In the paper “Decentralized Society: Finding Web3’s Soul”, the Ethereum co-founder Vitalik Buterin recently pointed out that Web3 today centers around “expressing transferrable, financial assets, rather than encoding social relationships of trust.”
In this article, I’ll discuss briefly how we can get away from the Play-to-Earn model (actually, I think we should get away from all X-to-Earn models) and build a more sustainable model called Play-for-Honor.
Yield Farming basically stands for “provide liquidity to earn.” The “X-to-Earn” model can be traced all the way back to the beginning of the “DeFi Summer” in 2020 when Compound launched yield farming to reward its liquidity providers with its native tokens COMP. Since then, from Compound to Yearn and Uniswap, more and more DeFi projects have adopted the same incentive mechanism to reward their liquidity providers.
Starting from 2021, many blockchain gaming (so-called GameFi) projects stole the spotlight and quickly dominated the space with the Play-to-Earn (P2E) model. NFT games are not something new that suddenly came out of nowhere. As a matter of fact, NFT-centric games had existed since 2017 when Cryptokitties was launched. Starting from 2021, many blockchain gaming (so-called GameFi) projects stole the spotlight and quickly dominated the space with the Play-to-Earn (P2E) model. But the genre didn’t gain much traction at that time until the rise of NFTs in 2021.
Many NFT games adopted a notable feature called Play-to-Earn (P2E), where players earn different NFTs or crypto tokens for participating in the game and reaching certain milestones. Players then can sell those earned tokens to profit. Axie Infinity is one of the most notable P2E games. The game reached a record $1.5 billion in annualized revenue in mid-2021.
Since then, more and more projects have taken the same X-to-Earn concept and added their own ingredients. To name a few: Move-to-Earn, Learn-to-Earn, Participate-to-Earn, Write-to-Earn, Like-to-Earn, Eat-to-Earn, Watch-to-Earn, etc.
The fundamental problem with the Play-to-Earn model is that you get the wrong community on day 1. The people who gonna join your community will primarily be the short-term profit hunters who invest in the NFTs and expect to make a quick profit by playing the NFT game to at least break even.
The financially driven community mindset leads to unsustainability. To retain your community interest, the project needs to maintain a relatively attractive APY, which requires the high growth of newcomers to pay enough upfront. The APY correlates directly to the NFT’s average price and the token price.
When the market has enough heat, everything looks positive since the project can maintain the high growth of newcomers to provide an attractive APY for its current players. The attractive APY provides strong support to its NFT and token price.
However, a different story comes when the market turns against you. Newcomer growth will begin to fade, and the project won’t be able to collect enough upfront revenue to maintain an attractive APY. Following the APY drop, NFT and token prices will also drop, further driving the APY and newcomer growth. A death spiral starts to occur.
How to tackle this problem? The answer is that we need to change from the financially driven Play-to-Earn model to a more social-oriented and sustainable Play-for-Honor (PfH) model.
The Play-for-Honor model, as the name implies, focuses on building the reputation and trust of the community and turning players into long-term loyal citizens.
Instead of gamification of community activities that encourage members to engage in your community’s desired behaviors and goals for a quick profit, a reputation system is a long-term effort to build and showcase your reputation to a community, both of which are positive to the community as a whole.
In the web2 gaming space, we see many top games ( From Star Citizens to For Honor, etc.) have great reputation systems, many of which last long. However, today’s web3 games are all about APY, earning, and big NFT sales.
The missing piece here is Decentralized Identity (souls) and Soulbound tokens. What if you need first to create your own decentralized identity as a player and consistently play XYZ to earn different reputation points to build up your identity instead of connecting your crypto wallet, playing the game to make a quick profit, and then leaving? For every significant achievement, you will be given a Soulbound token (a non-transferable NFT), and everyone will be able to see your honor. How cool is that?
As you keep building up your identity and reputation and receiving different Soulbound tokens, you will be rewarded with different financial rewards from time to time and access to exclusive communication channels and product features. More importantly, you have more voice and votes in the DAO governance, which means more reputation leads to more power and responsibilities in the community.
As for the token distribution to the community, today’s P2E and many yield farming mechanisms reward tokens to community members who make every single move. We believe this is wrong and ridiculous.
A true blockchain-powered Web3.0 game project should run as a decentralized society, and the DAO serves as the government. The government should spend its treasury money on public infrastructures and give grants to support various entrepreneurship to create more value for its citizens, then tax the value and repeat the cycle instead of throwing away the money directly to the people for free.
Therefore, we believe only the top players who made the most contributions with the most honor + the content creators should be rewarded.
As a pioneer, Oort Digital wants to experiment with this new model. In the following article, I will explain how Oort Digital will specifically implement this Play-for-Honor model for more sustainability and lay a true foundation of trust in today’s blockchain gaming space.