This article first appeared in Wealth, The Edge Malaysia Weekly on October 25, 2021 - October 31, 2021
These days, trading cryptocurrencies is commonplace for many people looking to make money. Take a glance at cryptocurrency ranking website CoinGecko and there is a list of 9,900 digital tokens, most of them launched in the past five years. And many have profited from trading these cryptocurrencies.
Yet, trading is no longer the only way to profit from cryptocurrency as the trend continues to evolve rapidly. One can even play mobile games to earn money. The more you play it, the better you get at it and, hopefully, the more you earn.
The hottest game in town these days is Axie Infinity (Axie), with its popularity reflected in the prices of its digital tokens. A quick check online shows that Axie Infinity Shards (AXS) — the token issued by the game developer to raise funds to develop Axie — has risen 176% to US$138 as at Oct 5 from about US$50 two weeks ago.
AXS is also known as the project token that grants holders the power to vote for significant changes that the developer introduces to the game. Its price usually rises in tandem with its popularity and future potential.
Smooth Love Potion (SLP), the in-game token that Axie players earn through defeating monsters and battling with other players, has been on a wild ride since April. It shot up 929% to 36 US cents per token in May from 3.5 US cents two weeks before that. Dramatic swings followed, before the dust settled at 8.9 US cents a token as at Oct 5.
ASX and SLP can be traded on the market via non-regulated decentralised exchanges that automatically match and execute trades online via algorithms known as smart contracts.
Ee Wui Yang, an experienced gamer in Axie and a crypto entrepreneur, says one can make RM1,000 to RM2,000 a month by playing Axie two hours a day.
“It used to be a ‘grindy’ game (involving a lot of repetitive actions to level up or earn cryptocurrency). A player needed to spend six to seven hours a day to earn a thousand or two [ringgit]. But now they only need to play about two hours a day since the developer made changes to the game recently,” he says.
The monthly income from playing the game depends on factors such as the price of the SLP and the exchange rate of a specific fiat currency against the US dollar. This is because an Axie gamer would need to sell his SLP for stablecoins, usually one with its value pegged to the US dollar, such as Tether (USDT), before converting them into fiat currency.
“Players in the Philippines, for instance, would find the game more attractive than Malaysians, as one US dollar is worth more to the former than the latter. It is definitely less attractive to Singaporeans,” says Ee.
It is important to understand the concept of non-fungible tokens (NFTs) before one plunges into Axie and other similar games.
Put simply, an NFT is a unique digital token with its own identity and is non-interchangeable. This allows an NFT to be used as a representation of various distinguishable items such as an artwork, for instance, with the proof of ownership traceable through a blockchain ledger.
A famous local use case is the sale of the Doge to the Moon NFT in an online auction in July for 36.3 Ether (equivalent to RM325,000 then). The artwork was created by Red Hong Yi, a Malaysian contemporary artist known more recently for her artwork used on the cover of TIME magazine’s April issue.
A person needs to purchase three NFTs online from the Axie Marketplace before playing the game. Each token represents an in-game monster with specific status and abilities that a player would use to win battles.
The Axie NFT is priced in Ether, which means a person would need to buy Ether from an exchange and store it in a specific cryptocurrency wallet, Ronin Wallet, to purchase monsters online.
Naturally, the higher the demand for Axie NFTs (or monsters) and the higher the price of Ether, the higher the barriers to entry for the game. A glance at the Axie Marketplace shows that a monster would cost at least 0.04 Ether (or US$140, RM585) as at Oct 6. More than 335,000 monsters are listed for sale in the marketplace.
Besides earning SLP from battles in the game, Axie players can make money by selling their monsters at an attractive price when demand is high.
Jason Kwong, an Axie player and founder of NFT art agency Imperium Universe, says Axie players can also earn money by breeding new monsters in the game. “Each monster you buy belongs to one of nine clusters with different traits. A player can breed a new monster with different features by matching two monsters from different clusters,” he says.
Such a concept is not new in the world of traditional gaming and NFT games. For instance, there are existing horse-racing games where players can buy an NFT that represents a particular type of horse and put it on the field to compete in a race.
“You can also buy an NFT for a horse of a certain breed and match it with a horse from another breed. Some players would even pay you to breed with your horse. It is the same in Axie. I believe more NFT games like this will come out,” Kwong says.
Axie has started allowing its players to buy land that acts as the base of operations for their monsters and also gives them an edge in battles. The game charges a 4.25% fee for each NFT sold.
The ultimate concept is to create a metaverse — a virtual space in the online game where players can earn and spend cryptocurrencies and live in digitally. “It is like a parallel universe to the real world we are living in,” explains Kwong.
Axie, created by Vietnam-based game studio Sky Mavis, used to be a game that almost anyone could play and where cryptocurrencies could be earned. It was widely treated as a part-time job for side income.
“There were even video clips showing groups of people in some villages in the Philippines playing it together to earn money,” says Kwong.
