The Rise and Fall of “X to Earn”:
There is no doubt that 2021 was considered the Gamefi year. The leading game “Axie Infinity”, a non-fungible token-based online video game developed by Vietnamese studio Sky Mavis, utilized the model of P2E(Play to Earn) and opened a brand new chapter for games in Web3.
Tracing back to the history of P2E, “Second Life”, a game from 2003, was one of the first games that enabled players to earn real money in the real world. The game allowed players to create and sell virtual goods within its economy, and some players made a significant amount of money from it.
Blockchain and Axie Infinity did not create the P2E model. However, it did have some important innovations:
The ownership of in-game assets
More secured and decentralized
Transparency
Convenience
In the blockchain, players could formally own the assets from the game through NFTs. These in-game assets could be used in games or traded in the secondary market. Blockchain also guaranteed a more secured and decentralized way for players to play the digital games. Moreover, security and transparency are guaranteed because every action that a player or the developer makes could be tracked and recorded through the Blockchain.
The prosperity of Axie Infinity pumped the price of AXS(its native token) from $0.1 to $160 within a year, that was primarily because an increasing number of people had been driven to the game. They participated in Axie because they were told that a decent amount of profit could be made from it, but not because of a seeking of entertainment. However, in less than 1 year, due to a poor macroeconomic environment and an unsustainable economic model, the price of AXS has fallen to $24. Fewer players are still playing the game and nearly no new players.
More than that, there were hundreds of fork P2E games at the end of last year, and about 90% of them are dead by now. In fact, the ultimate fate of every P2E game is death since it follows a pattern of the first 25% of players making the money from the rest 75% of players, and when fewer new players are coming in, the economic model would ultimately collapse. Soon, the price of its native token would consistently fall, and this is when FUD (fear, uncertainty, doubt) would occur.
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An In-depth Analysis of “Stepn”:
Now let’s focus on Stepn, Stepn is also an “X to Earn” prototype finance project, but it brings the world of Web2 and Web3 together simply by changing “play to earn” into “run to earn”. As a player, you need to purchase an NFT running shoes on their mobile app and you could make money by running in the real world. The estimated ROI time is 1-2 months depending on the price of its native token. There is also a wastage mechanism on the shoes, so you have to keep investing if the shoes are completely abraded.
I doubt Stepn on the first day it launched, even though it was a successful product born in web3 and at the same time popular in web2. Currently, the native token “GMT” has dropped 80% since it was banned in China and it almost fell into a death spiral. However, I believe there are more reasons for that.
Though“Run to earn” is a brilliant and innovative idea, that running is a sport that everyone can do in the real world, those nft run shoes are too pricey: even the cheapest one costs around 1000 dollars. Running with a 1000 dollars virtual shoes could not be applied to every person, so this is a huge drawback of Stepn.
An unsustainable economic model: Every “X to earn” project would ultimately collapse when fewer new people are participating, and since every player is making the money from the next player that joins the game. Otherwise, why should the players get rewarded by playing the game?
The ROI period is way too long: regardless of the volatility of its native token and the whole crypto market, one needs 30-40 days consecutively running to make their investment back, which is too long for an “ X to earn” prototype investment. There are plenty of 15-25 days ROI “X to earn” projects in the market. Although a longer period of ROI is more sustainable than a shorter one, incremental risks are required to take into account. Personally, as an investor seeking future profit, I would rather choose other potential projects in the crypto market that have approximate risk as Stepn, but may bring more benefits.
Other factors such as the prohibition of Chinese IP users, inappropriate statements that the Devs made on Twitter and discord, a modification of the team’s earnings in the whitepaper, and a suspicious transfer of huge amounts of money out of its official wallet.
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The Possible Solutions and Insights for the Future:
Stepn could be a widespread app like “Keep” if the cost of its cheapest virtual shoes is 10 dollars, because in this case, more people would be able to participate and treat Stepn as an incentive to do exercise, instead of an investment. There are plenty of approaches to creating a "sustainable tokenomics" model, but the key is the attitude of users. Users should focus on using Stepn to run to be healthier, instead of making money. Therefore, I believe the project would be possibly sustainable and possess a healthy ecosystem if it could have more “real users”, instead of “ investors”. On the contrary, users right now are speculators that simply seeking venture profit, since they are acquainted with the mechanism behind it, “a Ponzi Scheme” (庞氏骗局). However, the “real users” who treat Stepn as an incentive to do exercise are far from the majority. What the Devs should actually do is to attract more “real users”, since only if the number of these people increases, the whole ecosystem could be sustainable in the long run.
Overall, the “X to earn” prototype could be viewed as a strong and efficient approach to gain new users, but it could not be a traditional business model. If “X to earn” wants to be widely used and successful, here are some of the attributes that I believe a successful P2E Gamefi should possess:
The game itself has to be addictive and appealing over time, like “League of Legends” or “Honor of Kings”(王者荣耀). There should always have a substantial amount of loyal players who could maintain a good environment in the gaming community.
The game mechanism should make players willing to spend their money, such as purchasing game props (buying skins from League of Legends or spending money on Lottery from Genshin Impact).
Apply a ranking system of accomplishments from the game, and only the players who are on the rank are having access to “play to earn”. This rank should only qualify 10-20% of the players in the entire game ecosystem.
These mechanisms enable the “earning players” to make money from the “consumer player”, which could possibly create a sustainable recycling economy. In fact, the key is the PlayAbility of the game, otherwise there will be no consumers, and by now all of the Web3 games are actually not fun at all. However, designing a playable game is quite difficult and expensive, and the process of which would also take several years. I believe that there will be a “Web2.5” metaverse game soon in the future, which could be an integration of Web2 and Web3, in both technologies and culture.
Here is one of my ideas of the Metaverse game: think about the Murder Mystery Game(剧本杀), people may not still be required to sit in a chair, behold a long list of scripts, and be restricted by reality. The traditional Murder Mystery Game will likely be changed by the technology of Web3 and Metaverse. Imagine that people could jump into the virtual plot and act with the characters in it directly, though this requires advanced technologies to fulfill, I am still convinced that this can happen in the near future.
Overall, even though the entire crypto market just crashed badly, we need to have faith in the potent potentials that crypto and blockchain possess and the promising future that they could bring us.