P2E projects

When you were a kid, I bet you’d often dream of a way to earn money just by staying at home and playing video games. Well, P2E probably won’t be enough to let you quit your job, but it might indeed reward you for simply playing the game.

So, what is P2E?

Obviously, the P2E games are hugely compelling for the players: what could be better than earning crypto or NFTs while you play, stuff that you can then trade for real money?

Does it seem too good to be true, though? Well, you’re thinking right. Because every P2E project raises the big question: where does the money actually come from? And, as it usually is in the crypto world, if you suspect you wouldn’t like the answer, you probably won’t.

A lot of P2E projects that promise you tons of crypto are Ponzi schemes, or financial pyramids, and losing your money is as likely as earning something. So how do you recognize a ‘pyramid’?

In the classic pyramid scheme, participants attempt to make money solely by recruiting others, usually where:

  • the project promises high returns in a short period of time;
  • it is unclear how value is generated;
  • the primary emphasis is on recruiting new participants.

Imagine a random GameCo P2E game. Players buy NFTs for $100 to “start playing.” They use the NFT inside of the game to earn $1/day. For the player, the investment pays off in 100 days, then they start getting “free money” — looks like a great deal!

Because this seems like the sweetest deal, GameCo gets a heap of money selling their NFTs, and uses these funds to pay out the $1/day rewards to its first — and new — players. However, their target audience isn’t infinite, the hype dies down and the market saturates. When this happens, there is no new revenue coming in, and 100k users expecting $100k per day in rewards. GameCo’s budget vaporizes in a matter of a couple of months (unless of course the team pulls the rug, which happens more often than not). In any case, GameCo inevitably goes bankrupt, and the players who bought their NFTs last lose their money.

The game is strictly “zero sum.” For every dollar gained, a dollar is lost by someone else. Early-comers made money because late-comers lost of up to 100% of theirs. This imagined “P2E” game is a classic financial pyramid and what is also called a Ponzi scheme.

A lot of the P2E gaming models have this same basic Ponzi concept, but it might not be obvious because the project tokenomics is obfuscated by the complexity of the various coins and assets involved: crypto, in-game tokens, NFTs, etc.

Technically, developers didn’t promise you that their project is not a pyramid. However, in the fiat world that’s considered fraud and is punishable by prison.

Anyway, if you’re into crypto, then you probably already knew that. Nothing new to say here except: DYOR.

But are all P2E projects Ponzi schemes?

And the only way for a project to be sustainable is for an external income stream (unrelated to P2E) to feed money into the game. This income stream would be required for FraudCo to buy back the NFTs created in-game to create demand for them. This external income stream could come from several sources:

  1. Players paying to purchase the game or a subscription (those who are in it for the fun, not for the returns)
  2. Vanity items (like new skins and avatars, that promise no economic returns)
  3. Advertising revenue (e.g. digital billboards)

This means that a P2E project doesn’t have to be a pyramid or scam if the game itself is successful, popular and fun to play. If it is, the P2E element comes out of the cash generated by players enjoying the game and donating, or out of third-party advertising budgets. The future of the P2E market seems to depend on a very simple question: do the developers want to do better and create a great game, or do they want another get-rich-fast scheme?

Here at JFactory, we are really fond of the P2E concept: the idea of earning money for playing games does sound like a childhood dream. No surprise that we wanted a part of the fun, so keep an eye out for our own take on a P2E game coming out in a few days: Heart & SOL [heartandsol.one].

Collect dragon eggs, help them hatch, send your dragons on treasure hunts, earn in-game stuff as well as crypto assets; level up and trade your NFT dragons or collect a full set and turn them in for a valuable higher-tier egg for even more rewards!

This is where you probably ask “so is yours a Ponzi?”

High-level Dragon NFTs can be locked in a validator node within JPool to secure a portion of the pool’s total stake to be delegated to this validator. We expect a high demand for such trained dragons among validator operators.

That being said, only users actively participating in the game will be able to achieve hefty earnings, but that’s life for you: there are winners and there are also-rans.

Phew, that was a long one, and I’m late to Twitter fights with people who still think that Ethereum is better than Solana. See you guys, and feel free to drop your questions and comments below!

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JFactory

JPool is a stake pool on the Solana blockchain network enabling safe, secure, high-yield rewards on your staked SOL.