Sponsored By

When a Play-To-Earn Bubble Bursts

There's more to be lost than a few crypto-bro's money when a play-to-earn game passes its peak.

Robert Green, Blogger

June 2, 2022

17 Min Read

[The opinions expressed here are solely those of the author and do not necessarily reflect those of his employer or gamedeveloper.com]


This article is not intended to be a definitive prediction - it’s more of a thought experiment around a potential outcome for NFT/P2E (Play-to-Earn) gaming. I should clarify what I mean by those terms as well, because there are several possible ways to integrate NFT’s into games, and it sounds like a lot of people are currently having piles of money thrown at them to explore all of them. So for the purposes of this discussion, I’m not talking about optional cosmetic NFT’s like Ubisoft’s ‘Digits’ or broader hypothetical plans for cross-game metaverse stuff. Instead, I’m talking about games where you can earn crypto-based rewards for playing, and in order to do so you need to own some NFT assets, or perhaps loan them from another player.

I should also be upfront about my biases about these ideas, which are fairly strongly opposed. I have long been of the opinion that the goal of videogames should primarily be to provide experiences and not rewards, which are typically in-game items and currencies. Obviously a game can provide both intrinsic and extrinsic benefits, but in my experience the more players focus on the extrinsic - the rewards - the less they tend to focus on the intrinsic - the inherent joy of play. To give a practical example you might be familiar with, this is why Bungie found, soon after launching Destiny, that players were camping outside of a cave shooting an endless stream of respawning enemies rather than playing the game as intended. Given the choice to do a boring repetitive action with a high likelihood of rewards versus a more enjoyable action with a lower or unknown likelihood, many players will pick the former, famously leading Soren Johnson to declare that “Given the opportunity, players will optimize the fun out of a game.”

What does this look like in a P2E game? If the goal is to earn real money, we can reasonably expect players to play the game in the way they think is likely to earn the most crypto, rather than whatever way is most enjoyable. It could even mean choosing to play a game they enjoy less than another game if the real-world earning potential is higher. As someone whose main concern is the player experience, this obviously worries me.

This bias for the intrinsic over extrinsic isn’t just a personal preference though - there’s good research to suggest that people who spend money on experiences rather than possessions are happier. As a technology that is aimed at enhancing the ownership aspect of gaming over the experiential, NFT-gaming is therefore a concerning trend.

Effects of the P2E model

As previously mentioned, the idea that you can earn real-money rewards in games can only be expected to tilt game design further towards enjoyment via the anticipation for and receiving of rewards. If we’re honest though, this has been an increasingly important part of gaming for quite some time. While this might be more than an incremental change, the aspect I started to think about in detail lately is how it might affect the psychology of leaving a game.

It shouldn’t be a secret at this point that a lot of what keeps players playing many games in the long-term is a large helping of sunk-cost fallacy (“I’ve put in a lot of time and effort to get this far, so I should keep going”), combined with a bit of Ikea effect (The phenomenon of valuing something more highly because you built it). Most really successful games these days, especially those with a focus on rewards and progression, have players build up something over days, weeks and months - something they might then feel sad to leave behind. This could be a high-level character in an MMO, a large card collection in a CCG, the collection of gear unlocks in a shooter, etc. I’m not sure if anyone has done the research on this, but I suspect that a large part of what keeps people playing games for long periods of time is that abandoning them would feel like an acknowledgement that all these things we’ve earned and built ultimately did not have any value outside of the enjoyment they brought us.

Enter NFTs and crypto then. In the short run, while the value of these tokens are increasing, I can actually see this potentially being a benefit for removing the feeling of loss associated with quitting a game. If you reach the point where you feel like you’ve seen all of what a game has to show you and find out that you can sell your virtual possessions for a profit, that time you spent in the game switches from being ‘lost’ to being an investment. Perhaps it might sound odd to read a game designer praising something that makes it easier to quit playing games, but for the health of the medium in general I think that we shouldn’t be trying to keep players around well past the point where they’re no longer enjoying the core gameplay anymore. If you don’t think that’s happening, then I suggest you look into the trend of ‘auto’ modes in mobile/casual games - options to automate or outright skip the gameplay part of a videogame so you can get to the rewards part without having to ask yourself if you’re still having fun. So yes, if a player wants to play a game for a while, build up something of value and then sell it for a profit when they move onto the next game, that doesn’t sound too bad to me.


that only works while the value of the NFT’s/crypto are stable or increasing. When the value starts going down, this problem could compound on itself. Say for example that I get into an NFT game that requires buying an NFT for $300. Then imagine a few months later, I’m questioning whether I want to keep playing this game, but I check the market rate of similar NFT’s and find they’re only going for $200 now and it’s trending downwards - what effect does this have on the psychology involved?

It’s true that any time you quit playing a videogame you’re not getting the upfront cost back (unless you can manage to sell a physical copy for the same price you paid), but in the case of the NFT game there’s an inherent promise that you’re not just buying a game, but an asset that can maintain or grow its value. And if it hasn’t currently increased in value, there’s a good chance that you can convince yourself - and that others will try to convince you - that it still could if you can just be patient enough.

