Building Sustainable P2E Games With Bitcoin

P2E is dead. Long live P2E.

A common (and justified) critique of Web3 gaming is that the concept of play-to-earn (P2E) is predatory and unsustainable. But what if I told you that there is a sub-sector of the industry that is making it work in a sustainable and net-positive way?

The idea that you can make money playing games is what first put Web3 gaming on the map. Who wouldn’t be attracted by the prospect of replacing a traditional 9 to 5 with farming mobs and proving your skills in player-versus-player (PvP) battles?

Although there may still be a path to success for games leveraging some of the more infamous token models, there is one sector of gaming that stands to gain significant uplift from implementing player earning in the form of nano-rewards.

Specifically, games that make the majority of their revenue from advertisements (namely hyper-casual games) can meaningfully increase KPIs, such as retention, ad impressions, and even in-app purchases (IAPs), by siphoning off a percentage of ad-based revenues to give back to players.

This is best suited for more casual games due to their pre-launch testing process. Teams will generally A/B test the core loop for day 1 (D1), day 3 (D3), and day 7 (D7) retention, which provides a base for the average revenue per user (ARPU), along with the cost per install (CPI), to have a solid foundation for estimated profits (ARPU – CPI = profits). All that’s left is to sink money into user acquisition (UA) and scale.

The uplift teams get by using a % of ARPU for player rewards is higher retention (up to day 30 [D30] – which is traditionally unheard of in hyper-casual). This in turn can result in a higher total ARPU as there are more opportunities for players to watch ads.

Sounds good on paper but the main challenge here is reducing transaction fees so that rewards can fit into the miniscule margins of hyper-casual (ranging between $0.02-$0.05, on average). With the average bank fee ranging from 1.5% to 3.5% and most L2 gas fees roughly at $0.1, teams have to look to other payment infrastructures.

This is where Bitcoin comes in. The Lightning Network, Bitcoins L2, allows for the transfer of nano-rewards in the form of a couple of Sats (1 Sat = 100M/th of 1 BTC or roughly $0.00026) at an average of 0.005% fees.

This is obviously not a get-rich-quick scheme and players can only expect to earn a couple of dollars per month but regardless, some games using this model have seen as much as a 10x in retention and an almost 5x in ARPU.

Some food for thought the next time you hear someone refute the sustainability of P2E. A more detailed analysis coming soon 👀

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Hi Joseph. Interesting reading. I would like to read more researches on sustainability of P2E game economies and web3 game economies in general. Do you have some advices of good researches on the matter?

Aside from the nan-rewards model highlighted in this report, sustainable P2E is like an oxymoron. I think Sorare has a good model. In general, any tournaments-based earning can be made sustainable without as much work as, say, an MMO like BigTime.

In terms of reading materials, I think there are some good Twitter accounts to follow on the topic but the truth is no one has figured out the playbook yet.

This is a great YT video on the topic. It's focused on Web2 but gives you a good idea of how much more complicated things get when using blockchain rails.