The crypto markets are down nearly 50% from their peak earlier this year, but people are still excited about all things blockchain, and gaming is no exception.
Early blockchain games were barely games – in CryptoKitties you could breed and collect cats, but you couldn’t do anything with them. This is changing. Developers know that gamers are already used to buying, trading, and collecting scarce assets inside the games they play. Whether it’s a particular hat in Team Fortress 2, a card in Hearthstone, or a weapon in Path of Exile, gamers have been collecting digital assets for years. The audience is a natural fit since you’re not creating a new behavior, just expanding on an existing one.
The current blockchain gaming darling is Axie Infinity. Everyone is writing about Axie Infinity. It’s a “Pokémon-inspired universe where anyone can earn tokens through skilled gameplay and contributions to the ecosystem. Players can battle, collect, raise, and build a land-based kingdom for their pets.”
In the last month, they’ve reached 250,000 daily active players, and their Discord server is on track to overtake Fortnite’s (the largest in the world). Google searches have surpassed Dota 2. But what is most interesting about the game is the real-world economy they’ve enabled.
In Axie Infinity, you need a currency called Small Love Potions (SLP) to breed Axies. Axies can’t be earned any way through the game except through breeding, and so players spend hours grinding in the game to earn SLP. So far this isn’t any different from farming gold in World of Warcraft. Players will always zero in on the critical bottleneck to progression and spend their time farming it.
Where Axie Infinity gets weird is that SLP is a ERC-20 token that trades on the Ethereum blockchain – in other words, it’s a fully open currency that you can freely trade on platforms outside the game. It’s as if gold in WoW was useful in game, but could also traded at the foreign exchange desk at Goldman Sachs. This has led to some surprising results: In the Philippines (where nearly 60% of the playerbase lives), people have realized that they can make more money farming SLP in Axie Infinity online than working other jobs (especially during lockdowns due to COVID-19). SLP has become so ubiquitous there that some places accept it as payment for rent!
The makers of Axie Infinity call this the “play to earn” model. The game is free to play, but unlike other free to play games, spending time in it can earn you real-world money. While this is technically possible through gold farming in WoW, it’s against their terms of service, whereas it’s actively condoned in Axie Infinity.
Okay so everything’s great. We’ve enabled people in the Philippines to make money through a digital economy, and everyone’s happy... Except now players are worried about bots.
Just like trading digital goods is a longstanding tradition in gaming, so too is botting. There is a rich history of gamers using bots for all sorts of reasons, including automating the boring task of grinding for digital currency and goods. Why spend hundreds of hours manually farming for rare drops in Diablo II when a bot can do it for you while you sleep?
It was already lucrative enough to bot in games like Diablo, WoW, and TF2, and those economies were much more tightly controlled. (I know this because I’ve done it.) If players were already willing to run bots in those games, the “real world” effect of blockchain games will only make it more lucrative.
To make matters worse, the open nature of the blockchain will make botting more effective. By design, many of the protocols running on Ethereum can interact with each other via code. This is what enables the “money legos” of decentralized finance – as a developer you can string together a bunch of different services to do something new without asking for permission. This openness also means it’s easier for bot developers to automate more of their systems. An Axie Infinity bot could play the game, take the SLP earnings it’s farmed, and automatically sell it on Uniswap for dollars. No middleman or marketplace required. This would of course be against the terms of service, but that won’t stop botters from trying… there’s money on the line after all.
And it’s not just SLP earnings from the in-game economy flowing out to the real-world. If there are money-making opportunities on SLP in the real world, arbitrageurs and traders may also affect the value of SLP in the game. Sure, they can’t affect the in-game sources as those are controlled by the developers. But the game economy no longer exists in a silo – fluctuations on SLP in the real world will affect players in the game too. Openness is a two way street.
I am ultimately excited about crypto and blockchains, and the potential for new business models within gaming that are built on top of it. But navigating this new world is going to be interesting to observe. Much of the ethos of cryptocurrency enthusiasts is built around the decentralized and open nature of the protocols. There are plenty of stories of this in crypto like Uniswap being forked and launched as Sushiswap, which has developed over time into being a legitimate competitor and not just a cash-grab clone. Freedom is what makes crypto evolve so quickly, and is key to its recent explosion.
Axie Infinity is in a bit of a different situation – their game itself is not open source, and unavailable for anyone to readily fork. Therefore they do have some centralized control available to them – if players are blatantly cheating, the developers can ban their accounts. Those players still keep their assets like any Axies they’ve collected or SLP, and they’re free to sell them on the open market; they just can’t use their account to play the game. (Though this does raise the question… what is stopping them from just transferring their assets to a new account and starting again?) But no one is going to be upset at the devs banning active cheaters.
But where do you draw the line? Maybe you also ban anyone who is botting inside the game. Maybe you start limiting where certain assets can be sold (perhaps only through your own marketplace like NBA Top Shot). At what point do you just become a traditional game company, telling players how they can and can’t play the game, or where they can and can’t sell their proceeds?
I don’t think anyone knows, but it sure as hell will be fun to find out. 🍿