In today’s podcast, we will discuss an emerging game mode: Play-toEarn (play-to-earn), that is, players can make money based on the time and energy they invest in the game. “Playing and earning” is also part of some larger trends-the relationship between players and platforms is changing, new incentives to participate in blockchain-based networks, and the upcoming new Internet era Web3.
Currently the most popular “make money while playing” is Axie Infinity , which is operated by a Vietnamese company called Sky Mavis. Players of this game get the NFT digital pet named Axie s and fight with other Axies teams (and thus get SLP rewards). These Axies can be propagated and sold using the in-game currency SLP, which can be exchanged for traditional legal currency.
You can think of this game as Pokemon on the blockchain. It has a built-in social network and real economy. There are even companies established around this game (such as Yield Guild Games). These companies help Players participate and lend them money to start the game. Since its release in March 2018, Axie Infinity’s total sales have exceeded US$3 billion, with most of the early growth coming from the Philippines.
Our guests today are Jeff Zirlin, the co-founder of Sky Mavis, Gabby Dizon, the co-founder of Yield Guild Games (YGG, a guild organization that provides the resources needed to start playing games for chain gamers), and the common cryptocurrency of a16z Partner Arianna Simpson. Together with Zoran Basich of a16z, they will discuss the larger technological trends that are driving the emergence of the “play and earn” model, the reason and location of its first popularity, the role the community plays, and related challenges, including starting to play games and The scalability challenges and the economic sustainability of this model.
The following content does not constitute investment advice.
Axie Infinity & the beginning of “Play and Earn”
Jeff Zirlin: Many of the original Axie community members and founders came from the CryptoKitty community, where we understood that launching new NFTs must be linked to actual work and effort in some ways. This can fundamentally prevent hyperinflation. So in the first iteration of the Axis combat system, we have experience points, which can be used to breed Axies. Then we had the idea that since many players asked to turn these experience points into tradable tokens, we tokenized the experience points.
Then we saw our players create a liquidity pool on the decentralized exchange Uniswap . Then we realized that you can actually calculate the expected hourly income by playing Axie games, because this liquidity pool guarantees liquidity.
So, I think we saw the potential of this game at that moment. We stated in a post published in January 2020 that we have seen the intersection between NFTs and DeFi, which is creating a model that we call “play while earning”. I think this may be the first time this term has been used. Used, at least for the first time in a non-speculative way.
Zoran Basich: A key issue to note here is that people have to pay a large sum of money to start playing this game-they have to download the Crypto wallet and buy three Axies pets, the price may be more than $1,000, and the price is constantly changing fluctuation. Gabby, you witnessed this in the Philippines. What do you see from this economic model?
Gabby Dizon: I have worked in the gaming industry for nearly 20 years and joined the Axie community as a player at the end of 2018. What I saw last year was that people in my home country, the Philippines, started to discover and play Axie as a way to get rid of the economic and income difficulties caused by the (new crown epidemic) blockade. These players are not cryptocurrency enthusiasts, but ordinary people trapped at home without a job.
Therefore, we came up with the idea of creating a union, as a way to bring people into the world of “playing and earning”, by launching a scholarship program to provide people all over the world with the opportunity to participate, not only in the Philippines, but also People in Southeast Asia, India, Latin America and other countries can play this game and make money from it without having to bear the cost of buying these Axies in advance.
What we have done is that we as a player collectively invest a lot of these assets, and then build communities around these different games, people can participate in these networks, so that when entering a game like Axie Infinity, you have to buy 3 Axies. No longer an obstacle.
Conditions for growth-Philippines and other regions
Zoran Basich: You mentioned the growth of “play while earning” games in the Philippines and other regions. What conditions have driven this growth? Why does the spark appear there? Regarding future community building, what can this give us?
Jeff Zirlin: I think there are some unique things related to the Philippines. Filipinos like mobile games, and people have a relatively high awareness of Crypto. Information and trends can spread here very quickly. Filipinos are traditionally early adopters of many social networks and platforms (such as Facebook). Especially in the Philippines, I think there are many special circumstances that make the Philippines basically ahead of other countries in the world, but I do think that it is only ahead of other emerging market economies by about 9 months.
