By William Wu, CEO of Catheon Gaming
Today, almost all of the monetary returns derived from gaming go to the publisher’s pockets. But with the integration of blockchain technologies, the future of game economics looks radically different. This is thanks to GameFi and the creation of metaverses.
GameFi is an intersection of gaming and finance that is giving players and investors a seat at the revenue-sharing table. Metaverses, on the other hand, expand the financial opportunities available to GameFi players and investors in gaming.
The evolution of game economics
Game economics have, for a long time, been designed to only give monetary returns to the developer. This is done through two models, pay-to-play (P2P), which charges a one-time or ongoing subscription fee, and free-to-play (F2P), which has no paywall but focuses on the sale of in-game items.
From pay-to-play to free-to-play
P2P was the dominant model from the 70s to roughly 2010. During the arcade days, it could be best described as pay-per-play. Players had no form of ownership over the games they played unless they owned an arcade cabinet. Therefore, they had to pay a small amount for every round or two they played, usually 25 cents.
Things changed with the creation of the home consoles. With systems like the Atari and Nintendo Entertainment System (NES), players would invest in the console and its video games. This gave them total access to whatever games they bought. They could play whenever they wanted without having to pay for every round.
F2P is a relatively new monetization model. It first emerged in the mid to late 2000s and has quickly become a go-to strategy, especially in mobile gaming, where it's the most commonly used model. In fact, around 90% of apps on Google Play and the App Store are free to play.
In free-to-play, rather than focusing on capturing revenue on the front end, companies orient themselves around microtransactions, which can offer a continuous revenue stream throughout the life of a game.
Both P2P and F2P are characterized by a one-way revenue stream that flows from the players’ pockets to those of game publishers. The problem here is that gamers don’t get a tangible reward for the time and effort they put into the game.
Play-to-earn
Blockchain technology is one of the top technologies of the century so far. Having originally been created for financial transactions, more recently it’s found its way into gaming. And, with it has come the promise of an entirely new monetary model, one that doesn’t only put money into the pockets of developers and studios, but also into players’ wallets.
This is play-to-earn (P2E). Using blockchain technology, P2E compensates players for their time and effort in the game by giving them true ownership of in-game items, and rewarding them for behaviors that positively impact a game's community growth in a native cryptographic token.
Furthermore, the items that players earn in-game are tokenized. They can be NFTs and/or crypto tokens, which means that they have value outside the game. This allows players to derive monetary value from gaming by selling whatever they collect or win at designated marketplaces.
It also opens up gaming to another demographic: investors. With in-game items essentially being assets, investors can speculate on them like they do with other crypto assets.
Due to these reasons, the P2E model has a place in the future of gaming. Games like Axie Infinity, despite their flaws, have proven that it works. Others, like The Sandbox, Decentraland, and Catheon Gaming, are already taking it a step further by merging P2E with another revolutionary idea in gaming: metaverses.
How does metaverse fit in?
There are two ways that P2E games can exist: by themselves or within an ecosystem. What the P2E model is offering, even on standalone games, is a viable financial opportunity. When that is put into a larger ecosystem, it opens the door to greater prospects. And that’s what metaverses do.
Metaverses put video games within big, virtual ecosystems. Such an ecosystem has its own economy, complete with marketplaces, social lobbies, other video games and so much more. It also has its own token, which can be used across different sections of the metaverse. The same applies to assets within the ecosystem.
For instance, if you collect tokens from Game A in a virtual world, you can use them to buy a new outfit for your metaverse avatar or buy in-game items in Game B. The word for that is interoperability. It is crucial because rather than keeping value restricted within one game, it allows its transfer across various platforms through the metaverse’s ecosystem token.
A few such projects already exist. A good example is the Catheon Ecosystem. This consists of 25 gaming titles, an NFT marketplace, a game launcher and a metaverse, all linked by the native Catheon Token. This token can be used across the vast ecosystem provided by the metaverse.
Metaverses as the future
Metaverses offer new financial opportunities for GameFi players and investors. They bring with them a new level of interoperability as platforms that allow players to utilize in-game assets or monetize them in secondary markets.
This will initially happen between blockchain games and platforms in the same virtual world and eventually, on a larger scale between different worlds. It is the promise that virtual worlds hold for the game industry.
About the author:
William Wu, the CEO of Catheon Gaming, is a professional with experience in investment banking and business analysis. Before Catheon, William offered his services as an investment professional at Oaktree Capital Management in Hong Kong and a consultant at McKinsey & Company. His role was primarily focused on helping global organizations develop corporate strategies and providing investment consultation.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.