Crypto Gaming: Advantages, Axie Infinity, and a Look into the Future

Cedric Laohoo
6 min readFeb 25, 2022

Crypto Gaming and Its Advantages over Traditional Gaming

The gaming industry today is driven by two business models — “free-to-play” and “pay-to-play” — that have helped it grow into a $180 billion dollar industry, supported by over 3 billion people worldwide. Big game makers — examples of which include Activision Blizzard (Overwatch, World of Warcraft, Hearthstone), Electronic Arts (Apex Legends, FIFA), and Epic Games (Fortnite) — continue to dominate the industry, owning 50% market share of the fast-growing industry (9% CAGR over the past 10 years).

Web3 gaming (which I will refer to as “crypto gaming” moving forward) is the latest addition to the growing list of use cases for a decentralized, blockchain-based future. Unpacking that further, the biggest difference between traditional gaming (gaming as we know it today) and crypto gaming is one of ownership.

In traditional gaming, in-game purchases (characters, skins, weapons) and advancements (level ups, guild achievements, global ranking) are centralized within game developers’ platforms. Once the developers stop supporting a game or once gamers decide to quit playing it, ownership of the same purchases and advancements reside with the developers and not the gamers; this renders the thousands of hours of playtime worthless (aside from the psychological benefit / ”fun” that gamers got from playing the game).

I can still remember working so hard (and spending a lot of money) to collect Arcana items for my Defense of the Ancients (DotA) heroes, only to realize that the moment I stop playing DotA (I did, 1.5 years ago), everything I worked hard for will cease to be mine. The platform that holds my Arcana items is owned and operated by Valve (the owner of DotA), and there is no easy way for me to simply cash-out those items. That same experience is what I went through when I chose to stop playing FlyFF (one of the earliest MMORPG games that existed) after having been a crucial part of my younger gaming years.

In crypto gaming, all in-game assets are minted in the form of NFTs, enabling assets to hold monetary value even outside the realms and platforms of game developers. This way, ownership is given back to the gamers, who are now empowered to keep or trade their in-game assets, without worrying about wasting the time and effort they have put into playing games. What’s more, this also sets up the gaming industry for a borderless future (where assets from one game can be ported and used for another game — the core principle of the metaverse).

Another key advantage of crypto gaming that makes it stickier than traditional gaming is its innate play-to-earn model. In traditional gaming, there are very limited ways to convert playtime into fiat currency (except if you are a professional gamer who earns money from streams or esports competitions). In crypto gaming, there are 2 ways that gamers can convert playtime into fiat currency. By virtue of being NFTs, in-game assets can easily be traded on NFT marketplaces (like Opensea), converting cryptocurrency into fiat currency. Not only that, many crypto games (like Axie Infinity) also reward players with cryptocurrency the more they play and engage with the game.

Crypto Gaming through the Lens of Axie Infinity

Crypto gaming’s sudden rise in 2021 was heavily driven by the impact of the COVID-19 pandemic on jobs, specifically within lower income countries. In the Philippines (where the daily minimum wage is $8), people turned to crypto gaming for income generation while their previous sources of livelihood continued to be closed due to strict lockdowns.

Axie Infinity, at the back of the pandemic, became the undisputed flag bearer of crypto gaming, attracting players from all over the world with its easy-to-play game mechanics and high earning potential. As a refresher, Axie Infinity is a free-to-play NFT-based online game where you can send Axies (in-game creatures) to battle against monsters (Player vs. Environment / “PvE”) and players (Player vs. Player / “PvP”), in exchange for Smooth Love Potion ($SLP) tokens. To start playing the game, players must buy-in by purchasing Axies (you need 3 of them to form a team) on the Axie Infinity marketplace, now valued at ~$100 per Axie.

At its peak (reached in April and July 2021), the game enabled players to earn up to $70 for a day’s worth of game time, easily 8x of minimum wage for a 3rd world country like the Philippines. Pretty solid deal, right? With that, it comes with no surprise that Axie Infinity drew in millions of players, reaching a peak of 2.5M monthly active players who have exchanged more than $4B worth of value over the past 1.5 years.

As Axie Infinity’s user base grew and the game just continued to print more money to give out as rewards for players, what do you think will happen? Inflation and devaluation of currency. The value of Axie Infinity’s in-game currency ($SLP) has dropped significantly over the past few months, heavily decreasing its impact-generating potential. From its peak trading value of $0.36 per token, $SLP is now just trading at $0.02 (a 94% drop in value from all-time-high). While Axie Infinity’s user base continued to grow, the maximum income you can get from Axie today (~$3 if you get 150 SLPs per day) represents just 34% of minimum wage in lower income countries, significantly lower from its peak and definitely less stickier than it used to be.

This is the downside of Axie Infinity’s tokenomics today. The game is creating (“minting” in the crypto world) too much $SLPs to reward new users, but there’s just not a lot of incentives for players to use (“burning” in the crypto world) the $SLPs in-game. Looking at the burn-to-mint ratio of $SLPs in 2021, Axie Infinity has mostly been minting $SLPs, putting a strong inflationary pressure on its currency valuation.

Does this mean that Axie Infinity (in its current form) is doomed? Probably not. The game has a deep base of active players, and that is a good enough starting point for survival. For it to continue being the flag bearer of crypto gaming and drive it forward, however, structural changes have to be implemented. Without going into in-depth details (because Axie Infinity roadmapping is not the intent of this article), Axie Infinity has to develop game mechanics that will address $SLP inflation (i.e. capping the number of new players who can join; further reducing the total number of $SLP rewards per player per day) and $SLP utilization (i.e. increasing the $SLP cost of creating new Axies, exchanging certain amount of $SLP to improve or even completely change an Axie’s body parts).

And what’s next for crypto gaming? For mass adoption to happen, the industry needs to learn from Axie Infinity’s early hiccups and give traditional gamers more reasons to take the leap; it is simply not enough to bank on the advantages of ownership and earning potential. crypto gaming first needs to create quality games that can compare against traditional games available today — supreme graphics + enjoyable gameplays is the perfect formula. Education also needs to be given priority because the general population is still hesitant about everything related to crypto. If people are required to buy into crypto games using cryptocurrency, we need to educate them about how to transact cryptocurrency in the cheapest, most efficient, and safest ways possible.

Looking ahead, the future of crypto gaming is a Wreck It Ralph-esque, Ready Player One-esque metaverse of co-existing games, where players can jump from one game to the next without changing hardware nor software. The future of gaming is one where there are no boundaries. That is extremely exciting, but before that becomes a reality, mass adoption for crypto games needs to happen.



Cedric Laohoo

Stanford GSB | Brand Management | Crypto Enthusiast | follow me on social media: @cedriclaohoo