The financialization of entertainment: cryptocurrency will start the paradigm shift of games

As the field of cryptocurrency games becomes more and more saturated, people’s views on it are not seldom with subtle differences, but from “everything is a Ponzi scheme” to “cryptocurrency games will always fundamentally change work, life and games.” “All aspects of the” stand in line in these two views. People’s transformation from traditional game players and developers to cryptocurrency investors brings their personal and professional identities (and capital) to these concepts, which makes the conversation in this field full of personal opinions.

In this paper, I shared my recent views on cryptocurrency games and elaborated on them. I discussed the following:

(1) Short-term and long-term trends.

(2) The current truth: financial incentives are driving growth.

(3) Opportunities and execution risks of cryptocurrency games aimed at entertainment.

The financialization of entertainment

Traditional games are already taking the path of entertainment financialization; people can make money by trading skins, being anchors and professional players. Cryptocurrency just takes it to a new level. Currently I have observed two main categories appearing:

(1) “Play-first” cryptocurrency game, its core is interesting gameplay, and cryptocurrency is used as a competitive advantage to further attract players.

(2) “Earn-first” cryptocurrency game, its main temptation, gameplay and fun ultimately come from making money by participating in the cryptocurrency game economy.

Both types of games can hit the core of people playing games: the threshold for satisfying desires in games is lower than in real life, and people can use it to satisfy their basic desires (see: Maslow’s hierarchy of needs theory) . Put another way, humans like to play the same game of life in a parametric and alternate reality. The most popular games make use of mimicry desires, and while creating cycles in the game to satisfy desires, they also shape desires.


The game is to make money, make money, make money

The current leader in the field of cryptocurrency games is Axie Infinity. Although many game experts criticized its uninteresting gameplay, it achieved a valuation of 35 billion U.S. dollars ($AXS). Players who focus on this game can earn thousands of dollars a month, and low-income players have flocked to the game to find economic opportunities (especially the Philippines, which accounts for 40% of the global total).

Axie Infinity and dozens of games that clone it tell us that maybe fun is not the key to the development of a cryptocurrency game. The key is the game mechanics that reward players with real-world income. The game Illuvium will not be launched until two years later, but its current valuation has reached 11 billion U.S. dollars ($ILV), mainly due to the introduction of tokens and staking mechanisms before the game.

At present, there are the following problems with regard to the early appeal of “Play and Earn” (P2E) games:

(1) How much people care about the core game itself?

(2) Is the profit potential of the game and the NFT market value of the game the most important?

(3) More fundamentally, if money is the purpose, then is it a real game or just a “farming

A gamified micro-economy with “cryptocurrency” as the core game mechanism?

Although it sounds like a major sin in the game field, in many ways, cryptocurrency investment and trading itself can be regarded as the largest massively multiplayer online role-playing game (MMORPG) on the Internet. Many people feel that It is very addictive and very interesting.

Timing of prediction: “Play first” games and “Make money first” games

The first game to make money: the economy is the center, and the way to achieve it is through cryptocurrency

Due to the short development time, the influx of investor funds into the surrounding guilds, and the asymmetric returns that bring groups of new players, the games that make money first will see the fastest growth and the flow of competitors in the short term. .

Early appeal of money-making games

Since the token incentive mechanism is guiding and maintaining the interest of players and speculators, the “money first” cryptocurrency game can enter the market faster. Because investors and traders compete with each other to become the big winners of the game, successful play of earning games may generate high speculative premiums. Cryptocurrency natives find it particularly exciting to invest in this game (regardless of whether it is fun or not) because these games experiment with concepts such as “NFT flipping, airdrops, betting, farming, and ownership economy” in cryptocurrencies.

Although the original purpose of these cryptocurrency-native games is to pursue an interesting game experience, just by analyzing the user groups of such games, you can find that what really drives the growth of players is the opportunity to make money. For players of this type of game, the game is integrated with work and investment-they consider which NFT must be bought, and when they play that game and cultivate that token, they have a time and strategy. Calculated opportunity cost.

