🚩5 Red Flags for NFT Gaming Investors & How Compete to Earn Might Be the Answer
A quick-and-easy read on what makes certain P2E games successful, what makes others fail, and a takeaway checklist on how to find the difference.
The cold hard truth is, 99% of all NFT Games you come across will fail. And not a quiet kind of fail, more of this kind.Â
As a Crypto Gaming investor and builder, you need to understand how to cut through the hype and pinpoint projects that are going into the inevitable graveyard.Â
This post will cover:
An Example of How NOT to Build a P2E Game
A Possible Solution → Compete to Earn
An Example of Compete-to-Earn in Action: Crypto Raiders
A Takeaway of 2 Checklists to Use when Auditing NFT Games
For those of you who’d like to keep up with the rest of the series:
The Story of a Ponzi P2E Game’s LifecycleÂ
Credit to DeFiVader
Launch Phase: New P2E game releases hyped up NFTs and Tokens. Promises X amount of daily token earned. Return On Investment at 300%+
Growth Phase: Demand is rampant -> Prices surge to ridiculous heights and everyone’s making their Return on Investment back in a few months.Â
Peak Euphoria Phase: People are out here to make bags. Player investors have the money printer running wild, minting tokens for earnings & breeding NFTs to sell.Â
Hyper-Inflation Phase: Supply of the token and NFTs grows out of control with everyone trying to make a return on the game. But demand slows as it always does. Supply/Demand rears its ugly head.Â
Dumpster Fire Phase: NFT prices begin to cave. ROI begins to cave. Token price begins to cave. Max exodus ensues.
Lessons from Ponzinomics (The DON’Ts for Investors)
🚩DON’T Invest in Games That implement earning mechanisms from day one. Attracting mainly investors looking for Return On Investment. (Buy this $20k NFT and make $100 / day).
🚩DON’T Invest in Games That allow guilds that are built on ‘yield’ to constitute the majority of the starting player base. They employ scholars who have one job, earning returns. Not playing the game for enjoyment.Â
🚩DON’T Invest in Games That only have one way to bring capital into their games and that’s new players buying new NFTs.Â
🚩DON’T Invest in Games That have no clear path to burn earned tokens and NFTs to do core things in the game. Inflation is going to smack you across the face.Â
There are always exceptions to the rule and of course, you CAN make money as an opening investor in these games.Â
Just remember, we’re talking about the games that aren’t going to be flashes in the pan but survive the graveyard.Â
So, what are the DOs that some games are pioneering?
A Possible Solution: Compete-to-Earn (Make Earning A Function of Skill)Â
No one walks onto a poker table with their chips and expects to get a guaranteed 2x on their money. They come in wanting to play the game and understand that with a mix of skill and luck, they can walk out with winnings.Â
Returns are NOT guaranteed but possible.Â
That’s an essential belief in any P2E game that expects to survive. If you hear a game pitching 2-3x returns, run the other way. If you see one that says the best will earn, lean in. Â
Compete-to-Earn Crypto games check a lot of the boxes rules necessary for an outstanding P2E game.
#1: Not everyone can make money.Â
The only way to earn money is to build knowledge and skills in the game.Â
You can be the most skilled (competing)Â
You can help provide things to the ecosystem (crafting / UGC)
You can help people become skilled & back them (guides / sponsorships / theorycrafting)
#2: Those that do, need to invest a significant amount of time or create enough value to enter the world of earning. This auto-selects for people biased for the long-term, not quick churn and burn.
#3: Skill-based gameplay biases a game’s player base towards people who are there to play rather than to extract right out the bat. You have to get very good and keep improving your character to stay at the top. Meaning you’re probably constantly re-investing in the ecosystem rather than extracting.
But instead of talking about it, I’d like to show you an example game pioneering the model.Â
Example: Crypto Raiders (How Compete-to-Earn Might Work)Â
Crypto Raiders just recently announced that they will be having one of the largest tournaments in P2E history.
What’s the overall structure and prize pool?
2,500 access passes will be minted using the currency token, $AURUM.Â
Current players and $RAIDER stakers get higher priority in the allow-list.Â
The CR treasury will guarantee $1M for the prize pool minimum.Â
50% of $AURUM for the access pass mint goes to the prize pool.Â
50% of $AURUMÂ for the access pass mint will be burnt.Â
How will the tournament play out?Â
Every access pass holder will have a unique login with a max-level raider, unlimited consumables, and 200+ pieces of identical gear.Â
How do the access passes work?
Each pass gives 1 entry to the Raider International.Â
The passes will have different tiers. The higher the tier, the more rewards associated with it. Examples of rewards:
Legendary Mount (not a horse 😉 )Â
Smelting Furnace
Custom Background
Custom Skin (upgrade your raider cosmetic)Â
This tournament is a marquee event after the CR team has enabled daily, weekly, and monthly tournaments as the main output for earning in the game. Daily tournaments can have prize pools of $800, ranging to monthlies in the $10k+ range.Â
Why is this compete-to-earn model so game-changing for P2E?Â
This solves the issue of players all expecting to earn. Access passes and tournaments clearly allow for people to invest money with no guarantee of return.Â
Building a game for skill and mastery leaves a lot of room for players to dive deeper into the ‘fun’ elements of a game.Â
Creating skill-based success as your primary means of providing ‘earning’ in a P2E game allows you to heavily skew the returns towards players dedicated to adding value to a game & invest in the long-term.Â
Every single thing in this tournament is bought for through $AURUM (the in-game currency). Meaning, a massive source of burning supply for a token used to ‘earn’.Â
Now, let’s bring it all together for whenever you’re vetting your own projects to jump into.
[TAKEAWAY] Two Checklists to Audit Any P2E Game
Question Checklist 1 [A yes = run away quickly]Â
Are they implementing earning from day one?
Are they targeting mainly guilds and investors with a promise of long-term ROI (not ‘for fun’ players)Â
Is the main way that the game developer plans to make money through new players? (ponzinomics)
Is earning based on time-based activities (PvE, Daily Quests) and not skill-based? (bot heaven)
Are there no serious ways to tackle token or NFT inflation? (no sinks or burns)
Question Checklist 2 [A yes = finding a potential C2E Gem]
Is the game trying to attract players before implementing P2E?Â
Is the core game-loop focused on skill-based gameplay that the developers are trying to incentivize [Ascenders Launch Tournament]?
Are they thinking of ways for you to spend in-game currency to improve your characters? [Consumables, Cosmetics, Things that don’t affect skill-based play?]
Do they organize tournaments, leaderboards, and provide esports grants?Â
Follow these two base checklists and you’ll already be far ahead of the herd when auditing a game for long-term sustainability.Â
If you’d like to keep up with the rest of the 4-part series, subscribe so we can update you as we come out with our next part!
Appendix - All the sources that helped build my knowledge.
[1] DeFi Vader’s Thread on Crypto Economy Crashes
[2] Space Pixel’s Thread on Ponzi Economies
[3] Haseeb Qureshi’s threads on Crypto Game recessions
[4] CR Podcast - Delphi - Compete-to-Earn
[5] Darren Lau on Sustainable Game Economies