It wasn’t that long ago that GameFi was riding high. Led by Axie Infinity, play-to-earn gaming emerged as a cultural and economic force in DeFi. With in-game rewards incentivizing players and enabling many to meet living expenses, a new model had been born. Between the beginning of March and the November peak, Axie’s governance token, AXS, multiplied in value 110 times, bestowing the venture with a $10.5B market capitalization.
But like everything else in crypto, GameFi has tumbled since those November highs. And AXS has lost 60% of its value. Meantime, Smooth Love Potion, its in-game coin that drives much of its tokenomics, has crashed 95% since July.
Even so, many gamers are playing games other than Axie Infinity. Many players also use play-to-earn, or P2E, to supplement their income and are not solely reliant on GameFi revenues to support themselves. That’s continuing.
So what comes next for GameFi? Was it just a bubble, or, as so many believe, is it an innovative new model with staying power that will endure a bear market?
To get some answers, The Defiant interviewed P2E gamers representing top gaming guild Yield Guild Games (YGG).
YGG appears to be surviving the downward spiral in GameFi thanks to savvy investments and partnerships with other P2E teams. The guild has invested $9.7M into 48 different projects including Axie Infinity, Illuvium, and Monkey League. YGG estimates the deals allowed it to accumulate in-game assets and NFTs at an average discount of 91%, meaning that most of its investments remain in profit despite recent bloodshed in the GameFi markets.
Looking forward, the YGG DAO said the guild plans to “double the size of its core team in the coming months” through new hires. YGG also predicts that more than 10M million crypto wallets will have interacted with crypto games before the end of 2022. It’s even expanding regional sub-DAOs.
“We are anticipating sustained exponential growth in NFT gaming this year, which is significant because this demonstrates how many millions more lives will be positively impacted through play-to-earn and other income-earning opportunities in the open Metaverse,” the DAO said.
The Rise of Gaming Guilds
That’s quite a boast. But YGG has established a record of agility during the evolution of GameFi.
The 2020 and 2021 crypto bull markets erected significant barriers to entry for many prospective P2E gamers based in low-wage economies, giving rise to groups called gaming guilds.
Gaming guilds are play-to-earn collectives that connect in-game asset owners with P2E gamers. Revenues are shared among members, with players taking the majority of profits. Many guilds’ primary revenues are generated playing Axie Infinity, with The Sandbox, Star Atlas, and Splinterlands also gaining popularity among guilds.
Data from DappRadar shows that the number of unique active wallets (UAW) interacting with crypto-powered P2E games overtook that of DeFi protocols during the second half of 2021. Axie Infinity also solidified its position as the leading P2E title last year, with daily active users surging from 20,000 in March to more than 2.5 million during December.
Yield Guild Games was co-founded in November 2020 by Beryl Li and current chairman Gabby Dizon. Li had previously worked for Philippine cryptocurrency exchange and wallet Coins.ph before launching an asset tokenization platform on Ethereum, while Dizon has 20 years of experience in developing games and launched the blockchain game studio Alto.io in 2018.
YGG made headlines in 2021 after one of its Filipino members reportedly purchased two houses using profits from playing Axie Infinity. However, the purchases were made after Small Love Potion recently rallied 940% in one week, suggesting the real estate investments had been funded by a well-timed hodl.
The collective has partnered with crypto industry leaders including FTX, Coinbase, and venture capitalists to support gaming scholars based in emerging economies such as Indonesia, India, Venezuela, and Peru.
YGG’s core roles include “scholars,” gamers that utilize YGG’s assets to generate revenue from P2E games, “managers,” members that are “responsible for recruiting and onboarding scholars,” and investors that provide in-game assets that are used by scholars. The guild also spans community helpers, moderators, ambassadors, and the YGG core team.
YGG collects 10% of all revenues earned, with 70% going directly to scholars, and the remaining 20% being distributed to community managers. Revenues are paid out twice monthly. Charts provided by YGG show that the guild’s revenues experienced a significant decline alongside the price of SLP during the second half of the year. Revenue fell by 69% between November and December.
Despite the slump in revenues, YGG asserted that the guild “is long-term focused,” adding that “demand for Axie Infinity scholarships still outpaces the supply of scholarships available regardless of the SLP token price.”
Guild members also emphasized the benefits P2E has offered them amid the Covid-19 pandemic. Mona, a scholar supported by the YGG-FTX sponsorship program, stated that playing Axie Infinity for the guild has assisted her in “mak[ing] ends meet… during the pandemic.”
The Defiant spoke to “Game,” a pseudonymous member of YGG. The 26-year-old male Filipino college graduate describes P2E as a “supplemental income” complementing other employment, although he stated he hopes P2E will become his primary income in the future. “I wish that someday play-to-earn can become my primary source of income. I enjoy playing video games and YGG rewards me for my passion.”