The number of cryptocurrency associations, communities, and e-sports alliances in the “make money first” category of games has rapidly increased in a short period of time, proving that the opportunity to make money is the core of such games. The reason why guilds such as YGG and Merit Circle (just raised more than 100 million US dollars) can exist and trade at a huge premium is because the “money first” category of games they settled in provides opportunities to make money in the game. If you are optimistic about the current game guild, then you will also be optimistic about those games that are centered on money, and the money-making component of the game is the core.


All games in the world are for real fun, but game developers must maintain a pragmatic attitude towards the current user group of the game, why they want to play and who is their main target audience. At this stage, cryptocurrency games usually target two main audiences with some overlap: traditional gamers and cryptocurrency investors. If a game’s marketing and distribution strategy revolves around cryptocurrency exchanges, token issuing platforms and guilds, even if the developers of this game have the desire to make games, they still do not regard traditional game players as Target. Currently, most cryptocurrency games are aimed at cryptocurrency enthusiasts and low-SES players who are motivated by the opportunity to make money (which is still a large and growing audience).

Most games will not cross the promotion gap from the early market (cryptocurrency enthusiasts) to the mainstream market (traditional gamers or low SES players). Nevertheless, games like Axie Infinity are paving the way for other games, attracting a large number of people who want to make money by playing games.

Some early successful cryptocurrency games just accepted the original principles of cryptocurrency and provided people with opportunities for entertainment by earning money. At the same time, some developers will spend several years to produce works comparable to 3A games. They are aimed at ordinary gamers, but face a huge potential risk-they may only develop a mid-level game in months or even years, and they are not competitive in providing money-making opportunities . Rather than trying to imitate the fun of traditional games, a more feasible solution for developers in this field is to focus on creating a minimal runnable game, with interesting play-and-earning mechanisms as the core of the game.

Will the music stop?

“Money First” games have also inherited a difficult sustainability issue. They cannot create a sustained growth economy. At present, Axie Infinity’s revenue has begun to decline, which will make the group of players whose main purpose is to make money unwilling to continue playing this game. If the new players cannot win and achieve profitability, Axie Infinity’s inflation will exceed the growth rate and cause an economic recession. Hundreds of game guilds stationed in Axie Infinity will also be affected. Most people in this game user group play games for financial incentives, so trying to make the game’s gameplay “more interesting” will not solve the upcoming economic recession. 

The findings of Lars & Naavik Research show that (Axie Infinity) the daily income of a typical player is already below the minimum wage in the Philippines. The income of high-level players will be higher than the minimum wage line, but their income has been declining since August.


In other words, this type of Ponzi economics economy with endogenous inflation is actually more durable than people think. When a large amount of venture capital is vying to invest in the next hot game of playing and making money, It is more durable. Similarly, poker and slot machines are still online casino games focused on making money. They constitute a multi-billion dollar industry that has lasted for decades.

Although “make money first” games are not exactly the same as online casino games, the “make money first” cryptocurrency games we have seen also integrate the desire to make money with financial mechanisms and game mechanisms. Although the “make money first” category of cryptocurrency games cannot linearly develop and replace traditional games, they can innovate and open up their own paths and business models, making it possible for people to continue to make money and have fun from games.

As a summary of this section, I don’t think that the current new version of cryptocurrency games will simply unlock the “next stage of the gaming world” or trigger a paradigm shift in the industry. In the short term, the cryptocurrency in the game field does not look like an evolution of traditional games, but products that choose a completely different path. Although monetary incentives are currently attracting players’ interest, in the long run, games that use cryptocurrency to unlock fundamental new game mechanisms are better positioned.

Just as the DeFi protocol cannot rely solely on the tokenomics and yields of inflation to maintain their products, games that emphasize fun rather than cryptocurrency can exist independently as a product, so they will become strong competitors in this field. . But these games will have some lag before we see more games enter the market, because they require longer development time and are accompanied by a series of execution risks. There is more content below.