How “Play and Earn” reflects the broader Web3 trend
Zoran Basich: So if the “playing and earning” model does spread and continues to grow, it means that something bigger is happening-what is it? What kind of changes are we actually seeing?
Arianna Simpson: We believe that people who create value should be able to participate in a beneficial way. This is the core idea of Web3. People make a living through Axie, so they can not let the platform itself retain all the value, but give it back to the community, creators, and those who are really responsible for creating value. I think this is an unstoppable movement.
Jeff Zirlin: A framework we can consider is, for example, who is the middleman who can be removed? How is the value extracted by the middleman shared with the actual users and stakeholders of the platform? As far as Axie is concerned, I think the current situation is that app stores and game publishers have been excluded, and they usually take more than 50% of the revenue generated by the game. We have removed it. We do not use them. We are sharing these values with those who really promote the development of our network (that is, the community).
How sustainable is “Playing and Earning”?
Zoran Basich: Okay, people need to spend money to enter the game, they interact with their characters, and at the same time they compete with each other and earn rewards. But how to understand its sustainability? What do you think of its underlying economic model?
Jeff Zirlin: One way of looking at this model at the moment is that Axie is an economy that is somewhat dependent on growth, just like any emerging market country. Currently Axie is somewhat dependent on capital inflows. But in the long run, it is very important for us to let players spend in the Axie economy, because it means they think the game is really interesting, or they see that money can be used in exchange for rights or respect . The more Axie becomes like a real social network or a country, the more opportunities for this type of value exchange. In the early stages, we defined Axie as a social network and a game. This is becoming more and more true, because we have achieved many things, such as our Discord was squeezed.
Zoran Basich: What are the key factors that make “Playing and Earning ” sustainable? For example, how do you see the upper limit of potential capital inflows and participation?
Arianna Simpson: In many ways, these “play and earn” economies will be similar to real-world economies. They are very complex, and I think it will be a real challenge to continue to manage the capital, token supply, and all the dynamics in these meta-universes.
In my opinion, the most critical point is to ensure that different groups of players continue to participate for different reasons and get different values from it. So, people may be purely because they like playing games, or because they get a lot of personal accomplishment from mentoring others. In many cases, this may be an economic reason. There are many reasons why people want to play this game and join the community, but as long as players who have invested additional capital can get other fun from it, that’s fine. This is no different from the real world economy. For example, I may be richer, I may pay others to do things I don’t want to do, or someone may pay me to do things they don’t want to do.
Therefore, as long as a strong ecosystem of participants continues to exist, I think this will actually move things forward.
Zoran Basich: What is the balance between the people who trade in this economy and the people who withdraw money from the economy? For example, some players will convert game assets into fiat currency because they need to pay bills, right? So between how much money to put into the system and how much money to withdraw, they need to make a choice. What are the trends in this? How does this affect the business model?
Jeff Zirlin: In terms of capital flows, we see that the funds deposited in our ecosystem are far more than the funds withdrawn. Only 4% of Axies are sold on the market. So, I think it shows the emotional connection and that people are not just for money. This also provides them with new opportunities, social networks and a lot of fun.
So, now I think it’s easier to balance the economy at a time of rapid economic growth and people’s high moods. In the long run, it is necessary to continue to ensure that it is very interesting to join this community and become a part of the community, and the game is also very interesting.
The role of the community
Zoran Basich: But what makes people feel that they are part of the community? There should be some greater feeling in this, not just “Oh, I’m going to make some money.” Right?
Jeff Zirlin: Exactly. I think this can be attributed to a common economic alliance, but it also includes cultural alliances. When new members join, they will understand this, and when they join, they have actually transferred some ideas to themselves. So, I think this is very important. This community is excellent in education and guidance. 80% of our users are from recommendations.
Arianna Simpson: I think this shows people’s enthusiasm for what is happening, whether it is offline (the attendance rate of related Meetups is very high) or in the digital field (in the case of Axie, it is on Deiscord, Substacks, etc.) ). Therefore, this community has a stickiness, that is, people feel that this community is theirs, and they are benefiting from being a member of this community, rather than letting others squeeze value from them.
