators’ love of making price predictions. At its heart, it’s a chart analysis competition, in which players wager against each other that they can identify charting patterns and predict whether the next candle will close up or down. However, it’s not quite that simple!
The game also involves magical items (which, like users’ characters, are represented by NFTs). These can be used to ‘level up’ players, and to cast spells that mislead opponents or obscure the charts. These objects can, like all NFTs, be traded on secondary markets – so if a player receives a valuable item that they don’t need or want, they can sell it.
Many play-to-earn titles are variations on card games, which makes sense given that NFTs are perfect for representing digital collectibles like baseball cards. Gods Unchained is another example of a digital card trading game. Players collect cards of different gods by buying them or winning them in battles against other players or the computer.
In each game, players select a set of cards from their overall holdings, and compete against an opponent by playing different cards. The player who reduces their opponent’s life score to zero wins, with players levelling up and receiving new cards when they are successful. As ever, cards are NFTs and can be traded on external marketplaces, allowing players to monetise their efforts. Cards can also be sold for GODS, the in-game currency, within the platform.
One of 2021’s most hotly-anticipated play-to-earn titles, Illuvium is a decentralised, open-world RPG in which players can explore, capture and train creatures known as Illuvials, pit them against each other in battles, and take on different roles within the game. The richness of the game world allows for many different strategies, and the tagline ‘Fight for ETH’ has clear appeal at a time when crypto is crossing boundaries and gaining mainstream interest. Following delays, Illuvium is likely to launch early in 2022, but already has a huge following.
While some play-to-earn games are free to get started with, others require an up-front investment. Axie Infinity, for example, can only be played once a gamer has acquired a team of three Axies. These can be bought from the Axie marketplace, but cost at least $200 each – making it impossible for many gamers to earn from playing.
Axie scholarships offer a way to sidestep this barrier. By lending Axies to gamers in return for a proportion of their daily income, these initiatives allow players to earn and build experience without needing to make a large outlay.
Crypto Gaming United, for example, is a play-to-earn gaming guild that provides such scholarships, facilitated through the blockchain-based freelance platform LaborX. Gamers can apply for a scholarship by filling out a simple application and creating a special Gig on LaborX.
Yield Guild Games (YGG) is another popular guild following a similar concept.
By removing the entry barriers, scholarship organizations open the world of NFT games up to everyone willing to invest some time into playing the games.
Building The Software That Powers Play-To-Earn
The popularity of blockchain-based games has allowed the rise of the play-to-earn sector, in which users are rewarded for spending time in games. NFTs are fundamental to this development, since they offer players the ability to sell the characters they have spent time developing, and the valuable digital items they have created or won. Because marketplaces are hosted on the blockchain, they are secure to use and there are no middlemen, meaning players cannot be defrauded or charged the commission fees that are common on the informal ‘grey’ markets for conventional games.
While play-to-earn games like Axie Infinity and Gods Unchained have proven popular in their own right, other initiatives have set about building the infrastructure that enables developers to integrate NFTs and blockchain into their games.
Enjin is a platform that enables gaming studios and developers to create, manage, and trade NFTs, without needing to interact directly with the blockchain or understand blockchain coding. All Enjin NFTs are backed with EnjinCoin (ENJ), the platform’s token. ENJ are locked in the NFT when it is created, giving each digital object intrinsic value and reducing the supply of available ENJ. Any amount of ENJ can be locked in an NFT, and users can destroy the NFTs and release the ENJ they contain at any time.
Enjin has gained attention from major players in the tech space, including Microsoft and Samsung. While some traders seek to profit from buying and selling individual NFTs, such as Axies, others choose to gain exposure to the sector as a whole by buying ENJ. ENJ/USDT can be traded on TimeX.