The “play first” game: interesting gameplay and cryptocurrency

In the medium term, we will see more game-first games launching cryptocurrency concepts and innovations. These innovations will occur along a pedigree, from cosmetic skins to NFTs to token models where players can play their ownership in the game.

In the first few new versions, developers will try to forcefully incorporate the concept of “play to earn”, tokens and NFTs into very traditional games. I predict that P2E as a concept will carry out a lot of experiments in the next 2 to 5 years. But in the long run, I believe that developers will use cryptocurrency to unlock new game mechanics. For example, the game can introduce creative concepts, such as a dynamic NFT that mimics wear and tear or build a game from the bottom up using user-generated content (such as Loot). In the end, cryptocurrency will become a huge sandbox for experimentation in the game industry.

This is why cryptocurrency games can usher in a new golden age in the gaming industry. With great graphics, interesting stories, and emotional temptations, these games can take new and exciting ways to use cryptocurrency to enhance the sense of accomplishment and make players more engaged.


Cryptocurrency also provides new power in the gaming sector. In the current traditional games, some key stages of the game creation value chain generate most of the industry’s profits. Cryptocurrency allows game companies to monetize almost at any stage of game creation, turning the existing “free-to-play” business model over. Most notably, the game can monetize and channel community funds before the game is ready. In fact, the first consideration in the design of traditional games is capitalization. There are mainly several modes: purchase games, free games and subscriptions. And changing the revenue model of the game is the most exciting and new thing. There are no free games, not even the well-known e-sports nowadays.

At the same time, cryptocurrency also allows another type of participants to replace traditional game players: game lovers, collectors, and money-makers. These people are not necessarily playing games, but can support this space by participating in other transactions, betting, participating in events, watching live broadcasts, speculating, and collecting game souvenirs. Cryptocurrency can enable these new actors on the periphery of the game to make practical contributions to the future of the game in novel ways.

Similarly, it also has the opportunity (also a double-edged sword) to allow gamers to own their achievements and items in the game, and essentially financialize their fun. Although most players have not yet awakened their strong desire for ownership, it only takes a successful cryptocurrency game to stimulate the player community and make them question why they have not been able to own their own game assets for a long time. However, there are risks.


Although cryptocurrency and related games sound promising, games that support cryptocurrency will not become mainstream just because of the entry of experienced game developers. In fact, many games introduce cryptocurrency to ask for trouble, and people’s understanding (and experimentation) of how cryptocurrency interacts with games is limited, which leads to extremely difficult design problems.

Even so, these encrypted games cannot rely solely on 3A-level game screens, they also need to have product quality that can beat existing games. If a game has mastered the crypto economy but its own quality is mediocre, it can only dig out users from other cryptocurrency games at best, and cannot have an impact on the 200 billion online game industry. I believe that the ultimate success in the next ten years will be those games that use cryptocurrency to unlock new game mechanics, not those traditional games that simply add play-and-earning mechanics.


At present, the best game simulation and parameterization of our real life, but it has a guardrail and belongs to a closed economy. Tokens or NFTs can financialize part of the game. It eliminates the main guardrail and fundamentally changes the way the game is played, so that the game can inherit the entire financial landscape of the “real” world. When faced with a game exposed to the power of speculators, investors, and arbitrageurs, traditional game developers will feel that they lack experience in designing and controlling gameplay and player psychology. This kind of game has incentives outside the game, around the game’s token and NFT price movement. The first step is to acknowledge this reality and purposefully consider this different power when designing the game.

Although many game developers try to use cryptocurrency-native venture capital companies or consultants (these people love to boast that they can handle token economics) to make up for the lack of knowledge, but in reality, they use cryptocurrency natives and experienced game developers The number of games in which the cooperation of economists adopts the “player first” approach to solve difficult design problems is extremely small and can be ignored. Developers should look for partners and rely on them to point out the many opportunities and external factors that cryptocurrency brings to their games.

