(Reuters) – Jarindr Thitadilaka said he made as much as $2,000 a month last year from his collection of digital pets that he will breed and put into battle to win cryptocurrencies .
The 28-year-old from Bangkok is playing Axie Infinity, a new type of blockchain-based online game dubbed “play-to-earn” that combines entertainment with financial speculation.
These games can create lucrative businesses amid the hype surrounding NFTs and virtual worlds, attracting millions of players and billion-dollar investors who see gaming as a way to introduce cryptocurrencies to more people.
In Axie Infinity, users buy virtual creatures with different properties, such as NFTs or non-fungible tokens (digital assets whose owners are recorded on the blockchain), for tens of thousands to hundreds of thousands of dollars.
Players can then use pets to earn money by winning battles, as well as creating new pets whose value depends on their rarity. These assets can be traded with other players on the platform, which says it has about 1.5 million daily users.
“It’s not just a game anymore. It’s more of an ecosystem,” Thitadilaka said. “You could even call it a country, right?”
And when Axie Infinity suffered a $615 million heist, the dangers of this speculative ecosystem and the largely unregulated crypto gaming industry suddenly came into focus. Hackers targeted part of the system used to transmit cryptocurrencies in and out of the game.
Sky Mavis, the Vietnam-based owner of Axie Infinity, said it will cover the loss through its own balance sheet funds and $150 million raised by investors including cryptocurrency exchange Binance and venture capital firm a16z.
Sky Mavis co-founder Aleksander Larsen told Reuters that if he could have done something different, he would have been more focused on security when developing the game that launched in 2018.
“We’re basically running 100 miles an hour up to this point,” he said. “The trade-offs we’ve made may not be optimal.”
The hack, one of the biggest cryptocurrency heists of all time, sheds light on Play to earn, a young world largely unknown outside of cryptocurrency and gaming circles that is becoming A huge business.
Players spent $4.9 billion on in-game NFTs last year, or about 3 percent of the global gaming industry, according to market tracker DappRadar. Although demand has cooled since peaking last November, sales of gaming NFTs are still at $484 million so far in 2022.
Investor interest in NFT-based games has also surged, with projects attracting $4 billion in venture capital funding last year, up from $80,000 in 2020, DappRadar said.
“There are a lot of users who want to interact with the technology,” Larson said, adding that Axie Infinity made more than $1.3 billion in revenue last year. “It’s like you’ve discovered a new continent…it’s like rediscovering America.”
Chart: Monthly sales of game-related NFTs
To have and to lose?
Unofficial financial networks have also emerged around these games, adding to the complexity as some players take advantage of their coveted in-game properties for more money.
Last July, Thailand’s Thitadilaka decided he wanted to make more money playing games alone, so he and his friends decided to form an organization known in gaming parlance as a “guild.” They allow people who want to play Axie Infinity for free to use their NFTs without investing assets and take a cut of any winnings.
This pattern is common in games. Thitadilaka said his guild GuildFi grew into a network of 3,000 Axie Infinity players who split the proceeds equally with asset owners. Thitadilaka now runs GuildFi in a full-time capacity, and the company has raised $146 million from investors.
Southeast Asian countries such as Thailand and the Philippines have become the hottest gaming hubs in the world.
Teriz Pia, 25, who lives in Manila, quit her job as a preschool teacher last June after her brother founded the Real Deal Guild, a gaming guild that makes money from games.
Now, she says she makes up to $20,000 a month in multiple games and other crypto assets through her network of more than 300 players.
For Axie Infinity, Pia keeps her players 70% and she takes 30%. In another game, Pegaxy, players buy and trade NFTs of virtual horses to enter races to win crypto tokens, which it splits 60:40.
“I don’t call them workers. I just call them my friends or my academics,” she said. “If you’re a teacher, the Philippine salary…I’m a college graduate, I’m an educator, but it’s not enough. I never thought I could make that kind of money .”
But Pia warns it’s a dangerous business.
“There’s a lot of risk. When I invest in a new game…as a member of the Real Deal Guild, we have a collaborative team, we have researchers, but at the end of the day, it’s still a cryptocurrency, and it’s still risky.”
Yield Guild Games, one of the largest gaming monetization networks, said it had 10,000 Axie Infinity players, who retained 70% of its revenue, for a total of $11.7 million as of the fourth quarter of 2021.
Australian Corey Wilton, 25, who founded Pegaxy, says the company has about 160,000 daily users. He estimates that 95% of users who play money-making games participate as “tenants”, generating income without owning the assets, while 5% are asset owners.
‘How people get hurt’
Legal experts warn that players who effectively invest in risky assets have no safety net and will be very vulnerable if projects fail or the asset market dries up.
As regulators around the world try to handle cryptocurrencies themselves, there has been little regulation of NFTs or the relatively niche offshoot of gaming money-making games, which often use in-game crypto tokens that can then be cashed out for traditional currencies.
“Storing any value in a project like this is risky. The benefits of blockchain-based games are often through rewards paid in the project’s native token,” said David Lee, a cryptocurrency partner at London-based law firm Fladgate. .
“Neither tokens nor in-game assets have a guaranteed value, as their value is usually determined by market supply and demand. This means that prices can fluctuate wildly, and if the project becomes less popular or abandoned, then there is the potential for these assets to become worthless.”
However, advocates of these games say success is built on a combination of skills, strategy and luck.
“There’s definitely money to be made, but there’s also money to be lost here,” added Pegaxy’s Wilton. “Play to earn shouldn’t be confused with charity, that’s how people get hurt.”
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