Recently, games that combine P2E (Play-to-Earn) features and blockchain technology have become popular, causing a significant shift in the gaming industry. Through P2E games, players can trade in-game assets and currency for real money efficiently and reliably. In this article, we will explore why P2E games and blockchain technology are a perfect combination for the gaming industry, as well as the risks and limitations associated with implementing blockchain in games, and lastly the potential solutions to hedge the risk. By reading this article, you will gain a better understanding of the potential of P2E games and blockchain technology, and be able to establish new business models and strategies in the gaming industry.
What is P2E game?
Definition of P2E and Differences from the conventional games
P2E games, or Play-to-Earn games, refer to games where players can earn real money by playing. Players can receive in-game assets as a reward for participating in the game, and this can be traded into real value asset later. Typically, most of these games utilize blockchain technology to prove ownership of in-game assets, as well as to transfer and trade them.
In P2E games, players can receive digital assets as a reward for completing various actions and missions. These rewards, in the form of tokens or NFTs (Non-Fungible Tokens), are implemented through blockchain technology. These tokens or NFTs can be exchanged for other cryptocurrencies or traditional currencies, allowing players to monetize their in-game assets.
Ultimately, P2E games offer not only an enjoyable gaming experience, but also the potential to generate income while playing. Similarly, providing tokens and NFTs to pre-registered users before the game’s launch can be an effective way to attract users, while it can save the advertising or publishing costs. The benefits that can be obtained through tokens created with blockchain technology are very extensive.
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A brief look at P2E game examples
- Axie Infinity: This game, released by Vietnamese tech company Sky Mavis in 2018, is one of the most successful P2E games. In Axie Infinity, players collect, breed, and raise fantasy creatures called Axies and engage in battles. While playing the game, players can acquire tokens (cryptocurrencies) called AXS (Axie Infinity Shards) and SLP (Smooth Love Potion), which can be traded for other cryptocurrencies or used within the game ecosystem.
- Decentraland: Decentraland is a virtual reality platform based on the Ethereum blockchain network, launched in 2017. On the platform, players can create, explore, and trade virtual assets. The platform has a basic cryptocurrency called MANA, which players can use to purchase digital assets such as virtual land, wearables, and in-game items. MANA can also be exchanged for cash or used within the Decentraland ecosystem.
What is Blockchain?
Blockchain technology is a digital, decentralized, and secure system for storing and sharing information across the entire computer network. Transactions or records are stored in blocks that are linked together in chronological order to form a chain. This is where the name Blockchain came from. The decentralized nature of blockchain proves that a single institution or organization does not control the information. Rather, it relies on a network of computers, known as nodes, to maintain and update the digital ledger. This allows for a more transparent and secure transaction that is protected against fraud and tampering. Blockchain technology has many applications beyond cryptocurrencies, including supply chain management, digital identity (DID), and decentralized finance (DeFi), as well as social media (SNS) and games (P2E).
Key Functions and Advantages of Blockchain
Value Creation Using Tokens/Coins Tokens or coins are digital assets that represent value and can be used within a specific blockchain ecosystem. Tokens can be used as an exchange medium for goods and services, and can also grant access to specific content or locations by including utility features within the token. Non-fungible tokens (NFTs) can be used to record and store ownership of real estate, art, digital assets, and more. Companies can create tokens to establish an economic system. Tokens derive their value based on factors such as user demand, utility, token scarcity, and market preference. How these factors are controlled and managed can be crucial to raising significant funds, so it is important to collaborate with blockchain experts or tokenomics specialists.
A smart contract is a self-executing contract that runs on a blockchain. Unlike traditional contracts, smart contracts are made up of codes that are automatically enforced between parties based on predetermined terms and conditions. Smart contracts follow this process:
- Agreement: Two or more parties agree to the terms and conditions of a transaction or contract.
- Code: The contract is translated into computer code that includes the rules, conditions, and results of the transaction.
- Deployment: The code is deployed on the blockchain, making it safe, transparent, and tamper-proof.
- Execution: When the conditions specified in the code are met, the smart contract automatically executes the agreed-upon action, such as a fund transfer, release of digital assets, or updating records.
Distributed Ledger A distributed ledger is a shared and decentralized database that is managed across a network of nodes rather than being stored on a single centralized server. In other words, blockchain technology allows for a distributed ledger where transactions are safely stored and updated across multiple nodes (computers), enhancing transparency, trust, and security.
Why P2E games and blockchain technology create a perfect harmony
Improved security and transparency through player ownership
Many users who first learn about P2E may not be familiar with the blockchain technology. Users who enjoyed traditional online games may have thought they owned in-game items or assets (game currency), but in reality, they did not. Game developers or publishers could control the server hosting the game, and game operators also could manipulate the game economy after the launch. Similarly, there have been cases where users’ acquired items or currency were rolled back due to DB management or server issues. Additionally, players often use third-party websites to trade in-game items and currency, which can lead to many cases of fraud.
