One of the best things I’ve heard about in recent months is the rise of crypto games.
Crypto games, also called NFT (non-fungible token) games, blockchain games or play-to-earn games, have enjoyed exponential popularity and growth in the past year. Crypto gaming is probably the biggest reason why a lot of people are suddenly more interested and involved in cryptocurrency in many areas in Southeast Asia and South America.
As I shared in my last post here, I developed a deep interest in crypto gaming because of its potential not only as an investment vehicle but more importantly, its potential to change lives. I sound melodramatic right now, but I will talk more about this in-depth later to explain my thinking.
I first became interested in crypto games in July when my brother was given an Axie Infinity scholarship by a friend I met in the Phinvest Discord server. Although I know that people can make money through online gaming before by selling rare items and collectibles, Axie Infinity allows virtually most of its players to do so, not just a select few. Crypto gaming just spoke to my soul; play games and earn money? Yes, please.
Since then, I’ve researched as much as I can in this space, cobbled together my own teams of Axies, joined communities in Discord and Telegram for new NFT and crypto gaming projects, participated in some new projects, took profit from a game I got in early and had that money scammed right under me by a bogus link sent in Discord. It’s been a wild ride. And I loved every moment of it! Yes, including the experience of being scammed.
I mean obviously I don’t want to be scammed and lose money, but I feel like I can almost claim the status of a crypto veteran, bloodied but unbowed and still have a lot of fight left in me. As they say, weeks in crypto is like years in the stock market. I haven’t been scammed in the stock market.
I’ve been told that the best way to learn in cryptocurrency is by getting your feet wet and just participate in the market. But the learning curve is too steep, and the stakes are so high, it’s no wonder most would rather stay in the sidelines. Which is a shame, really because I believe that crypto gaming is THE FUTURE of gaming. There’s no going back.
Once people realize that you can get paid and/or accumulate wealth while entertaining yourself, who would want to go back to spending hours on a game, unpaid?
Those hours you spend daily playing a computer game is no longer just wasting time (“Nasa tapat ka na naman ng computer, ang aga-aga!” – Filipino moms all over the country), you’re investing/working/accumulating wealth. What a massive shift!
So to my fellow titos and titas who are intrigued about what all the cool kids are talking about, I gotchu. In this post, I will share the things I have learned so far, keeping the jargon to a bare minimum, and as simple as possible. I am also still learning and have so much more learn; let’s do this together.
What are Crypto Games?
Simply put, crypto games are video, online, and mobile games built on a blockchain and allow players to generate income while playing. That’s why these are also referred to as play-to-earn games (P2E).
To earn cryptocurrency, most games require that players must own the game’s NFTs or non-fungible tokens, which are unique digital properties or assets.
When you play a video game, remember how you don’t actually own the items you “own” in the game? When you played Pokemon Go, you didn’t actually own that Squirtle. Your kid’s Minecraft manor isn’t really his. Your Mobile Legends character and the skins you bought for it with real money so it will reflect the “real you” are not really yours. They all belong to the game and the game developers have the power to take your inventory back for any or no reason at all.
It’s because traditional video games are centralized. Meaning, the game itself owns everything in it. All the items in a particular game can only be used in their respective games. You buy the game, then you play the game. Maybe you buy a pet piglet in blue sweaters for $5. When you decide to stop playing, you no longer have access to the items you accumulated. You can’t even transfer that piglet to another game. Nor can you sell it to get back the money you paid for the items.
Items in crypto games, on the other hand, exist independent of their specific game. When you stop playing altogether, your inventory still exist outside of the game. You can sell or lend it to another person or sell it in exchange for cryptocurrency or real-world currency.
The reason for this is that the crypto gaming items are on the blockchain.
Blockchain is an important concept in understanding cryptocurrency and it pays to know how it works. But for our purposes (this is a guide for noobs, after all), the blockchain refers to a database that stores information AND no single person or entity owns the blockchain.
The blockchain allows you to create, store, and sell an item. The blockchain will also reflect:
- the item name (ex: sword of destiny)
- item picture
- how many of these items exist (to reflect how rare or common it is) and
- who owns the item at any given time, that is, ownership history
These items are called NFTs or non-fungible tokens. Non-fungible means that these are unique and cannot be replaced with something else. NFTs are true assets in the sense that they can be bought, sold, and transferred in exchange for cryptocurrency or real-world money.
