# NFT Gaming: Expensive, Centralized, and Boring
# Background
As a little background here for everyone, I'm a fairly constant critic of cryptocurrencies and "blockchain" based tech solutions. The idea of a merkle tree root with proof of work preventing the abuse of said system isn't new. The consensus mechanism around the nodes, and the speed at which transactions can propagate through the network is a relatively new idea allowed by the wide availability and high speed transmissions of the current internet infrastructure. The system results in a public, highly available (HA), fault tolerant (FT) system that can ensure that your data, in a read-only capacity, is basically there if the data is small enough to be stored on chain and you know where that data is. There are some strategies available that will let you ensure that happens, but none of them are particularly economical. If you need the same for write capacity, well, you're boned, and that is a different post. I'm going to be glossing over a deeper technical discussion here because I want to talk about my experience with the games, and the associated costs.
# NFTs (Non-Fungible Tokens)
NFT's come with the promise of ownership, but in reality it is more like a receipt. The receipt guarantees nothing other than a transaction happened for a certain item, or it's clones, from a certain vendor, at a certain time. NFT metadata is much like the terms and conditions printed on the back of the receipt. However, since putting metadata on chain is pretty pricy, it will more likely be another pointer to a sidechain or a datastore that will contain that data as well. All of this is generally OK, lots of receipts will point to policies of the company for that date and will be in effect according to the policy at that date. It's yours, it lives in your wallet, and it can be read (see the note about the availabilty) by anyone at anytime. Whether the data is encrypted or not is someone else's problem. In fact, an NFT vendor could technically encrypt the on-chain data so it can't be read unless you have the private key to decrypt it at minting time, making it extra useless afterwards.
# NFTs In Games
NFTs in games suggest that you now own your assets for the games. This isn't new. Steam does it, Blizzard does it, etc. For legal reasons, they tend to call the purchases "access" or "unlocking" because "buying" can infer other terms and conditions. In any case, you still "own" everything that you've purchased. You can only transfer the items if the system allows you to via Steam marketplace, or not at all as with Blizzard/Riot etc. The NFT games offer the exact same things, except you've got the option to sell things you collect in the game on the marketplaces they run. You can theoretically also sell them in a peer to peer fashion, but doing so can carry significant risks for the unaware and unread.
What is new however is the addition of bonus gatekeepers. I'm going to use Axie Infinity, arguably the most popular NFT game right now, as the example game. The flow(s) generally apply to all games. I'd do more research in to the various ones, but I'll be honest with you, I can't afford it. I don't think that most people have that kind of money to spend on just trying things out.
One thing where it is "useful" is if you were looking to do a cross-game promotion where getting/having something in one game allowed for bonus assets to be delivered in another, completely unrelated game. You don't have to share private databases, because the inventory database is publicly accessible. It could get a little weird without agreements, but it's a brave new world out there.
# Play To Earn
Play To Earn a.k.a. P2E/Play2Earn is an new spin on an old concept. Imagine gold farming, but that's what everyone does. Much ink has been spilled on how these games pay more than a living wage to people living in impoverished countries, how it's a whole new market where people will earn while they play, and it's a "saviour". Nothing can be further from the truth. Play to earn games generally need to exist on a side-chain, or "Layer 2" chain, in order to reduce the costs of running the game itself. There are a number of strategies that can be used to do this such as optimistic rollups, or zero knowledge roll ups, but in the end the system itself is secured on the primary chain. This is most typically the Ethereum chain, using ETH as the currency of choice. In order to enter the game's L2 ecosystem where the action happens, you have to spend that currency to get on to the side chain. This is when the fees begin, sort of. This assumes you already have ETH. If you don't, you need to deposit fiat on to an exchange, or find someone to sell you some directly. In the exchange case, you pay a spread on the cost of the coin against the "market" price, and then you generally pay a withdrawl fee to the exchange, and you generally have to cover the transaction cost (with bad timing, could be in the thousands). Some exchanges will allow you to mitigate costs by setting the transaction fees, but there is a floor if you want any kind of timeliness. Binance does allow "gas free" interaction with the Sky Mavis Ronin Wallet though, so you can dodge a bit there.
# Tolls, tolls, everywhere
In the case of Axie Infinity, it uses several different currencies, but the one you'll get is wETH or "Wrapped ETH" when first onboarding. Wrapping your ETH costs money because it transacts on the Ethereum blockchain, and boy does it cost you! To wrap 0.07 ETH, it cost 0.008706 ETH. That's a cost of over 10%! Of course, you can look at using an exchange, trade that ETH for USDC, then use that to get wETH, but the spread will be...whatever it is at the time on both exchanges. You can argue that the total cost would be lower had I gone the exchange route, but you're still looking at network transaction fees.