Zoran Basich: But there seems to be a paradox here. As a feature of traditional systems (whether it is a financial system or a game system), it is difficult for you to transfer your account from one bank to another, or you cannot transfer the goods in the game from one game to another. But Crypto changed this, making assets easier to carry. So, is it easy to have some equally attractive games with equally cute characters, and then your community might move there?
Jeff Zirlin: What we have created is not just a gaming community. In many ways, it is like a country where people share common cultural values. We have a very deep economy. Therefore, I think that for this type of network, it is much more difficult to uproot a community and transplant it into a new universe where they have no interest. We are seeing players in the real world forming an Axie community, and everyone in the town or city where people are located is playing Axie Infinity. It has a network effect, right? The more people who hold Axie tokens, the more people who hold Axies NFT; the more people who own the land in this universe, the stronger these economic and social relationships will become between each other.
Gabby Dizon: Yes. A major feature of the transition from Web2 to Web3 is that the community is opt-in. The community forms the same tribe around a specific asset or a specific game universe by allowing people to share economic ownership and have the same sense of belonging. People stay in this community because they choose to stay here and they help build a tribal culture. There are common economic and cultural incentives in the community. But if people want to leave this network and join another network, no one prevents them from doing so.
Zoran Basich: When it comes to user selection and user behavior, how has this changed? Since YGG is funding players, bringing them into the game, and helping them start the game, Gabby, you have a close view on this aspect. Is there one or several different behavior patterns that are evolving?
Gabby Dizon: We (YGG) see ourselves as a necessary level to bring people from the real world to the meta-universe, especially for those who cannot afford the upfront funding. But once they get involved and have income, we will encourage them to transform from players to investors.
Therefore, people initially made money by earning SLP tokens. They exchange it for legal tender to support their families and pay bills. What we see is that when they have some surplus income, many of them actually changed their behavior for the first time in their lives: people have more investor mentality. Now they think, “Should I buy Axies for my family so they can start making money? Do I want to buy the first piece of land on Axie Infinity and become a virtual land owner?” and so on.
Scalability Challenge & Ronin
Zoran Basich: Jeff, you mentioned CryptoKitties earlier. This is the most prominent example of a game that has truly achieved mainstream success before Axie. It gave its Ethernet Square, network congestion for some time, right? So what are the challenges of Axie in terms of growth and scalability?
Jeff Zirlin: There are many small, low-value transactions in our ecosystem, and these transactions are critical to our user base in emerging markets. However, due to the high fees of the Ethereum network, these transactions are basically unaffordable on Ethereum, and obviously we are in a bull market, which also happened at the same time as the rising gas cost on Ethereum. The success of the Ethereum ecosystem and all these DeFi applications actually stifled our growth, and it squeezed out our users. The situation we once faced was that we really needed to migrate most of our transactions to our own infrastructure.
In April of this year, we launched Ronin, our Ethereum sidechain, and we added this key facility to the equation to provide conditions for our growth. Before Ronin was launched, our daily active users were approximately 38,000; now, our daily active users have reached 2.4 million.
Zoran Basich: To be precise, what does Ronin sidechain do for you? What potential does it unlock?
Jeff Zirlin: Ronin allowed the proliferation of this scholarship model because people involved a lot of transactions when running the scholarship program. Therefore, breeding Axies, sending Axies to different accounts, claiming rewards in the game, etc., all these on-chain transactions are expensive if they are on Ethereum, and usually take a while; while on Ronin, these transactions The cost is very cheap, so far it is free, and much faster.
This is why we call it Ronin. Ronin refers to a samurai without a master. It’s all about taking our destiny in our own hands. We can be the ones who determine our growth path without having to be passive receivers of the Ethereum market situation and Gas prices.