Case study


Axie Infinity by Sky Mavis

This is all hypothetical so far, so let’s look at a real-world example. The obvious choice is the poster-child thus far for P2E gaming, Axie Infinity. If you’ve been following the news then you probably know that they suffered an enormous hack/theft of over $600M this year, but most of what I’ll cover is prior to that. If anything, the fact that players may have lost their ability to cash-out for a while yet so many stayed with the game probably supports this hypothesis.

Here’s a brief overview of the game and the relevant timeline. Axie Infinity by Sky Mavis is a game about pokemon-style team battles, but instead of catching pokemon, you need to mint them as NFTs, and battles can earn you a secondary crypto-currency called SLP (Smooth Love Potion), which is involved in breeding new ‘Axies’. If you can’t afford to buy your own Axies, there is a system where players can effectively borrow them from other players, in exchange for giving them a cut of your earnings, which the community refers to as ‘scholarships’.

In 2021, this game started to explode in popularity. In the middle of the year even people with no interest in blockchain gaming probably heard about players in the Philippines being able to earn a decent wage just by grinding Axie Infinity through the aforementioned scholarships. Over the course of a few months, the main AXS token value had skyrocketed from a few US dollars to a peak of ~$160, while the secondary SLP currency had risen from ~5c to ~35c. During this time, player counts had ramped up to an incredible 2 million daily players.

But as amazing as the rise was, it also came with problems. The increasing value of AXS would start to limit how many more players could join the game. The cost of buying a team of 3 Axies - the minimum requirement to start playing - was reportedly now over $1000. That's a pretty enormous barrier to entry, and a great team could go for far more. Meanwhile the surge of new players grinding SLP full-time led to a huge surplus of it and corresponding collapse in value, a problem potentially worsened if spending SLP for breeding also gets harder because of the high AXS cost involved.

By the end of January 2022, the values of AXS and SLP had fallen from their peaks by around 70% and 97% respectively, and that’s still pre-hack. Throughout this, the developers have acknowledged the issues and promised future updates to address them. It appears that they were having some success too, but I get the impression that their main tools were increasing costs and reducing rewards within the game. To put it another way, they slowed the devaluing economy outside of the game by devaluing the economy inside the game instead. Players are definitely not going to like it when that happens, but perhaps they'd tolerate it in the short term if it saves their existing assets from getting less valuable every week. As I write this, both tokens are still trending downwards, though now we’re into post-hack territory.

Here’s the curious part though - if the numbers I could find are accurate, the player counts actually peaked in January, and haven’t dropped hugely since. There were still reportedly 1.5-2 million daily players this April, after the hack and half a year after the peak. Two possible explanations jump out:

  1. Players grew to love the game independently of the profit motive.

  2. It’s a bad case of HODL.

#1 is fairly hard to take too seriously. Polls of their own players have shown that the gameplay itself was easily the least favourite part of the game, well behind the economy and the community. There are also plenty of other, similar games available in the F2P space, many with high production values and popular licences, so players definitely won’t feel like this is the only place they can get this kind of gameplay.
#2 therefore seems more likely. If you’re not familiar with crypto slang, HODL is a misspelling of ‘hold’ that is now considered an acronym for “Hold On for Dear Life”, the belief that once you hold a crypto asset, you should never sell at a loss - hold on long enough and it’ll inevitably go up in value. While this may have generally been true for the major crypto-currencies over a long enough timeline, it’s certainly not a given. Many crypto-based projects have had plenty of investors HODLing long after it was obvious that the project was dead or a scam. This is a classic aspect of all speculative assets - and gambling more generally - the attitude of “I can’t quit while I’m losing, so I need to risk losing even more."

When you’ve put a bunch of playtime into a game, these problems stack - now you’ve sunk time, effort and money in the pursuit of making a desired profit, and that makes the incentive to HODL even stronger. Now the negative feelings associated with leaving a videogame we’ve been hooked on are added to the negative feelings associated with selling stock at a loss. Adding to this is the combination of both the developers and other players insisting that any problems will be fixed with upcoming updates or changing market conditions, because both have a financial interest in you believing that. Now you might be thinking that you could just hold onto the assets but quit playing. That’s certainly an option, though if you really believed that the price was going to rebound, wouldn’t you want to keep playing so that you have more of those rebounded assets when it does?

All of this, at long last, leads to this nightmare scenario:

NFT/P2E gaming could lead to huge numbers of people, often in low-income countries, grinding games like a job for months earning tokens that have collapsed in value in a futile effort to achieve some semblance of profitability.


SLP - the Play-To-Earn currency - price from June 2021 to Jan 2022, via CoinMarketCap.

Is this likely?

The above is a pretty dire scenario I’ll admit, so let’s take a step back and evaluate some of the assumptions that went into it.

#1: Inflationary issues. Inflation has long been a tricky problem in games-as-a-service models. In P2E games especially it’s hard to imagine this isn’t going to be an ongoing issue, as any game that sees its earnings reach a meaningful amount is likely to see an increase in players interested in grinding that currency without plans to spend it in-game. It effectively takes the gold-farming issues that pop up around successful MMO’s and makes that a legitimate and even encouraged way to play the game, which is a great recipe for driving hyper-inflation.