So now you're set to interact with the Axie Infinity Marketplace with 88.4% of the ETH you started out with. When I first decided to do this, Axies were 0.02 wETH minimum (~$80 USD). You need a minimum of 3 axies to play and start earning, but there are no tutorials, no "getting started", and looking for help yields zero results from the developers. It's all social, baby! Time to do some research!
Selling axies? Sky Mavis takes 4.15%.
wETH to ETH? 0.6% spread. Katana dEX (opens new window)
ETH to USDT/USDC? 0.075% Binance Fee Schedule (opens new window)
Need cash for bills? Withdrawl fees specific to your country.
For funsies, the PHP fees in Binance are 25 PHP to deposit, and 60 PHP to withdraw. It might be just a $1.17 to get your money, but that's after several layers to exchange. That's each time as well, so as long as you treat it like a paycheque, you'll be able to dodge most of the pain. You're not getting out for less than 0.6% + withdrawl fees though. You can claim your SLP once every two weeks at most.
After researching the current meta, desired trait combinations, watching videos of how to play (which are almost entirely focused on maximizing Smooth Love Potion a.k.a. SLP, the in game currency you earn to make money with), you come back to the marketplace a few hours poorer to start putting together that team. If you're serious about earning, you've got additional hours of searching and filtering to do here. Not optimizing your team to the meta means you're gonna lose. Losing doesn't get you SLP. As of 2022-02-04, the amount you get from the solo mode and "daily quests" is going to zero. It's going to pure PvP. Your team will also have to keep up with the meta as it elvolves in order to keep earning.
I wanted/needed to get started, so with my few hours of reading in hand, I picked out near-meta axies at the cheap tier. After rolling out an average of 0.0206743 ETH, I'm down to 0.00805744 ETH (~10.24% of initial), but I've got 3 assets! The axies that are now my team. I load up their client (so decentralized!) and hit up adventure mode to Learn 2 Play with my team's set of moves.
# The Gameplay
The experience...sucked?
The "game" has no merits. It's a set of cards that you have a simple energy cost for that have some effects, and the single player adventure mode difficult ramps up very quickly to limit the amount of experience and SLP you earn. That was before they declared the sunsetting of adventure mode SLPs. The daily quests were worth about 25 SLP a shot, but required you to win 5 PvP matches, and get 10 adventure completions. It's a shitty mobile game, but without the fun. Losing means not earning money, and since the game isn't fun, there is nothing to fall back on. The characters aren't iconic, they're little blobs with shitty art assets rammed up their asses, or jammed in to their foreheads. There is no story, no personality. It exists to put a veneer on a hype driven marketplace.
# The economics
For some people, the economics are hard to argue with. You're capped at 20 - 60 energy per day based on how many axies you have, with getting back an increasing amount of energy every n hours. As with most things in this shitty universe, it's better when you have more.
| Axies/Energy | Refill Rate |
|---|---|
| 3-9 Axies: Max Energy: 20 Energy per Day | Refill Time: 5 Energy every 6 hours |
| 10-19 Axies: Max Energy: 40 Energy per Day | Refill Time: 5 Energy every 3 hour |
| 20 or more Axies: Max Energy: 60 Energy per Day | Refill Time: 5 Energy every 2 hours |
Each action takes an energy, win or lose, so you're looking at 40 energy per day max if you're poor, 120 if you're rich.
# The Regs
At the time that Axie was getting all of the press and love for "saving" people in the Philippines, SLP was selling at $0.25 -$0.35/each (about $17.50 USD). For a country with an average wage of $5.73/hour, pulling in 3 hours worth of wages depending on how lucky you got in the arena would do well. It's shame that those prices only lasted a month. They fell below $0.20 after 2021-08-21 from their peak at $0.345 on 2021-07-24, and haven't recovered at all. To date, the value has fallen to $0.011. For the majority of accounts, you're going to be earning less than that minimum wage.
