How long will P2E last after a full GameFi outbreak?

Original title: P2E explosion, Ready for a New Crypto Carnival?

Source: Gold krypton capital

If 2020 was "liquidity mining" led DeFi, this year is "Play to Earn" (P2E). This new crypto economy business model is driving GameFi Autumn.

Aixe, for example, has generated $59.2m in revenue over the past seven days, according to Tokenterminal. That's more than Ethereum, BSC and more than Uniswap, the DeFi leader.

In addition, according to the data of the last month, its income also maintained a steady growth, not a sudden outbreak.

The token performance is even more impressive. During recent market underperformance, AXS (Axie Taiwan Dollar) rose more than 10 times in the last month, according to Coingecko.

Axie's popularity has also led to a wave of GameFi tokens, with more on the way, and we're likely to see a wave of Game tokens soon. Despite the relatively quiet market, GameFi  Autumn may not be far away.

In the impression, blockchain +NFT+ game has long become an industry consensus, but has been lukewarm. The reason is that in addition to the general game experience, low playability and scarcity of high-quality games, the game industry has a fast iteration. Even in the traditional game industry, there are not many games that can maintain long-term popularity. Even for game platforms, they have to rely on the continuous launch of new games to meet the needs of users. But aside from the impression stream, is this wave of Game craze, the "Meme" in April, a short climax and then silence, or can it drive the development of the whole blockchain Game like the "liquidity mining" last year?

What is the P2E

As the name suggests, P2E is "play and earn" and can be played in a variety of ways.

(The cute pet game featuring fish/cat/bird/dragon has become a common way to earn a living in places like the Philippines.)

Although different games play differently, they can be summed up in the following four modes:

1. In combination with DeFi's mobile mining to provide incentives for those who provide mobility;

2. NFT items in the game can be acquired through the game, and users can trade in open and tradable markets (OpenSea, etc.);

3. Really invest in the game, earn in-game tokens, and then trade them on the secondary market;

4. Share the revenue generated by the game platform in some way, such as holding NT dollars, joining the game union, renting NFT, etc.

"Paly to Earn" has stimulated the new vitality of the blockchain game industry. It not only enables the old gamers to enjoy the fun of playing games while experiencing the fun of NFT and making money, but also has great appeal to the new gamers. After all, playing games to make money is much better than the traditional way of working.

P2E is also a new source of value for game unions, as the day before yesterday, the no. 1 union on AXIE, YGG, raised money by issuing governance tokens. Its 25 million tokens were purchased by 32 addresses in just three minutes, raising $12.5 million, which is not seen even in a bull market. According to the introduction, YYG is organized as DAO, and the owner is all investors and players. Investors are responsible for the initial investment, while players are responsible for participating in gold farming. The surplus of the guild is reinvested to buy virtual assets and land in the game.

So here's the problem. Capital markets are never short of new stories, but it is hard to keep them going. Could P2E, which looks so good, be a flash in the pan?

The essence of P2E -- the extension and evolution of mobile mining

At the heart of the crypto economy are cryptocurrencies; The decentralization of the cryptocurrency economy is also the decentralization of the cryptocurrency, depending on how the cryptocurrency is allocated, which is the biggest problem facing most cryptocurrency projects.

Last year's "liquidity mining" opened up a new situation to solve the problem. Whether it is a so-called fair start or partial incentive, the allocation of cryptocurrency has evolved from project-led to user-led, with most ordinary users also able to acquire the tokens of the project through active participation, participation in the governance of the project or cash in the secondary market. The more decentralized the allocation of tokens, the more reasonable the value discovery will be. This is why liquid mining has transformed the cryptocurrency industry and is sustainable.

P2E can be better understood from the perspective of "liquid mining". In essence, P2E is the continuation of liquid mining. And compared to DeFi, which has a limited audience and a limited set of scenarios, P2E has a much more diverse gameplay and no user threshold, which may partly explain why P2E has become more widely known in a short period of time.