Since May, after Axie entered the scene, many new players have flocked to the game, causing the prices of Axie NFTs to spike, quickly lifting the barriers to entry. There are also more professional players in the game with superior knowledge and skills. In short, it is much harder for Axie players to earn money nowadays.
The higher barriers to entry are partly why Ee and others are running Axie scholarship programmes worldwide for more people to join the game.
Ee says the organiser of the scholarship lends monsters to the scholars and trains them to win battles in the game. The scholars would need to commit several hours a day to the game to earn a given number of cryptocurrencies. The profit is split between the organiser and scholars at a specific ratio.
Under Ee’s programme Fuelabs Axie, the organiser takes 45% of the profits. Ee interviews potential scholars through phone calls and, once they are successful, they can play the game without forking out a sen.
Such a programme is seen as a win-win solution, as the players do not need to spend about RM1,500 to kick off their gaming journey while the organiser monetises their extra monsters.
So far, all scholars under Fuelabs Axie have been from the Philippines. “We don’t have local scholars, as the regulations surrounding NFTs here are still unclear,” says Ee.
Such a programme is also good for the Axie community, as prices of its NFTs (monsters), project tokens (AXS) and in-game cyrptocurrencies (SLP) would only rise over the long term if demand increases in tandem with the number of players.
The scholarship programmes are also about community building, says Ee. For instance, he enjoys interviewing scholars over the phone.
“I call every one of them. Some are university students whose scholarships were reduced by 10% to 15%. Some lost their financial support during the pandemic.
“The entry barrier is getting high, and the community needs to continue to grow. It will crumble one day if it stops growing and dwindles,” he says.
While Axie Infinity (Axie) is the hottest game in town, it is hardly the only non-fungible token (NFT) game launched recently with the play-to-earn model.
According to data company Statista, as at Sept 28, the top five games with the highest number of players in the last 30 days were Alien Worlds (699,140), Splinterlands (434,030), Galaxy Blocks (271,870), MOBOX: NFT Farmer (216,510) and Axie (193,770).
Quick research online shows that these games involve the trading of NFTs that represent unique cards and items that, in turn, can be used in the game to earn cryptocurrencies. Various digital tokens can be mined passively by performing a few clicks on the screen or earned through battles with other players.
It is worth noting that these cryptocurrency prices can be highly volatile and vulnerable to pump-and-dump tactics deployed by market speculators.
Cryptocurrency ranking website CoinGecko shows that the price of TLM, the cryptocurrency mined through playing Alien Worlds, collapsed by 97% to 19 US cents a token, on Oct 7, from its peak of US$6.93, on April 11.
Tethan Arena (Tethan) is another up-and-coming NFT game that has garnered some attention in the blockchain community. Based on online videos, Tethan players control a character that has a unique set of abilities while wandering on a map alone or with friends, trying their best to survive battles — and, of course, earn digital tokens.
As at Oct 7, the price of THG, the cryptocurrency associated with Tethan, was US$2.83, up 76% from Sept 17.
Play-to-earn is a term commonly associated with non-fungible token (NFT) games such as Axie Infinity (Axie), as many people play it for side income while working a full-time job. It is unlike other non-blockchain-based games, where people spend money to play them.
Is playing NFT games a good way to earn side income, though? Does the element of cryptocurrency encourage unhealthy speculation?
Licensed financial planner Marshall Wong, 31, is sceptical about Axie despite the benefits it brings to the gaming community. He is concerned that certain players could exploit the game by inflating the prices of NFTs and in-game currencies through members of their inner circles.
“They could expand their circles to inflate prices. If this is what most players do, the game would turn into something similar to a pyramid scheme,” Wong says.
It will take time to see whether the game developer will continue to improve the game to generate revenues based on real demand from players for its in-game items, he adds.
“As a financial planner, I would encourage people to seek other part-time jobs — such as becoming a Grab driver — that involve interaction with the real world. Skills a person learns from the game are very niche and harder to be applied elsewhere.”
Yet, Wong sees the benefit of NFT games, as he himself used to be an avid player of MapleStory, a popular online game, when he was 13. He would play the game for hours and sell in-game items online to strangers for a small profit. Transactions were done based on trust and, sometimes, he did not receive the cash promised by the buyers.
“From a gamer’s perspective, the online marketplace of NFT games is a much better platform for gamers to transact in-game items safely,” he says.
Wong does not think NFT games will have an adverse impact on the psychology of gamers, nor that they could fuel speculative behaviour in a big way.
After all, investors have been speculating on various asset classes such as shares and properties, instead of digital assets. Speculation also existed in the gaming world for a long time before the birth of NFT games.
“Gamers have been speculating on various in-game items for many years. For instance, they can buy rare items at a low price and sell them at a higher price at a better timing. It is not something new. NFT games merely make it more convenient to do so,” says Wong.
He believes Axie and other NFT games could change if the developers continue to innovate and enhance their products. “It is an interesting development,” he says.
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