Published
December 9, 2021

The Rise of DAOs in the Play-to- Earn Landscape

Often the most impactful innovations are achieved by combining seemingly disparate yet tangentially related technologies to realize synergies which could not otherwise have been created. The development of Bitcoin, with its marriage of blockchains, consensus protocols, public-key cryptography, peer-to-peer networking, and other technologies is one example of an innovation which is more valuable than the sum of its parts. Another such example is the combination of play-to-earn (P2E) games and decentralized autonomous organizations (DAOs) to form P2E gaming guilds. 

This article will explore the landscape of P2E gaming guilds and examine some of the important implications underlying the phenomenon. In particular, the following subjects will be covered:

  1. An Introduction to P2E and DAOs
  2. The Incumbent P2E Guilds
  3. Implications of P2E Gamer Consolidation

An Introduction to P2E and DAOs

Before considering the specifics of the P2E DAO trend, it is useful to first establish an understanding of both concepts in isolation. 

The P2E gaming business model – otherwise known as GameFi – centers on making gamers the primary beneficiaries of a game’s success. Not unlike games sold under other models, P2E games reward users for their active engagement in the community with in-game assets. Where P2E games deviate from other models is by creating an active secondary market for these virtual assets, enabling users to exchange rewards they have earned in the course of playing the game for cryptocurrency, which in turn can be translated into real-world fiat money. Accordingly, rather than purchasing cosmetic items or character upgrades and having no viable pathway through which to re-sell them, P2E games confer greater agency on gamers in allowing them to either hold or sell their in-game assets as they please. Whether they elect to reinvest their virtual goods into their avatars or liquidate their positions entirely, P2E gamers enjoy an unprecedented level of choice in how they derive benefits from their in-game time.

With respect to DAOs, they have been cemented as among the most cutting-edge and potentially revolutionary applications of blockchain and crypto technology. DAOs represent a novel framework for corporate structure that relies on a nexus of smart contracts to dictate the investing and operational decisions of the DAO. With all of their financial transactions being readily viewable on the blockchain, such organizations provide transparency that is unrivaled by traditional corporations. Members of a DAO hold governance tokens which enable them to vote on proposals, with each member’s vote being weighted by their proportional ownership of DAO tokens. A number of DAOs have been formed with the express purpose of actively investing in NFTs.  

The Incumbent P2E Guilds

The current landscape of P2E gaming guilds is one that is still nascent yet rapidly evolving. While many guilds rely on comparable profit-sharing models, some of the more mature ones have diversified their revenue streams to avoid being entirely dependent on a single source of earnings. Additionally, while the DAO structure has served as the backbone for the most popular guilds, other more informal organizational structures have emerged as viable alternatives. Following are notable P2E guilds that are either currently operational or poised for an imminent launch:

Yield Guild Games

Yield Guild Games (YGG) is among the best-known leaders in the world of P2E-focused DAOs. After seeing the positive economic effect of Axie Infinity on citizens of Cabanatuan City in the Philippines, local Filipino gaming entrepreneur Gabby Dizon was quick to realize the vast potential for a business model built on lending out in-game characters to decentralize the process of yield-earning. Joined by Beryl Li as Chief Financial Officer and the anonymous Owl of Moistness as Chief Technology Officer, Dizon founded YGG in 2020. The guild was born with the vision of bringing yield-farming to P2E metaverse games while simultaneously helping to accelerate the growth and development of these virtual worlds. 

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The core activities of YGG can be broken down as follows: 

  • Community-building: for one, the guild necessarily relies on having a wide-spanning network of competitive P2E gamers to participate in the DAO and help it realize its mission of creating and capturing value in virtual worlds. This entails deploying their assets to guild members to enable them to earn rewards in their respective blockchain-based games, as well as inviting the participation of members in making operational and investing decisions as part of the DAO’s decentralized governance. To support their community-building activities, the YGG team actively recruits new players, community managers, ambassadors, and game masters, and incentivizes participation through reward programs and a level-up system. 
  • Yield-earning: part-and-parcel with YGG’s ambition to maximize the reach of their community is their revenue model. Fundamentally, the guild relies on a profit-sharing model which involves the rent or sale of in-game assets to its players (known as ‘scholars’ in the parlance of P2E guilds), who then use these assets to generate yield in P2E games and split their earnings with the guild. Overall, the guild’s value is derived from multiple sources in addition to yield earned on the active use of its in-game assets, including rewards generated from revenue streams such as merchandise sales, subscription fees, and sponsorships, among others.