However, with blockchain technology, these problems can be resolved using transaction technology. All transaction information is recorded within a block, so it cannot be modified or deleted. Through this function, users can view all transaction histories equally, and enjoy the game while being aware that transactions cannot be changed or deleted. In this process, game users begin to trust that the game economy is fair and that their assets are secure.
In P2E games where blockchain technology is highly implemented, NFTs carry the player’s information, providing true ownership of in-game assets. NFTs implemented with blockchain technology cannot be replicated or altered, which means users can play the game and make transactions based on their ownership without fear of fraud or manipulation.
Generating revenue and securing loyal customers with tokens and NFTs
P2E games enable players to earn profits directly by utilizing tokens (coins) and NFTs, which help them secure their loyal customers. Tokens are digital assets used as a form of utility in the game. In P2E games, tokens are used to trade in-game assets, receive services or upgrades within the game. Furthermore, players can acquire tokens by completing specific missions or tasks, participating in tournaments (PvP), or contributing to the game ecosystem.
NFTs have a different concept from tokens (fungible tokens). NFTs can be seen as unique digital assets that represent ownership of in-game items or goods. Rare items such as weapons, armor, and land acquired in-game can be made into NFTs, which can be traded on marketplaces such as OpenSea and Rarible because they were created using blockchain technology.
By introducing tokens and NFTs into the game, game developers can create new revenue streams and encourage players to spend more time in the game. For example, players will try to acquire tokens by completing in-game quests, using them to upgrade in-game items and registering upgraded items (NFTs) on external markets to monetize them.
This cyclical system encourages game users to become loyal customers by providing various ways to enjoy the game while earning the profits. Similarly, players will invest more time and money into the game ecosystem in order to acquire tokens and NFTs, increasing the likelihood of contributing to the game community.
Challenges and Risks of Implementing Blockchain in Games
While blockchain technology brings many benefits to the gaming industry, there are also several potential issues and risks to consider. Here are some of the main challenges:
Using blockchain technology in the gaming industry can lead to such issues as money laundering, fraud, and consumer protection. Therefore, it is important to carefully check the regulations of governments and related agencies in each country before proceeding with the business. In some countries, P2E games may not be registered on the Play Store or App Store due to regulatory issues.
In particular, 2023 is known as the “year of regulation” in the blockchain industry, so both business operators and investors need to keep up with the industry trends and the regulatory status, preparing them in advance.
While everyone agrees on the transparency, high security, and added value creation through tokens and NFTs that blockchain offers, blockchain technology has high entry barriers for development. Since it is an emerging technology, there are a few experts, so finding them takes a lot of time and cost. and requires hiring experts, which takes a lot of time and cost. Many companies are still hesitant to adopt blockchain because they have not yet developed strategies to safely and efficiently build blockchain infrastructure such as the mainnet and smart contract development, as well as maintaining the value of tokens and NFTs.
There are several ways to address these issues and risks and operate a successful business. First, to eliminate regulatory risk, it is recommended to partner with blockchain experts or specialized companies. Choosing a partner who not only has blockchain technology expertise but also knows the legal aspects and has references is important. Second, to overcome infrastructure development and technical limitations, it is recommended to use services such as BaaS (Blockchain as a Service). For example, Luniverse by Lambda256 allows users to create a chain (network) with just a few clicks on the console, create and distribute tokens and NFTs as desired without gas fees, and operate and manage them with various APIs provided.
With the NOVA update, Luniverse will provide node services and multi-chain APIs. Users can now operate important nodes for maintaining and operating blockchain networks with just a few clicks. This allows DAaps, including P2E games, to easily secure data and stability with fewer resources. In addition, game developers or DAap developers can provide greater flexibility and interoperability by connecting to multiple blockchain networks such as Ethereum and Polygon through multi-chain APIs.
P2E (Play to Earn) games are a relatively new and rapidly developing field in the gaming industry. As mentioned above, P2E games have clear and diverse advantages, but there are also challenges that must be overcome, such as regulations and technical limitations.
Since P2E games include a model of generating revenue within the game, there is a risk of players feeling like they are working instead of playing. As with many existing games, if game content feels like a chore or task, users will leave.
Similarly, if developers focus too much on technology and economic systems, game quality may suffer. If a lot of resources are spent on creating tokens and NFTs with blockchain technology and integrating them with existing systems, developers may naturally neglect the development of the game’s core story and content.
Ultimately, it is important for business operators to choose a stable blockchain service that can be operated with minimal time and cost, allowing them to focus on better decision-making.
If you are planning a business using blockchain technology, consult with an expert!
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