#2: Limits to player growth. Games with a required NFT buy-in present an interesting problem - if players can only sell their NFT’s to other players, the main thing which increases the overall market value is the growth in demand caused by an influx of new players. You can’t have a fixed base of users all selling at a profit to each other now can you? But at some point this same growth in value would naturally slow player growth as players have limits on how much they're able and willing to invest in a game. It’s also pretty natural for games to peak in demand either at launch or soon after, and it’s generally only the very successful games that can buck that trend for a while. So either your influx of new players drops because you’ve already reached most of the people interested in playing your game or because the ones still interested can’t afford to enter any more.

#3: Decline. It seems reasonable to suppose that for any game with an NFT buy-in, there’s a limit to how much the value can drop before it starts to cause a downward spiral - seeing prices drop makes it less appealing as an investment, which in turn would lead to lower demand for the remaining NFTs, which would cause a further decline, and so on. Any gamers interested in picking up a new P2E game specifically would likely look for a game that’s still on the rise instead, because that’s where the most potential for profit lies.

#4: Reluctance to sell in a downturn. This one is fairly well established in other investment areas. As mentioned earlier, loss aversion in the stock market often results in investors being hesitant to sell a stock at a loss even when there’s no good reason to believe it’s going to increase any time soon. Holding on even when the market is clearly going south is a natural result of not wanting to acknowledge that you made a bad call.

#5: Players will continue to play during this time. Due to the relatively new nature of this model, it’s hard to provide a lot of historical evidence of this. What data I have seen, combined with my experience of how long players will continue playing any endless game once it has become a habit, makes it seem fairly plausible though.

Sample comments from the Axie sub-reddit:

“And lets be real for a second, we are all here because of the earning potential. And to discuss this otherwise is wasting time. I'm holding all my axies. I don't care if it hits zero but i won't sell for those prices now.” - Source

“Honestly theres alot of good card games that are more fun and i would rather play. I'm just stuck trying to get my losses back from investing” - Source

“I am holding. No point sellin at these prices. It could happend that mavis comes up with a genious plan. As they say : buy when there is blood in the streets” - Source

“I’m just assuming the entire market is going to zero and just holding until the next bull run, maybe by EOY” - Source


I’ve presented a nightmare scenario for NFT/P2E games, but it doesn’t strike me as a highly unlikely one. The gold rush that we’ve all seen happening in this space looks custom-made to create the kind of boom and bust hype cycles that benefit those who get in early - if they know when to get out - while leaving those who didn’t on the hook. Given the biases I laid out earlier, I sincerely hope it doesn’t happen, and that this scenario doesn’t leave millions of people burned out from videogames entirely. But I worry that it’s only a matter of time before we see headlines like “Online game had players working for months for now-worthless tokens”. It could probably be written today.



A sampling of a dozen P2E game currencies over the previous 12 months (or since creation if less than 1 year old), via CoinMarketCap. A couple (on the far right) have brief spikes at launch, but otherwise they all follow roughly the same pattern - at some point the price rises, peaks shortly after, then trends towards zero.

While writing this blog, I’ve been digging into the NFT gaming space, and the more I looked, the more I started to see the same pattern. As mentioned above, Axie Infinity may have become the poster-child for NFT/P2E gaming, and within 3 months of the AXS token reaching its peak, it had already lost half its value. While its meteoric rise had made international news, the subsequent fall hadn’t. I guess a few people making millions will usually be deemed more newsworthy than tens of thousands of people losing hundreds.

So I looked around for other examples and found that not only was this pattern not unique, Axie was actually doing relatively well. I looked up lists of the top games in the P2E space from 2021 and every one of them had since peaked and crashed. A particularly notable example that I won’t call out by name was from a team who was at GDC this year giving multiple talks hyping blockchain gaming, at a time when the value of their token was already down over 80% from its peak. It has continued to decline since. Much like Axie, the rapid growth in their player base may have stopped, but it also hasn’t fallen off much either.

Some of these projects have even gone as far as pre-selling in-game assets for games that have only been shown as concept art so far. When this happens, it looks like the same boom and bust cycle can still happen well before the game is even released. Whether or not releasing a high-quality game will cause them to rebound remains to be seen, though it’s still odd to see such wild swings in the value of game assets that may not exist for several years. Trying to pre-sell virtual land plots in metaverse projects that don’t exist yet is another worryingly common tactic.

Most of the games I found peaked late 2021, along with the NFT market as a whole. Many are branched off Ethereum, which has also dropped significantly. Having to rely on an intermediary currency that often fluctuates wildly in value is another risk factor in this sector, but I’ll leave that analysis for another time. Regardless, every game I looked at has dropped by far more than Ethereum did over the same timeline, and we’re starting to see stories about how the NFT market as a whole has crashed, making it harder to believe we’re going to see a repeat of late-2021 any time soon. As I was finishing up this article, the crypto market took another notable dip as one of the larger stablecoin projects entered a death spiral and was wiped out within a few days.

Read more about:


About the Author(s)

Daily news, dev blogs, and stories from Game Developer straight to your inbox

You May Also Like