Another key point is that records in the blockchain cannot be erased or changed, so your ownership will remain even if you quit the game (unless of course, you transfer the item to another wallet or address), nor can anyone mess with your assets.
We can imagine the blockchain to reflect, for instance, that “Katie Scarlett owns 1 out of the 10 existing swords of destiny in XXX game” and anybody can check the blockchain to verify this. Nobody, not even the game developers, can transfer my NFT without my express permission nor take it back from me (although they can be banned from earning while in the game).
HOW TO EARN FROM CRYPTO GAMES?
This is my favorite part. There are a lot of ways to earn and invest in crypto games. Whatever your investment strategy is, there is a way for you to participate and profit.
1. Play the game
This one is fairly straightforward. You buy and use the number or type of NFTs required to earn in-game utility tokens. You play the game, you earn tokens, then you sell or trade the token in cryptocurrency exchanges like Binance, Uniswap, or Pancakeswap.
Axie Infinity requires players to own 3 Axies in their Ronin wallets (the wallet exclusive to the game) to be able to farm SLP or Smooth Love Potion in Adventure or PvE mode and fight real players in the Arena or PvP mode.
Town Star by Gala Games require that you own and place an NFT in the town you’re building. Once you hit the daily goal, you will be rewarded with the corresponding number of tokens, determined by the rarity of your NFT.
Some players save their tokens and wait for the price to rise before selling, while others sell as soon as they receive their rewards.
Short shameless plug because I love this game so much. Town Star is like the old Facebook game Farmville, but you get to earn cryptocurrency. I swear it’s just as addicting. I played it for 3 weeks without an NFT so I know that this game will last because people like me (aka titas lol) will be hooked.
Anyway, if you want to get your feet wet in crypto gaming without commitment or spending money, consider playing Town Star by signing up for a Gala Games account using my referral code:
Referral code: 617f76749d66265b0b9f6dbf
Remember, you don’t need to own an NFT to start playing Town Star.
2. Buy the governance token and HODL
If you don’t want to play the game but are interested in investing your money in the game, this option is for you. Buy the game’s governance token and HODL (hold on for dear life) until you 10x, 20x or 100x your investment.
Most games have two types of tokens:
- Utility token are used in the game in various ways, including minting and buying in-game non-NFT items. There is no limit on the number of utility tokens the game can release but they are “burned” or removed from circulation once used; and
- Governance token allows holders to vote or participate in community decision-making. There is a finite and predetermined number of these tokens and the game will not make anymore of them. Unlike utility tokens, they are not burned but are released back to circulation if used.
Holders of governance tokens can (or will be able to) participate in determining the direction and future of the game as well as vote on any number of issues raised to token holders. This automatically gives the governance token value.
But investing in governance tokens has its own risks. Look at this chart for Axie Infinity’s AXS token, for example:
If you’re one of the lucky people who invested in AXS for $0.15 at its inception in December 2020, you would already be driving your very own Lambo .
On the other hand, look at this chart for PVU, the governance token of Plant Versus Undead
PVU investors who got in on August 2 of this year saw their investments go from $13.97, to an all-time high of $24.05 in 22 days, to today’s $0.32.
Of course, these prices aren’t permanent and with the nature of crypto gaming, anything can happen. Similar to other investment vehicles, make sure that if you plan to invest in a game’s governance token and HODLing, that you do your research, manage your risks, and invest only what you can afford to lose.
Also, remember that you are taking tremendous risks when investing in a new game. It might be the new Axie Infinity or the developers can pull the rug right under you. Or you know, the game just sucks and nobody want to play it.
3. Trade tokens and flip NFTs
Buy the token or the NFT at a low price and sell it at a higher price. Exploit temporary inefficiencies in the market to your advantage. Simple but it also comes with its own challenges in the form of whales and bots.
Your challenge in trading and flipping NFTs is that the space is riddled with bots that scoop up NFTs at floor prices even before they are reflected in the game marketplace. By the time you see that cheap NFT, a bot already found it in the blockchain and bought it.
Bots and whales also menace small buyers and newbies during token presales, where the token is typically at its cheapest. Many game developers don’t make precautions against bots and it’s usually not against the game’s terms of service (TOS) to use them. And of course, devs love it when they catch the attention of whales (large investors). More often than not, whales use bots and with their large holdings and the volatile nature of cryptocurrency, they can manipulate prices.
If you’ve been in the space long enough, you would regularly see people expressing bitterness against or love for whales depending on whether or not they profited from the whale’s movement that day.
