Play-to-earn

Play-to-earn, often shortened to P2E, is a model where playing a blockchain game produces rewards that can be sold for real money. Players earn fungible tokens for battles or quests, or win NFT items, then trade them on a DEX or marketplace. Many games require buying NFT characters or items before you can start earning.

The rewards come from token emissions written into the game's economy, plus fees and purchases from other players. Players spend tokens on upgrades, breeding, or repairs, which act as sinks that remove tokens from circulation. Because rewards are paid in a token that trades on open markets, the dollar value of a day's play depends entirely on that token's price. Some games also ran scholarship programs, where owners lent NFTs to players and split the earnings.

For anyone holding P2E tokens, the core problem is that players who come to earn tend to sell what they earn. If the game cannot attract enough spending from people who want to play rather than cash out, the reward token keeps dropping, earnings fall in dollar terms, players leave, and the cycle speeds up. Several well-known P2E games went through exactly this boom and collapse.

Work out the payback period: how long it takes to recover the cost of the starter NFTs at the present reward rate, remembering that rate can fall quickly. Check whether the developers can change reward rates, how emissions are scheduled, and how much the team holds. Be skeptical of earnings screenshots and referral programs that pay you mainly for bringing in new players.