Crypto and gaming collide in high-risk ‘play-to-earn’ economies
Last year, Jarindr Thitadilaka claimed to have earned up to $2,000 a month from his collection of digital pets, which he would breed and send into a fight to win cryptocurrency.
The Bangkok-based 28-year-old was playing Axie Infinity, one of a new generation of blockchain-based online games known as “play-to-earn” that combine entertainment and financial speculation.
In the midst of the excitement surrounding NFTs and virtual worlds, these games may be lucrative enterprises, attracting millions of players as well as billions of cash from investors who see the games as a method to expose more people to cryptocurrencies.
Users can acquire virtual blob-like creatures with varied properties as non-fungible tokens (NFTs) – digital assets whose owner is recorded on the blockchain – for tens of dollars to hundreds of thousands of dollars in Axie Infinity.
Players can then use their pets to win battles and create new pets, the worth of which is determined by their rarity. On the platform, which claims to have 1.5 million daily users, the assets can be swapped with other participants.
“It’s no longer just a game. It’s more akin to a natural system, “Thitadilaka stated. “Do you think you can name it a country?”
Last week, the perils of this speculative ecosystem, as well as the highly unregulated crypto gaming business, were brought to light.
Sky Mavis, the Vietnam-based owner of Axie Infinity, said the money would be reimbursed using a combination of its own balance sheet cash and $150 million collected from investors such as cryptocurrency exchange Binance and venture capital firm a16z.
Aleksander Larsen, a co-founder of Sky Mavis, told Reuters that if he could go back in time, he would have prioritized security when building the game, which was launched in 2018.
According to market researcher DappRadar, players spent $4.9 billion on NFTs in games last year, accounting for around 3% of the worldwide gaming business. Despite a drop in demand from last November’s peak, gaming NFTs have notched up $484 million in sales thus far in 2022.