The PvP awards table is pretty rough these days. Assuming each battle on the slow-as-hell battle system takes you about 2 minutes to complete, you're gonna get 30 matches in an hour, and if you're matched at your skill level, you'll win about 55% of the time. You only get SLP if you win. So for a high ranked player, you're looking to get $3.30/h at todays prices, but $112(!) at previous ones. It's not looking good against a regular job anymore, but it's still not bad if you've got 2 young children who could be another earner in the house. 9 year olds should be earning their keep anyways!
| MMR | SLP Reward |
|---|---|
| 800 – 950 | 1 SLP |
| 950 – 1150 | 3-4 SLP |
| 1150 – 1350 | 6 SLP |
| 1350 – 1450 | 9 SLP |
| 1450 – 1550 | 12 SLP |
| 1550 – 1650 | 15 SLP |
| 1650 – 1750 | 18 SLP |
| 1750+ | 20 SLP |
The fact of the matter is, if prices are high, it's great! If you have capital to invest, you're looking good while prices are high. You just have to sit there and be good at this shitty game and ensure that you're optimized. You'll recoup your investment in about 9600 SLP, so around 4 game days at the highest tier if you never miss a refill. You start at 1200 MMR though, so it'll likely be a lot longer...if you're winning. It'll be about 2 months before you're at zero...if prices stay steady.
Oh, also, you have to be optimized. This is work, not play. If you can't get another job, maybe it's worth it. Maybe.
# I Am A Teapot
Oh shit, this is where the big money rolls in. If you've got capital, and a country that has a low minimum wage with a desparate populace, this is money. Right now $1000 will net you about 35 axies. Take that and you've got 11 teams and some spares. So now you can use other people's time to recoup your investments, and you only have to pay them enough to do it. Yield Guild Games takes a diminuitive 30% of your earnings. They give 66% of their cut to the "Community Manager" who do the recruiting and basic "training" for the game, and take 33% of the cut for themselves. That $2.31/h for the plebs, and $0.66 for the community manager, and $0.33 for the "guild". That is of course per account. YGG claims to have taken in more than 22M SLP in a July 2021 Medium Post (opens new window), from which they have said brought in $4m USD. Their $360,000 USD was pretty nice, especially since they own all of the NFTs (axies, SLP, land, etc) and all of the proceeds that come from that ecosystem. Also, you just ditch the chumps with low MMR. This is work, not play.
You only need 2 things: capital, and a stream of people who are desperate enough to work for $2.31/h, less fees. Of course, you need enough accounts to keep people busy. A single 3 axie team only has ~80 minutes of earning time per day in it, of which 44 minutes of that will be spent earning because of win rate. You need 18 accounts to keep that mill running 24/7, so about $486 USD at time of writing (this part). If you take your 10% tax, you'll break even in about 61 days, not including any capital gains you might make from breeding, people quitting and not cashing out. Binance is offering 115.25% AXS staking rewards for up to 400 AXS! That's insane. You also get the proceeds of sales of the ingame items whenever you're done. You're subjected to market risk, but your capital might already be covered.
# Sky Mavis
This one is lol. Aside the fact that if you tried to cash out hard on your $4B "market cap" on your shitty game, it would collapse the entire economy for it and it would be abandoned in an incredible rug pull, Sky Mavis is making bank. The AXS token is primarily controlled by Sky Mavis, and they get large staking rewards of their own token to ensure their control. What the token actually governs is hard to descern since the game requires a client to run it developed by Sky Mavis, and they can adjust the economy as they see fit. Supercell, the makers of Clash of Clans, Boom Beach, Clash Royale, and Hay Day, is only worth $16B. They actually have gameplay, decent art and a consistent identity, and I hate them too. The difference is that it wasn't a job, no one talked about money, no one was optimizing for earnings, and no one got fired for not earning enough.
# The Rest
Well, the crypto ecosystem gets more people to take little cuts from. Doesn't take all that much to extend it, especially if you get kickbacks to support it. You did it again Binance.
# Well, shit
The problem with writing this article is that going through the numbers, it does create value to people. Mostly those who already have capital. It incentivises more shitty behaviour, but adds an incredible amount of market risk for people who can't afford it, strips them of anything resembling worker and labour protections, allows for the creation of difficult to detect child labour camps, and direct-but-hidden manipulation by the centralized authoriy. Significant amounts of money are believed to be drawn in from the poorer strata as well being convinced by grifters that their investments will pay off. Interest rate statements by places like Binance are estimates, and fail to educate those people about market risk.
In writing this article, I've been pretty disturbed not just by the money being made, but also what my brain tells me. Rest assured, this is exploitation, market manipulation, and the absolute worst kind of endgame we can have for the future of leisure time. It also makes it apparent that losing 33% of the 0.7870574 ETH I put in to fees (0.02430600 ETH) and axie market risk (0.0179423 ETH) is about as much as I lost buying DemiGod (opens new window). So, maybe it's just capitalism's next evolution.