Arianna Simpson: I think this is a very important story. If they don’t, I think that while the game will obviously continue to grow, it will be restricted as before. Therefore, once the infrastructure is in place, the incredible potential will be unlocked.
enter the game
Zoran Basich: Another challenge is to enter the game, that is, the steps that need to be completed to start playing the game. You have to download multiple wallets, and obviously you need to pay some upfront funds. On the one hand, this shows how attractive this game is to those who are willing to follow these steps, but on the other hand, you want it to be simpler.
Jeff Zirlin: It is still very difficult to start playing Axie. Therefore, many of our development roadmaps are designed to reduce these obstacles. Specifically, if you are currently interested in Axie and want to play this game, you must figure out which Axies you really want to buy. This may involve a lot of research work on the Internet, perhaps watching YouTube tutorials. You are basically buying characters for a game you have never played.
We will release an upgraded version of the combat system. One of its features is that there will be a demo tutorial. People will be able to download Axie and get a free Axies team to understand the game and figure out themselves before making any economic decisions. Do you really like this gameplay? Do you like this community? Therefore, we think this will be an important stage.
Gabby Dizon: You know, this is where the community comes into play. What I like about it is that it replaces middlemen like Facebook and Google with a community-based structure, bringing people to games like Axie, teaching them how to play games, how to make money, and how to use cryptocurrencies. To me, it’s like Web2 simplifies people into statistics, just about daily active users; while in Web3, this community-based growth returns to individual users, creates content in the community and learns how to make money while playing. We have seen all these people make great improvements in their lives by making money, and I think it really makes a lot of sense.
“Play while earning” and future jobs
Zoran Basich: The concept of work is very important here. I mean, so far, this has mainly involved players and the people who fund these players. But when you look into the future, what new career will you foresee? No matter whether it is a specific job or a job category.
Jeff Zirlin: There are many different types of Axie players: competitive combat players, collectors, scholarship managers, and scholars, and some are long-term Axie holders, and content Creators and educators. In addition, many players also have multiple roles at the same time.
I think what we will see is that, at least in the Axie ecosystem, different types of players will begin to connect with each other or map to different professions. We have begun to see the rise of competitive Axie players who can earn a living by winning tournaments or climbing leaderboards.
I think we will also see the emergence of politicians in the world of Axie, such as people who lead committees. They will consider the best use of funds, or, for example, make governance recommendations. You may have people who focus on collecting or harvesting specific things. It might be like a farm worker. For example, go to Axie land to harvest resources. I think this is a prototype we have seen in the past, but I think it never really broke out, I think it ushered in a breakthrough moment in the rise of Axie and YGG and similar institutions.
Zoran Basich: We have heard a lot about Web3 and meta-universe, and other fashionable words, which are somewhat revolving around the view that we are more and more living on the Internet. Do these “play and earn” trends we are discussing go beyond games or work and become part of our lifestyle?
Gabby Dizon: Yes. This intersection of Crypto and the creator economy, as well as the future trend of work and the direction of people in the meta-universe, is actually one of the things that excites me the most. So, when you see these games in the virtual world, I think it will be more than just the games we see now. In the virtual world, people will be able to go to the bank, interact with a certain DeFi application, and do what we think is work, but in these virtual worlds that look like games. Therefore, I think that work and entertainment will be more and more integrated, and we will use cryptocurrencies as a means of exchanging value, but they are not necessarily the games we know today.
Games as a path to adopting Crypto
Zoran Basich: I want to know what you think about the overall adoption of cryptocurrencies -many people are still skeptical about it. In general, what does the “play and earn” game mean for the adoption of cryptocurrencies?
Arianna Simpson: Games will become a key way for hundreds of millions of users to enter the cryptocurrency field in the future, because from the past, it is not easy to participate in the cryptocurrency field, with high barriers to entry and high technical barriers. And it can be a little scary. This is about real money. The game provides a more friendly and approachable experience of entering this field. You have these cute electronic pets, and you can communicate with other players. We have discussed the real sense of community. So this is a more approachable way to enter this field. So we see that players may enter this field through a certain game, and then once they have a wallet, they begin to experiment with other Web3 products and experiences, and from here to a broader place.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/zoran-basich-play-and-earn-and-the-broader-web3-trend/
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