Game said that his P2E income has fluctuated significantly alongside the value of in-game assets, which are highly correlated to the broader crypto markets.
While noting that P2E earnings tend to grow alongside bullish crypto market conditions, he added: “if the performance of the market is not good and people lose their belief in the crypto markets, all the money in the market will flow out of the market resulting in… the revenues from play-to-earn games [to] decrease.”
He also noted that “Axie Infinity recently made changes to its in-game economy which resulted in earnings decreasing by 60%.” As such, Game emphasized the importance of diversifying within the P2E space. “As one game’s earning potential decreases, the guild offers its members other games with higher earning capacity,” he said.
“I now look back at traditional video games and the hours spent playing them, only wishing that this business model was available when I was much younger.”
Living Off P2E
Keanne, also a 26-year-old male college graduate and YGG scholar living in the Philippines, told The Defiant that P2E is his “primary source of income.”
Keanne says he was “trying to learn and trade crypto” prior to journeying into P2E. Shortly after beginning to trade in January 2021, Keanne stumbled upon a documentary about P2E gaming in which he learned about YGG.
He then joined YGG and began playing Axie during July 2021, the same month that SLP topped out at its all-time price high. With the price of SLP having tumbled more than 95% since July, Keanne says he has diversified into other P2E games.
“When I started playing Axie Infinity during the peak in July 2021, the price of SLP was at 19.97 PHP,” he told The Defiant. “After that peak, Axie has been on the decline and SLP price is down to about 1.50 PHP currently… I’m still an Axie scholar, but I’m also playing and earning in other games such as Splinterlands, Thetan Arena, and Pegaxy to diversify.”
Despite the downturn, Keanne says his income “isn’t highly correlated” to the performance of the broader crypto markets.
Keanne is currently a member of YGG and Axie University. He is also an ambassador and investor in the game Sipher.
In its report for 2021, YGG states that the guild grew to span 10,786 scholars after beginning the year with just 159. The players generated more than $11.3M in total, suggesting average per-capita earnings of roughly $733.35 for scholars.
The YGG DAO told The Defiant that it primarily revenue sources are its Axie Infinity scholarship program, “staking and farming game governance tokens” including Axie’s AXS and Aavegotchi’s GHST tokens, and from playing the popular P2E games Splinterlands and League of Kingdoms. Profits earned from League of Kingdoms are disbursed to the YGGLOK subDAO.
YGG also raised $12.5M through a public tokensale that distributed 24.8% of the token’s supply in July, which followed a $4M private round in June and a $1.3M round in March. However, the tokensale was the subject of controversy after just 32 wallets purchased all of the available tokens in 31 seconds.
YGG has invested $9.7M on partnership deals with 48 projects in the P2E sector, 76% of which was used to purchase in-game assets. The report states that the partnerships have enabled YGG to “access NFTs and tokens at a heavily discounted rate,” estimating it paid a 91% discount overall compared to if the same assets were purchased from the market.
YGG also said it will focus on expanding its regional subDAOs in 2022.
The Defiant spoke to Evan Spytma, the CEO of Yield Guild Games Southeast Asia (YGG SEA). He said that YGG SEA has attracted more than 5,000 scholars based in Indonesia, Malaysia, and Thailand, and hopes to add at least 1,000 new members by 2023. Spytma said that YGG SEA “buy[s] into NFT assets of different blockchain games, and lend[s] them out to our player base.” He described the model as enabling scholars “to get started with play-to-earn games by borrowing and using the game assets that YGG SEA owns.”
“This is the crux of our scholarship program: there is no upfront risk to our scholars and there is no upfront payment. All we require is their time, effort, and a willingness to learn,” he added.
YGG SEA distributes its revenues using the same breakdown as YGG. The guild also noted that it has invested in more than 30 different in-game assets with a focus on mobile-compatible gaming. Its scholarship program currently supports Axie Infinity, Thetan Arena, and StarSharks players. YGG SEA launched in November 2021, meaning that the value of SLP has fallen by more than 70% since it began operating. Despite the downtrend, Spytma says that investments into other in-game assets have maintained revenues for the DAO.
He estimates that the average income of scholars is above $1,000 USD per month, adding: “In Indonesia, that is almost triple the minimum wage.”
Spytma added that YGG SEA is working alongside local governments to create P2E programs to support temporarily unemployed workers amid the pandemic.
“YGG SEA is also working with governments to create similar programs for the temporary support of unemployed workers,” he said. “We are very eager to work with all SEA governments to roll out these employment scholarships and provide hope and opportunities during these troubled times.”
YGG SEA also plans to launch its own token via an Initial DEX Offering later this year.