On the other hand, P2E solves another problem that liquidity mining cannot solve: the value flow and redistribution of projects. Of course for most DeFi projects, this can be done on its own, such as DEX or lending platforms allocating commissions to liquidity providers. But for the game industry, there has long been a contradiction between the amount of traffic and revenue that users contribute to games and the experience that games provide to users. The P2E model is an improvement on this contradiction.

Therefore, the essence of P2E can be summed up as one is to change the allocation and governance of blockchain game tokens, making it more decentralized; On the other hand, it improves the circulation of the value of the game itself and the redistribution of wealth, so that players, ordinary users (non-players who participate in other ways), game platforms (project side), and even coin speculators can play together fairly.

But how long can this pattern last?

Sustainability of P2E from flowable mining

If P2E is the extension and expansion of liquid mining, we might as well look at the sustainability of P2E model from the liquid mining.

On June 16, 2020, The Lending Agreement Compound took the lead in liquidity mining, and in just 20 days, lock-in amounts increased from about $180 million to $650 million and users to about 6,000. Since then, Synthetix, Balancer, Curve and other DeFi projects have started their liquidity mining plans. The total lock up of DeFi has surged from about $1 billion on June 16 to about $15.1 billion on September 27. A 14-fold increase in less than four months.

Sushiswap, which forked into Uniswap, almost drained the liquidity of the no.1 DEX Uniswap in a short period of time through "vampire attack" and liquidity mining, and finally "forced" Uniswap to issue coins and start liquidity mining, so that liquidity and users could flow back.

Since then, more and more projects have been launched, more and more miners have joined the board, and DeFi users have witnessed an explosive growth. The miners who get in first will not only enjoy a large amount of almost free tokens, but will also benefit from the rising price of the coins due to the influx of users and increased usage.

Yet there is no free lunch in the market. Under the huge selling pressure of early players, token prices of many items began to collapse, triggering a "death spiral" in which miners left the field, TVL plummeted, and coin prices plummeted again.

But the story doesn't end there. According to the data of DeFi Llama, the total TVL in DeFi protocol has been maintaining a steady growth trend (recently, it has been adjusted back under the influence of the market), and the entire DeFi industry presents a situation of "a hundred flowers bloom", and the old high-quality DeFi is developing steadily. At the same time, various new and innovative DeFi protocols appear. The value of DeFi tokens has also been recognized by the market, with Uniswap at one point stabilizing in the top 10 of all cryptocurrencies by market capitalization.

Although the success of this wave of DeFi can not be attributed to liquid mining, the success of DeFi is not dependent on liquid mining. DeFi's success is more an innovation brought about by technological advances, an essential requirement of the crypto economy. For the DeFi protocol of the head, it is still in development even when it leaves the liquid mining. And liquidity mining has not gone away, becoming the most applicable method of allocating tokens within the crypto economy.

The development of DeFi may shed some light on the sustainability of P2E. In P2E, we are already seeing significant wealth effects and user engagement in the crypto economy. And compared to flow mining, the gameplay is more closely integrated with NFT, DeFi, etc. It is expected that we will witness a new feast of wealth from a new crypto economy business model.

But there is no such thing as a free lunch, and the amplification of the wealth effect inevitably comes with risks. Some of the foreseeable risks include: risk of volatile losses from participation in liquid mining; Higher token prices lead to higher costs for new players; As more people play the game, the wealth effect diminishes and people are bound to leave; The ensuing drop in the value of the currency accelerates the process further, and the game enters a cycle of death; P2E cannot be maintained due to unreasonable game mechanics. Another potential risk is that some of DeFi's infrastructure is already irreplaceable in the industry, and the game itself, as a product, can be replaced.

So in terms of the persistence of its wealth effect, it may not be as durable as liquid mining. However, as a new crypto economy business model, it has brought a large number of users and engagement to the crypto economy game industry, which has undoubtedly contributed to the growth of the crypto economy game industry and has been widely adopted by games and other crypto economy industries for a long time.

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