You can still trade the tokens and flip NFTs and make a profit if you craft a strategy. For the tokens, the bot problem decreases when you wait and buy the tokens a few hours or days after the chaos of the presale. Or you can opt to trade the ones already listed in exchanges.
For NFTs, instead of buying the cheapest items, research upcoming metas (most effective tactics available), buy them cheap, and sell them later for a profit.
4. Mint and sell NFTs
The idea is, you multiply your NFTs and sell the rest to others who want to play the game.
Many crypto games release only a limited number of NFTs and make no more. The plan is, the early adaptors who supported the project and took higher risks are rewarded since they can mint and sell NFTs, usually at a higher price than they paid for (depending on the supply and demand).
For example, the upcoming football manager simulator game NFT11 will only release 47,500 Legends ever. If the game becomes popular, the owners of the Legends can mint their own NFTs and sell them to those who want to get in the game.
I will be remiss if I don’t mention the OG, Axie Infinity, because a lot of people already made a lot of money from their Axie breeding operations.
The great thing with Axie is that there are already communities, platforms, and tools (some free, some paid) for sharing breeding strategies. Axie breeding is a legit business.
To breed Axies, you need at least 2 unrelated Axies – parents can’t be bred with their offspring and siblings can’t be bred with each other – SLP, and AXS. Breed them, wait for 5 days, pray to the Axie gods, hatch the Axies, and sell them in the Marketplace. RInse and repeat.
This is the simplified version and there are a lot of factors to consider before starting your operation, so make sure you do your own research.
5. Lend or lease NFTs, scholarships
This one I’m most excited about because it can be a source of passive income and provide employment to others. In the crypto gaming space, lending NFTs in exchange for a cut in the earnings is called scholarship. Many gaming guilds who have accumulated NFTs usually run scholarships but virtually anyone can run a program. As long as you have spare NFTs, you can lend it to another player.
As you guessed, this started with Axie Infinity and there are several ways to start your own scholarship program.
You can buy the 3 Axies from the Marketplace and send the Axies to your scholar’s wallet. The scholar will play and earn SLPs, you claim the SLPs, and you give scholar his or her share of the earnings.
If you want to scale your scholarships, your best bet is to develop your own breeding farm. This is profitable especially in the long-term but requires a huge capital up front. But once you have the breeding farm running and the first few scholars earning their SLPs, the operation can become self-sustaining.
I have heard of people running their own programs with a couple of scholars to start and slowly expanded to include tens if not hundreds of people. There are even big guilds with thousands of scholars.
Other than Axie Infinity, there are upcoming games that will allow scholarships or NFT lending. The newly released horse racing game Pegaxy allows breeders to lend their Pegaxies to scholars and their platform even have native support to prevent one party scamming the other. NFT11 will allow managers to lease their football players to other managers for a fee.
Gala Games doesn’t mention anything specifically about lending but there’s nothing stopping an NFT owner from opening a second (or third, and so on) Gala account and letting another person play with that account.
6. Real estate and/or in-game services
Many crypto games offer land or land deeds and this can be a great way to invest.
For most games, land ownership is still speculative and it’s not yet very clear what you can do with your land NFT. But this hasn’t stopped people from investing in them..
The possibilities of what you can do with lands seem only bound by your imagination. Some of the possibilities include:
- building another game in the game
- charging rent/license fees to those who want to mine your land’s resources
- building pubs/clubs/shops on your land where people can hang out and buy stuff
Other than land, there are other kinds of real estate that can generate income. One example is the Cemetery in Gala Games’ upcoming game Mirandus, where owners can charge those who “died” in-game to shorten respawn time. Or NFT11’s Stadium, where coaches can “recruit” that is, mint, players for a fee.
7. Stake crypto
Some games offer Staking, allowing people to earn cryptocurrency passively.
This is like depositing money in a bank. The bank uses your money and in return, you earn interest. In staking, your cryptocurrency will be used to support the blockchain in verifying cryptocurrency transactions in a process called proof of staking. In return, you are rewarded with cryptocurrency computed in APY or annual percentage yield.
If bank savings accounts give depositors less than 1% in annual APR, APYs of 100% or higher are not unheard of in crypto staking. The APY decreases or increases when more cryptocurrency are added or subtracted. The APY is not guaranteed and can change overnight.
Axie Infinity offer staking of their AXS token. My Defi Pet also allows staking of in-game NFTs every now and then.
