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Play to earn is a new tool in the cryptocurrency box, offering gamified access to digital coins and tokens. In its simplest form, play to earn uses a gaming environment to attract a community and award tokens for gameplay.
Play to earn has several elements, all of which can be tapped to generate value and make use of cryptocurrency market forces. Understanding all the elements of play to earn may make for lower-risk activities, while tapping the growing financial power of a new branch of the gaming industry.
Gameplay: The First Source of Earnings
Games like Axie Infinity showed that accessible gameplay could change the lives of millions. With easy mobile access and an addictive game model, Axies introduced millions to digital tokens, building a new corner of the crypto economy.
Game mechanics that reward with a valuable asset are building on previous free to play models. But instead of virtual coins or badges, the rewards are issued in potentially tradable tokens. The best and more liquid tokens can be traded on big markets like Binance or Coinbase.
Token rewards can then be liquidated on exchanges, or brought back into the game, to produce new characters, power up items or buy weapons, land plots or other assets the game allows.
In the case of Axie Infinity, the Smooth Love Potion (SLP) asset can be used to create new characters, but can also be sold or swapped to cash out of the game. Other play to earn platforms employ a similar reward token mechanism.
NFT Trading: Adding Value to Game Items
Non-fungible tokens (NFT) are a technology to assign a permanent record to a specific item. In their first iteration, NFT were used to create image collections, where a series of repeatable, but varied features created scarcity.
Perhaps CryptoPunks was the most intuitive example, where simple pixel art variations made the difference between common Punks and rare or unique items.
Play to earn takes the process a step further, by making the features of digital items also matter in terms of game mechanics. While NFT collectibles can be hot, game items wrapped as NFTs can have a longer life and be actually used within the game. This opens the potential for generating overpowered items and selling them for crypto tokens.
Open finance, decentralized finance or DeFi is a tool that brings cryptocurrency trading to almost all mobile users. When joining a play to earn game, the rewards can be used to achieve additional gains by using the power of decentralized exchanges.
The first approach is to simply swap or sell the tokens through some of the well-established decentralized exchanges. Trading spots like UniSwap, SushiSwap, PancakeSwap and many others offer a fast way to connect the same wallet used in the game, and lock in the earnings. Of course, the earnings will not be immediately available as cash, but they can be transformed into cash-like assets with their value tied to the US dollar. This will mitigate the volatility inherent to some crypto tokens.
Another way DeFi helps earn tokens is by locking in assets. What a player can do is to combine ETH or BNB or other base asset holdings with their game reward tokens. Then, the two assets can be locked into a trading pair, while the player gains rewards as a liquidity provider. Earnings hinge on a process known as algorithmic trading, where liquidity and valuation are determined by the token balances voluntarily provided by players or traders.
Trading: Riskier Approach to Locking In Earnings
Play to earn may be the first source of digital tokens for some users. But sometimes, starting a game also opens up the world of cryptocurrency trading. Initially, players may also need to buy some cryptocurrency, such as ETH or BNB, to fuel their wallets and gain access to in-game transactions.
In the past years, wallets gained multiple trading capabilities. Besides accessing decentralized exchanges, as mentioned above, wallets can make simple swaps. Services like Changelly also offer a smooth pass between two assets. Crypto.com also offers a potential transformation between digital assets, as well as using debit cards to turn tokens into cash.
To make money with swapping and trading, some fees may be required, so this path is not suitable for very small sums, where fees can exceed earnings. One possible approach is to hold in-game tokens until their price appreciates to a more significant sum.
Token Sales, IGOs and IDOs
Some games offer their tokens for early sale, some time before launching their play to earn game. Buying into the early offerings may entitle buyers to exclusive game item packages, as well as token rewards.
Token sales are often used as a risky investment with a significant potential upside. Buying into an early token offering may require years until the investment appreciates fully. Token sales also hold the risk of the team abandoning the game, leaving users with a low-value asset.
Token sales are usually announced on social media, with the Binance Launchpad service bringing out some of the best selections of play to earn projects. Smaller token sales may be risky and even use faked sites. Copied or faked NFT collections are also one of the risks for early buyers.
Cashing out of digital assets is the final step in making money with play to earn. While swapping between digital assets is easy, receiving cash may have regional hurdles. Not all digital coins and tokens have the same available liquidity. Selling digital coins and tokens for cash may be limited depending on the region.
Investing in digital assets and trading can be risky. Game reviews are not financial advice. The best approach is to avoid over-investment, as past performance is not indicative of future price moves.
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