The play-to-earn realities that have emerged over the past three years paint a far more complicated picture than either enthusiasts or critics anticipated. What began as a revolutionary promise — that gamers could earn meaningful income through blockchain-enabled gameplay — has evolved through cycles of explosive growth, devastating collapse, and cautious reinvention. Understanding where play-to-earn went wrong is essential to understanding where it might eventually go right.
The Axie Infinity Phenomenon
No discussion of play-to-earn realities is complete without examining Axie Infinity, the game that defined the category. At its peak in late 2021, Axie Infinity had nearly three million daily active players, generated over $200 million in monthly revenue, and created an economy where players in the Philippines earned more from the game than from minimum-wage employment.
The narrative was intoxicating. Scholarships — arrangements where NFT owners lent their game assets to players who could not afford the entry cost — created an entire ecosystem of managers, guilds, and players organized around extracting value from the game. News stories of Filipino families paying mortgages with Axie earnings circulated widely, creating the impression that play-to-earn was a new paradigm for economic inclusion.
The reality was more fragile than it appeared. Axie Infinity’s economy depended on a continuous influx of new players purchasing NFT assets at prices set by existing players. The Smooth Love Potion (SLP) token, earned through gameplay, had no demand driver beyond new player onboarding. When growth slowed, SLP prices collapsed — falling over 99% from their peak — and the economy that supported millions of players disintegrated.
The Ronin bridge hack in March 2022, which drained over $600 million in user funds, accelerated the decline but did not cause it. The fundamental economic model was unsustainable regardless of security incidents.
The Structural Problem with Pure Play-to-Earn
The core economic challenge facing play-to-earn games is deceptively simple: where does the money come from? In traditional gaming, players pay for entertainment. The value exchange is straightforward — dollars for fun. Revenue flows from players to developers.
Play-to-earn inverses this flow. If players are earning money, someone must be paying them. In the absence of external revenue sources — advertising, sponsorships, ecosystem subsidies — the only source of player earnings is other players. This creates a zero-sum dynamic where early participants profit at the expense of later entrants. The resemblance to pyramid schemes is not superficial — it reflects the actual flow of value.
Sustainable play-to-earn requires breaking this zero-sum dynamic by introducing external value into the economy. Advertising revenue, brand partnerships, esports prize pools funded by sponsors, and cross-game asset interoperability are all potential sources. But none of these have yet been implemented at a scale sufficient to support the earning expectations that defined the first wave of play-to-earn.
The Labor Exploitation Dimension
One of the most uncomfortable play-to-earn realities involves the labor dynamics of guild-based gaming economies. The scholarship model that emerged around Axie Infinity and similar games created structures where asset owners extracted a significant percentage — typically 30-50% — of the earnings generated by player labor.
This dynamic is difficult to distinguish from digital sharecropping. Players in developing countries performed repetitive, unglamorous gameplay tasks for hours daily, earning a fraction of what their labor produced while the asset owners — often located in wealthier countries — captured the majority of the value without playing at all.
When token prices collapsed, the burden fell disproportionately on the players at the bottom of the guild hierarchy. Asset owners could sell their NFTs and exit. Players with no capital investment had no assets to liquidate and no transferable skills to show for months of grinding. The promise of economic empowerment became a mechanism for extraction.
This is not an argument that all guild structures are exploitative or that play-to-earn is inherently harmful. But honest assessment of play-to-earn realities requires acknowledging that the first generation of these economies replicated — and in some cases intensified — the labor inequities they claimed to address.
The Pivot to Play-and-Earn
The industry’s response to the first wave’s failures has been a semantic and structural shift from “play-to-earn” to “play-and-earn.” The distinction is significant. Play-and-earn games position earning as a secondary benefit of genuinely enjoyable gameplay rather than the primary motivation for participation.
This shift acknowledges a fundamental insight: games must be fun first and profitable second. If the only reason players participate is financial reward, the game becomes work — and work that competes on wages with traditional employment will lose for everyone except those in the lowest-wage economies.
Games like Illuvium, Big Time, and Star Atlas represent this new approach, investing heavily in production quality, narrative depth, and gameplay mechanics that stand on their own merits. Token economies are designed around asset scarcity and utility rather than inflationary reward distribution. The thesis is that players who enjoy the game will naturally participate in its economy, creating organic demand for in-game assets without requiring ponzi-like growth dynamics.
Early results are mixed. Production quality has improved dramatically, but player retention and economic sustainability have not yet been proven at the scale that Axie achieved. The play-and-earn model remains more thesis than demonstrated reality.
What Sustainable GameFi Looks Like
If play-to-earn realities teach any lesson, it is that sustainable blockchain gaming economics must satisfy multiple constraints simultaneously. The game must be entertaining enough to attract players who would play even without earning potential. The economy must have external revenue sources that subsidize player earnings. The token design must resist inflationary spirals and speculative manipulation. And the asset market must provide genuine utility rather than purely speculative value.
Several design patterns show promise. Cosmetic NFTs that have no gameplay advantage but carry social status create demand driven by self-expression rather than financial return. These mirror the free-to-play model that has proven sustainable in traditional gaming — Fortnite generates billions from cosmetic sales without any play-to-earn component.
Interoperable assets that function across multiple games create utility beyond any single title. A character skin that works in five different games has inherently more value than one locked to a single platform. Cross-game interoperability is technically challenging but represents one of the few genuine value propositions that blockchain brings to gaming.
Tournament and competitive structures with externally funded prize pools create earning opportunities without inflationary token emissions. Esports has demonstrated that competitive gaming can generate substantial revenue through sponsorships and media rights — applying this model to blockchain games avoids the structural problems of universal play-to-earn.
The Demographic Reality
An honest assessment must also acknowledge who play-to-earn games actually serve. The overwhelming majority of play-to-earn participants have been located in developing countries — the Philippines, Venezuela, Indonesia, Brazil. For these players, even modest earnings in cryptocurrency can represent meaningful income.
This is simultaneously the strongest argument for and most troubling aspect of play-to-earn. On one hand, providing income opportunities to people with limited alternatives is genuinely valuable. On the other, building gaming economies that function primarily as low-wage labor markets for the Global South raises serious ethical questions about what “gaming” is being used to obscure.
The most thoughtful developers in the space are grappling with this tension, designing economies that provide genuine entertainment value regardless of geography while allowing earning opportunities as a supplement rather than a substitute for economic development.
Key Takeaways
- Play-to-earn realities revealed that first-generation models like Axie Infinity operated as unsustainable economies dependent on continuous new player growth
- The structural problem is value sourcing — without external revenue, player earnings come from other players in a zero-sum dynamic
- Guild scholarship models replicated labor exploitation patterns despite claims of economic empowerment
- The industry pivot to “play-and-earn” prioritizes gameplay quality with earning as secondary benefit
- Sustainable models require cosmetic-driven economies, cross-game interoperability, and externally funded competitive structures
- Demographic concentration in developing countries raises ethical questions about the true nature of these economies
The play-to-earn realities of the past three years have been humbling for the blockchain gaming industry. The initial promise was too simple, the execution was too speculative, and the human cost of failure was borne by those least able to absorb it. But the underlying insight — that players should capture value from the economies they participate in — remains compelling. The challenge is building games worthy of that insight.