8. Operate nodes
Another way to earn passive income in crypto gaming is to operate a node. Nodes support the full decentralization of games by crowdsourcing their servers to operators and in exchange, the latter will earn rewards in the form of tokens and/or NFT drops.
You buy the node license from the developer and then run the software on your computer or in a Virtual Private Server (VPS). Run the node for the required number of hours. Collect your crypto rewards daily.
As far as I know, the only game developer who offers node licenses so far is Gala Games. It sells licenses for Gala founder nodes and Town Star-dedicated nodes.
Although many people are bullish on GALA and want to buy a node, it’s not cheap. At the moment, the price of a Gala founder node is at $43,000 (24 November 2021) and it increases incrementally as more licenses are sold. There are only 50,000 licenses and once those are sold out, node owners can start selling their licenses in the secondary market. Hence the price.
I think more games will offer node licenses in the future because… it makes so much sense. If a crypto game really want to achieve true decentralization, it will farm out its computing needs to other servers and who better to give the reward to than to those who believe in the game? So personally, I’ll be on the look out for opportunities to invest in node sales (even outside of crypto games) because of its huge potential.
Now that you know the many ways you can earn and invest in crypto games, let’s look at the risks.
- First of all, because this is cryptocurrency, prices are very volatile. Prices can change in an instant without apparent reason or warning. That is why you should only invest money that you can afford to lose.
- Most crypto games are still in alpha or beta stages. These are not their final forms. They may change radically and not necessarily for the better or to your liking or advantage.
- It is not uncommon that governance tokens for games which are still essentially promises are already being traded. The token prices are largely based on the trailers or screenshots the devs release to tease their investors and potential players. These promises may or may not materialize or may take years to come to fruition.
- There are games which are great on the White Paper but then suck in the implementation. Or the devs deliver a totally different game from what was promised to the early adopters. So read the White Papers carefully, observe if the devs will follow through with their published promises and roadmap, but take it with a grain of salt.
- Developers being too scared of community condemnation and backlash that they ruin the game economy entirely, dragging your investment down with them.
- The learning curve is very steep if you’re totally new to cryptocurrency.
- There are many resources in YouTube and Twitter. This is a double-edged sword. I learned a lot by watching YouTube creators but there are also unscrupulous creators out there that will shill projects because they’re getting paid. Sure, they will issue some mealy-mouthed caveat that “you should do your own research” and “crypto is risky” but then hype very suspicious projects and remove their videos once the projects inevitably do a rug pull.
- Speaking of YouTube creators, many of them don’t know anything about investing. They know gaming because they’re long-time gamers, but most are clueless when it comes to money and investing. Choose the creators you follow wisely.
- Crypto is not the type of investment that you can set and forget. You need to watch your investments closely and if you’re a busy person or an introvert, you’re going to have to extend yourself and talk to people. You hate Twitter because it’s a cesspool and full of trolls? Sorry you’re going to have to be there. You hate scrolling and back reading to find out the context of the current discussion? Sorry, this is your life now. Learn to love back reading because most project communities live in Discord and Telegram. The earliest and juiciest news about projects percolate there and if you’re not tuned in at the right moment, you can miss out.
- There’s just a lot of scams out there and these scams are getting more and more elaborate each day. You can’t just trust anybody in crypto but don’t blame yourself too much when you do get scammed. Being scammed is probably a crypto right of passage by now.
- Remember that crypto is a zero-sum game. We can’t all win. A lot of people are going to lose money. The only thing you can do is to reduce your risks; you can’t eliminate it altogether. The specter of losing your entire investment is always there.
- You can get too greedy that you disregard all the red flags right in front of your face.
I know the list of risks I gave above is long and I’m sure that I missed some. But on the flip side, if you get lucky, make smart decisions, and control your greed, you can absolutely make life-changing money.
A NEW FRONTIER
Now let’s look at the other side.
I mentioned earlier that I think crypto gaming is going to change lives.
For one, crypto gaming is the point of entry to cryptocurrency for many people, including myself. Many of us were uninterested in cryptocurrency until we were exposed to it through gaming. Just by playing alone, we’re slowly learning how to navigate crypto. We’re learning how to open crypto wallets. We’re in exchanges, buying crypto P2P (peer to peer) and trading our tokens for stable coins. We’ve learned to hate and look out for ridiculous gas fees. We learned that we need to buy hardware wallets and never give out our seed phrases.
A few months back, these sentences would’ve confused me.
