What is play-to-earn?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
Play-to-earn describes games that pay out tokens or NFTs for in-game activity, which can then be traded outside the game. The payouts are usually funded either by new players' spending or by newly issued tokens. If the game shuts down, the tokens and items lose whatever use they had.
Key points
- In-game rewards that can be traded outside the game
- Funded by new players' spending or by new issuance
- The loop breaks down when player numbers fall
- A shutdown removes anywhere to use the items
Definition
A game design in which on-chain tokens or NFTs are awarded for in-game activity and can be traded on markets outside the game itself.
Conventional games have currencies and items too, but their terms of service usually forbid trading them outside. Play-to-earn issues them as on-chain tokens and NFTs that trade on open markets. Players can take them out as assets — and the game's internal economy becomes directly tied to market prices.
The crux of the design is where reward funding comes from. If new players buying starter items pay for existing players' rewards, the reward level cannot hold once player growth stops. If new token issuance pays for it, supply keeps expanding. Sustainability depends on whether revenue enters from outside the token loop at all.
People playing for rewards also behave differently from people playing for the game. When rewards fall the first group leaves, so player count and reward level feed back into each other. That dynamic has to be assessed separately from whether the game is enjoyable.
Watch out for
- · When a game shuts down, its tokens and NFTs lose anywhere to be used and can end up worthless
- · Designs requiring an upfront purchase before you can earn may never return that cost
- · Trades of in-game tokens can still be taxable income in Japan, so keep records