Until recently, games were split into two main models of monetisation: pay-to-play and free-to-play. However, a new model has started to emerge, dubbed ‘play-to-earn’. Here’s a brief overview of how gaming economics have shifted over the years.
Paid Games/Pay-to-Play (P2P): The First Video Games
It all started with arcade games back in the early 1970s. Arcade video games worked off a pay-per-play model. Like the name suggests, games were monetised per play. Arcade goers would have to stump up a small amount to enjoy one or two rounds of a game. This was hugely profitable.
When home consoles arrived on the scene in 1972, game developers saw a need to introduce a new revenue model: single payment. This new method of payment meant that players could simply pay a one-off sum in order to gain total access to a game. Examples include FIFA and Super Mario Brothers.
In the late ‘90s, subscription models — games that require the player to pay a regular subscription fee in order to maintain access to all parts of a game — were introduced. This method was especially popular with MMORPGs (massively multiplayer online role-playing games) like Tibia, Runescape, and World of Warcraft.
Free-to-Play Games (F2P)/Freemium: The Next Chapter of Gaming
In the free-to-play (F2P) business model, players have access to the core of the game free of charge, but are encouraged to spend money on enhancements, such as additional live, unrestricted playing time, an ad-free experience.
During the early days of the Apple App Store, the majority of early mobile games like Angry Birds, for example, were based on the traditional premium model (i.e., paying for the game up front).
In October 2009, the App Store introduced in-app purchases for free apps, enabling players to purchase digital items, such as in-game currency and resources, to enhance their experience.
Soon after, popular mobile apps like Angry Birds, Temple Run, and Plant vs. Zombies would switch from the premium model to what we call ‘freemium’. Video games like DOTA 2 and Team Fortress 2 quickly followed suit, adopting the free-to-play business model while offering purchasable cosmetics.
Play-to-Earn (P2E) and the Advent of GameFi
In 2017, Ethereum launched CryptoKitties, the first widely recognised blockchain game. Shortly after, a number of other decentralised blockchain games were launched, including Ether Shrimp Farm, Ether Cartel, and Pepe Farm. These games use a P2E economic model, which provides players with the opportunity to monetise their time spent playing games.
In P2E games, in-game assets are usually represented as NFTs, which players can obtain through in-game advancement and gameplay. Unlike traditional video games, where developers control all in-game economics, players in P2E games have ownership and control over their digital assets. They can even contribute to game decisions and help shape the future of the game through the accumulation of tokens.
Take Fairy Cat Gamefi (Fairycat .net), for example, a blockchain game that rose to prominence in 2022. In Fairy Cat, players collect, breed, train creatures called ‘Fairy Cat’. Unlike conventional in-game items, each Fairy cat and item can be traded on the game’s marketplace for real money.
The game has one native cryptocurrency: USDT. Which is what players earn through playing the game.
With all that said, games like Fairy cat can have a cost of entry. In order to start playing, users must adopt one pet character. Building out an average team in first stage would have cost around US$30
This initial cost is still a huge barrier for many, especially as the vast majority of blockchain game players currently hail from developing countries. This hurdle has led to the rise of gaming guilds — platforms that enable NFT owners to lend out in-game assets (NFTs) in return for a share of the assets generated — which reduce the considerable upfront costs for would-be participants. The most well-known guild is Yield Guild Games (YGG).