After the peak of popularity, NFT games begin to devalue

  • NFT games, as they are known, exploded in 2021 both in terms of number of players and profitability
  • But one situation is common in almost every NFT game: it becomes too popular, the value of the NFT explodes as more people enter the game, and the price goes down.
  • Now, the next step is to try to make the games more fun so that they are not only attracted to paying the players.

Market development cryptocurrencies The progress of the financial decentralization thesis is in full swing, including new tokens (DeFi) and millions of digital arts. Since last year, entertainment has also joined this trend list with a new video game model.

Games NFTs, as they are known, exploded in 2021 both in terms of the number of players and in terms of profitability. Games are built on a “play-win” mechanism, which allows users to make money based on their efforts during the game’s stages.

Unlike traditional video games, in NFT games, items purchased by players can be sold in a secondary market, the blockchain. “The items you collect while using and participating in the game are in this blockchain context, where the user can buy and sell assets independently of the game itself,” explains Fausto Vanin, founder of OnePercent. blockchain solutions company.

In the League of Legends (LoL) game, users can purchase their characters’ “skins”; in practice, it is like an outfit, and in some cases it can assign new abilities to the player. Once acquired, the player cannot recover the amount paid.

NFT is different in games. O Axie Infinity It’s been one of the most popular games on this wave since 2021. To gain access, the user must purchase an axie, an NFT from the Ethereum (ETH) network, which acts as a game character.

If the player decides to “withdraw” after the acquisition, it is possible to resell this NFT to other users, from which they may receive a refund. “In a traditional game, you end up wasting hundreds of reals and not being able to exchange that money. In NFT games, you buy cryptocurrencies, and even if the server owners turn off the games, you still have NFT and you can trade, ”says Yuri Fernandes, CIO of BitPreço.

In addition to selling NFTs, games allow players to earn new tokens as they progress through the level or achieve good rankings. And that too can be sold.

“The NFT game starts issuing dollars that can be exchanged for dollars, bitcoin, ethereum, what one wants. And since there is a demand for the purchase, the initial investment required to enter these games, in the end the game manages to buy the coins issued by the people who are already inside, ”explained analyst and partner Felipe Medeiros. At Quantzed Criptos, a school of technology and financial education for investors.

To convert game coins into cash, the user’s wallet must be linked to an exchange, which converts NFT into dollars or real currencies.

The dilemma of a short-lived game

From the outside, it looks like a “win-win” scheme that generates an economic return on leisure time. And for a while, it really was.

At the top of Axie Infinity, for example, some players could earn between R $ 2,000 and R $ 10,000 per month, depending on the timing and skill of the game. The game’s cryptocurrency, AXS, was valued at 17,272.9% in 2021, according to a survey conducted by Yubbe. E-Investor

In practice, those who entered the game and initially bought NFT, for example, could sell the asset for $ 17,200 for $ 1,200. Since the beginning of 2022, however, AXS has accumulated a depreciation of 58.51%.

Axie Infinity’s career can be used as an example to illustrate a situation that is common in almost all NFT games created so far: it becomes too popular, the value of NFT explodes as more people participate, and the price goes down.

Yubb’s $ 300 billion and $ 6 billion market capitalization survey of NFT games is a good example of this. All tokens analyzed showed positive variation in 2021; but only two will not fall by 2022.

GALA, the Ethereum network, was the most valued cryptocurrency among NFTs in 2021, rising by a staggering 41,936.3% a year. Tokena is from Gala Games, a studio dedicated to more than one winning game to play in the crypto universe. Most famously, Town Star, farms, and cities can be built to compete with other users to see who has the best management strategy.

Despite the rise, the token continued the movement of couples and in 2022 there is no harm, it has devalued 63.77% so far.

André Franco, head of research at Grupo 2TM, owner of the Bitcoin Market, explained that the same factor that estimates the NFT of a game leads to its failure: value creation. Unlike the economy of a country, which controls the issuance of currency by the Central Bank, in NFT games currencies are created in an inflationary way because there is no control over the creation of new tokens.

“The faster the game grows in terms of the number of users, the stronger the subsequent decline, as even the high payouts that grow the game start to pay less and less profit. It is necessary to have the means to extract liquidity from the token, as if we were talking about a country. If you issue a lot of money, it is usually amortized; that’s what happened with the games, ”says Franco.

NFT supply can always increase, but demand decreases over time. When this line is crossed and the market has more demand than the token supply, the value collapses. “People are starting to sell NFTs realizing that they are running out of purchasing power,” says Felipe Medeiros of Quantzed Cryptos.

With this dynamic, even if a lot of people start acting out of pay, the last one to enter is more likely to lose than to make money. “A lot of people lost money because this mechanism requires the end of the supply that is already in play to require demand to supply those assets because this mechanism creates a cycle that depends a lot on the entry of new players. The game holds its own as people enter, it’s almost a pyramid, ”says Medeiros.

The news of financial losses spreads, the token is devalued, people stop playing and the trend is to end the game.

Will the market evolve?

Although most of today’s games repeat the same technology that quickly added value to the game’s NFT value, the cryptocurrency market is on the way to renewal. This time, the topic is not just about technology, it’s also about fun.

“Several games were released at the end of last year, but others drowned their economies. This left a lesson for the market and the solution was to balance it, making it difficult to access the currency so that players have more and more skills to play and be rewarded for it, ”explained Yuri Fernandes, CIO of BitPreço.

Now, the goal of the market is to make NFT games with some mechanisms to control the issuance of coins. Thus, even if the payoff is not so easy, some players will enter the games just for fun.

For Felipe Medeiros, of Quantzed Cryptos, the games are in their infancy, so they are only available to players who are interested in payouts. “All the games that have come out so far are basically mercenary capital; people just want to play to make money. And that’s because the game isn’t fun, it’s very poor graphically, and it’s very limited to play,” he said.

But he believes that as games become more fun, the demand for entertainment-only players will sustain the game’s economy for a longer life. “Blockchain games are being developed to create demand, people will want to play for fun because there is a community there. It will be the only capital for entertainment, ”he said.

Medeiros also highlights two new games, Aurory and Ember Sword, with a more fun proposition. And so they can be hopeful.

Aurory Solana is an online strategy game where players have to get an AURY token to start participating. Ember Sword, on the other hand, is an online Ethereum fighting game that will allow users to start fighting without any initial investment – and is therefore one of the biggest promises of the market before it is already launched. scheduled for this year.

In 2TM’s research, the bet is that this is a bad time for the gaming market. In the coming years he will have to reinvent himself for a new game mechanic that is fun and makes money.

One proposal that has caught the eye of André Franco is the Illuvium game. Launched at the end of last year, the game was inspired by Pokemon and users need to control the “little monsters” in the ILV to reach the game’s token rewards. “A game with a very important premise. And if this game is fun, this is the first time we’ve seen it combined with NFT collection logic and a play-to-earn model, ”he says.

Leave a Comment