The introduction of ownership and monetary value will affect the psychology of players

“Ownership” (especially ownership through NFTs) has become a buzzword, and it is easy to forget that the main reason why games tokenize assets is that it introduces monetary value or makes it easier to form assets. If you ask the players of traditional games, you will find that they still believe that they “own” assets, even if they are not NFTs. Although most cryptocurrency games currently use NFTs as a store of value, NFTs can also be designed for other creative purposes, such as establishing identities in different games or sharing them with your friends.

The tokenization of in-game assets introduces a difficult design issue, because adding monetary value to game assets may have a negative impact on gameplay. For example, when “Diablo 3” joined the real money auction house (exchanging game assets for money), some players liked it very much, but the game ended up losing players. The case of the auction house illustrates that the financialization of game assets can cause problems with the natural rhythm of falling items, making some players unable to feel the rewards of the game. This is a design problem for which a repeatable solution has not yet been found. For the players of Diablo 3, the introduction of monetary value has changed the way people play and the reason for playing. In the past, players who played games for the sake of playing found that they began to play for rent. This potential psychological change caused players to no longer enjoy the game itself, and they quit the game to find other games that were not so close to the real world.

Game psychologists point out that much of the joy and addiction about games comes from unexpected and random rewards. The ability to easily obtain known rewards with money may actually deprive the game of fun. NFTs and many profitable games are rapidly moving towards pure financialization, which may eventually kill key gameplay. Especially in the eyes of avid gamers, it is a great evil for people to have the opportunity to gain material advantage through speculation in a highly competitive game.

Traditional gamers insist on the survival of the fittest in game technology, which makes adding tokens or NFTs (and the complexity of the real world they bring) very elusive. If a game is not “right”, it does not conform to their understanding of the game and the idea of ​​who should play the game, then it will definitely immediately attract criticism from the traditional game player community. This type of game should make a fuss about the tokenization of the appearance skin (rather than the skin that affects the gameplay to avoid the incentive to pay for profit), and consider the use of non-transferable tokens. Only in this way can players play the game. Mining”.

Implications: New developers who want to build large-scale games with a play-and-earn mechanism need to be extremely cautious and weave encrypted economic incentives and NFTs in a way that maintains the quality of the game, otherwise they may mess up the game and the incentives for the players to play and earn. In addition, cryptocurrency native game developers are facing a blue ocean opportunity, they can create a new generation of games, and the way to use cryptocurrency is not just to add a token or the tokenization mechanism of assets in the game. These types of games require longer development time, but once a few people get the correct formula, they do have the opportunity to incorporate billions of traditional game players into the cryptocurrency game system.

Concluding point of view

At the end of the article, I believe that cryptocurrency will initiate a paradigm shift in the game. Although it is not yet known what this transition will look like, I believe that in the short term, we can see “money first” cryptocurrency games like Axie and Zed Run use financial incentives to attract players to settle in. An attractive “black hole” is formed. Outer guilds and DAOs can complement this growth. In the medium term, we will see traditional games first try to use tokens and new monetization models of NFTs, and try to get both traditional game players and “money first” players to join. Moreover, in the long run, we will see a new generation of games adopting cryptocurrency, rather than simply adding a play-and-earning mechanism.

For game developers seeking creative risk, this is a major blue ocean. Attention and capital are on its side and can be deployed at any time. What cryptocurrency brings is not just a game with tokens or simple NFTs, but an innovative game world. It allows game developers to create a new category of games, revolve around the design freedom provided by cryptocurrency and a new group of game players, and embed professionalism, money making, and ownership directly into the game experience.

No matter what you think about these different market segments, they will have an interconnected future in the game; these games will also cross each other, learn from each other, and cooperate with each other. If you are building this future, we also want to hear your insights.

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