In order to devote serious time, effort, and personal investments to digital environments, individuals must establish trust in the durability of their digital presence and goods, as well as their economic robustness. Early implementations have demonstrated that this is indeed achievable with blockchain technology, which, using cryptography, can ensure digital trust and decentralised value storage.
Video games are no exception to blockchain’s application in finance and art. The foundation for value creation in play-to-earn games is blockchain technology, including non fungible tokens (or NFTs). An NFT is a digitally secured claim of ownership for a unique, non-transferable digital asset. Generally speaking, NFTs can take many forms within virtual worlds: characters, items, land, decorative personalization features, such as digital clothing, and more. Those who play the game well earn the most valuable items, and they can sell them for real-world money on their own terms.
It is the decentralized integrity and security of these digital items that makes them truly innovative, as they for the first time transcend the traditional proprietary, custodial ownership and discretion of a company or even government. To illustrate, in-game resources from play-to-earn games can be sold freely on marketplaces inside and outside the game, without relying on the permission or rules of publishers or other third parties.
Recent examples of play-to-earn communities have demonstrated the potential of play-to-earn games to create a new economy. This can be demonstrated by a video game called ‘Axie Infinity’. In the Philippines and Venezuela, play-to-earn has become particularly popular after it advanced from 4,000 to 2 million daily active users within a few months. For players in countries like these in the Global South, income from this digital world is far greater than what they can earn from their local physical economy.
Additionally, ancillary ‘scholarship platforms’ like Yield Guild Games, which enable and educate players in emerging economies to play-to-earn games, have attracted major investment and become billion-dollar companies in a matter of months — surpassing many popular video games in value. By globalizing the market for game-based NFTs in this way, play-to-earn games and their surrounding platforms are examples of frictionless economic opportunity and meritocratic participation across geographical boundaries. It seems that the world has never been flatter than it is in 2021.
For now, it is important to note that play-to-earn games do not eliminate the centralization found in games inherently and fully: they still require the publisher to define, issue and constrain the asset that will eventually be traded as an NFT. The greatest promise of play-to-earn games lies in their ability to decentralize marketplaces for the creation, ownership, and exchange of digital assets, as well as the potential created when those marketplaces are connected to the traditional economy and fiat currencies, enabling players to transfer their digital time, effort, and earnings into disposable income.
Owning and participating in these new worlds brings great profit to those who believed; many of whom were from emerging markets who acted quickly to capitalize on the opportunities.
The play-to-earn model may be a new and flexible way for the players themselves to earn money. But it also reflects some of the perils associated with the digital economy, which risks creating “humans as a service”: limited job security, precarious relationships between firms and employers, and a lack of social safety nets. Because freelancers are already overrepresented in the creative economy, policymakers will have to consider all of these issues.
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