In short, crypto games onboarded millions of new investors to cryptocurrency. From gaming, many of us are likely to branch out to other niches such as NFTs, DAOs (Decentralized Autonomous Organizations), and DeFi (Decentralized Finance), among others. Before gaming, our exposure to cryptocurrency was limited to Bitcoin, Elon Musk mooning Doge coins, and Reddit posts complaining about how their spouses invested their life savings in shit coins.
And while we were vaguely interested and/or amused by it all, we were not engaged because the barrier to entry, in knowledge and money, is too high. But now many of us are more than willing to straddle this barrier and help others do so, because we are incentivized.
And the industry is only getting started. For sure, as more and more games are being developed, millions more people are going to start being interested in learning to navigate the crypto world.
My favorite aspect of crypto gaming so far is how some games allow scholarship programs. People who would otherwise have no means of investing in cryptocurrency can have exposure by playing. In my family alone, my cousins who are saving money for tuition or to have their house fixed are earning and slowly learning how to navigate the crypto space. Outside of scholarships, they wouldn’t have the opportunity to be in crypto because the barrier to entry would be insurmountable.
Common barriers to entry
Although many long-timers claim that crypto is accessible for everyone, it really is not. Especially for those who are in developing countries, many of whom are still unbanked.
The first and most obvious is that you need money to invest in crypto.
Sure, there are teenagers in the West who are earning thousands in crypto with only a couple of hundred dollars in capital. But even a couple of hundred dollars is out of reach for most of us in developing countries. Most people in the world simply don’t have the extra money to invest, let alone invest in something that they have a very high chance of losing.
The second is knowledge. Even the most basic thing in crypto is too complicated for most people. Information that is taken for granted in crypto is too hard to understand for many of us because we don’t have the base knowledge yet. This is not a matter of underestimating people’s intelligence because I know plenty of intelligent people who are confused about how and where to start. The learning curve is too high, and it would help a lot if there were at least one person in a circle that would explain the basic mechanics to the group.
Third is slippage. Most people are not okay losing a chunk of their money in gas fees and slippage. If I only have a couple of hundred dollars to invest, I’d be gutted if a portion of that is lost even before I buy any cryptocurrency. The first time I exchanged fiat to Ethereum, I got confused why I lost more than a hundred dollars in the process. A portion of my money was just lost in a puff of thin air. I didn’t know then the Ethereum network is notorious for expensive gas fees. Not to mention the exchange rate losses from won to usd. Luckily, I’m in a position where I can absorb such losses, but most people are not.
Fourth is access. I’m talking as much about technology as well as access to banking services and proper identification. Most people in developing countries don’t own bank accounts, hence, can’t make transfers to buy cryptocurrencies. Many of them also don’t own valid passports or driver’s licenses so they can’t pass the KYC (know your customer) of exchanges like Binance.
In scholarship programs, the managers (at least the good ones) would be helping their scholars navigate these barriers. Apart from orienting the scholars of the game mechanics, the managers also direct their scholars to trusted resources and guides on where and how to start setting up their wallets, best practices for safety, and other related topics.
The manager also takes the financial risks, including slippage, and in many instances, helps the scholars work around access issues by transferring earnings in cash. And in some instances, the managers also help their scholars become managers themselves.
This chance to earn cryptocurrency at a relatively easy way is life-changing for many people who have otherwise very limited options. Given that many people lost their livelihoods or had their incomes reduced during the pandemic, a lot of people relied on their crypto games earnings to see them through. Others, like my cousins, are saving up money for their tuition fees. Some people, like me, are seeing this as an opportunity to build businesses and at the same time help change our families and communities.
I am cautious but optimistic about crypto gaming.
Cautious because it is, after all, cryptocurrency, and optimistic because it has so much potential.
If you feel that you’ve missed out by not being one of the early adopters, don’t be. The industry is still at its infancy and there are a lot of other opportunities that are yet to be released and/or discovered.
Of course, there will be people who will say that we missed the boat and it’ll be downhill from here, but I think they’re wrong. There are many amazing projects being developed as I write this post.
But of course, please be safe, do your own diligence, ask questions, be skeptical, and talk to people. Operating in a silo and being a lone genius don’t work in crypto. Talking to people and community are important, even if most of the time they just post crypto memes.
So those are my initial thoughts on crypto gaming based on my few months in the trenches. I’m sure I will learn more and I will be sharing them here with you in this blog.
If you have any comments, thoughts, suggestion, corrections, or you just want to connect and bond over crypto gaming (or maybe a hot tip?), please join me in the comments.