At launch, YGG’s core areas of focus were the P2E games and metaverses of Axie Infinity, The Sandbox, and League of Kingdoms, and the guild has held plans of expanding as the P2E ecosystem matures and more viable opportunities emerge. Namely, YGG has expanded into other popular P2E offerings including Splinterlands, ZED RUN, as well as Solana-based Star Atlas. The guild’s rewards program is disaggregated into different vaults for specific activities being performed in each game, with owners of the YGG token being free to stake their holdings in the particular vaults from which they seek to derive personal rewards.

Given its premier position, YGG has been among the more successful P2E guilds in raising traditional venture capital. The guild was supported by a USD$1.325M Seed Round led by Delphi Digital in addition to a USD$4M round led by BITKRAFT Ventures. More recently, YGG raised a USD$4.6M round led by Andreessen Horowitz, which cited the potential opportunity to address chronic and rampant unemployment in developing markets through virtual worlds and P2E gaming, ultimately pointing to YGG as “…an unstoppable force for good.

MAO DAO

Shorthand for Metaverse Ape Organization DAO, the MAO DAO comprises a guild representing primarily Chinese P2E gamers, with plans to expand the community to also include other South-East Asian members. The guild’s early operations are founded on the rudimentary model of Axie Infinity scholarships, wherein the DAO lends Axies to its players who then use them to farm in-game rewards which are ultimately split 65%/15%/20% among the scholar, community manager, and MAO DAO treasury, respectively. The DAO aims to double up as an incubator for community-sourced, early-stage NFT gaming ventures, providing support to Asian founders who may not otherwise have access to funding. 

Membership and the right to participate in the guild’s governance is conferred through ownership of Ready Player Cat (RPC) NFTs, a collection of 5,000 feline avatars which draw heavily in their designs from popular culture influences. The genesis version of RPC NFTs allows community members to share in the profits of the guild’s Axie Infinity scholarship program, and there are intentions to launch alternative sets of RPCs to grant members access to the rewards earned from other P2E games with whom the guild partners in future.  

In recent news, MAO DAO announced their formation of a strategic partnership with DODO, a multi-chain decentralized exchange and liquidity provider. The partnership will allow the guild to leverage DODO’s expertise in decentralized finance to help scale operations and realize competitive advantages to rival other P2E gaming DAOs.

Ready Player DAO

A much earlier-stage P2E guild, the ‘…gang of gaming nerds and metaverse explorers’ behind Ready Player DAO (RPD) have the grand ambition of building and cultivating a DAO that can drive P2E to become the dominant gaming business model, thereby leveling the playing field between professional game development studios and their audiences. The guild’s primary activities include investing into P2E games by acquiring in-game assets, enriching the P2E and DAO ecosystems by architecting new tools and processes, and bridging the gap between blockchain-based and traditional gaming through strategic partnerships with non-crypto gaming industry incumbents. 

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At the time of writing, RPD was still under active development. That said, the guild had already begun building its traction in the P2E gaming space, having raised in excess of 1,000 ETH and acquired a number of in-game assets in Axie Infinity. The guild also boasts a sizable community of Axie Infinity scholars, assimilating them into RPD as part of a merger with guild founder John Cabrera’s Ready Scholar School. Overall, RPD is making respectable progress as it gears up for its impending launch into the world of P2E DAOs.

Beyond DAO Structures

It is important to note that the consolidation of P2E gamers into guilds has not been occurring solely under the purview of DAOs. In fact, several factions have formed with missions and operations not unlike those of the aforementioned guilds, except they are not organized in the form of traditional DAOs. Examples of this trend in the direction of less rigid structures include:

  • Loot Squad: this informal guild provides standard Axie Infinity scholarship programs with a 70%/30% earnings split between scholars and the original owners of the in-game assets. The scholarship is provided by a group of Axie veterans going by the pseudonyms BinaryAssets, Flowbot44, and Brycent. The guild brought on its first official scholar in mid-May of 2021 and has grown to well over 100 since then. Loot Squad’s core team has also diversified its investments beyond Axie Infinity, acquiring assets in other P2E titles including Ember Sword and Guild of Guardians. 
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  • Method to the Mythos: more popularly known as MTTM, this guild was also formed with an initial focus on providing Axie Infinity Scholarships. Not organized as a DAO, MTTM brands itself as a first-class NFT and Axie Infinity community, and it relies on a profit-sharing model akin to other guilds with a 60%/40% split between the scholar and the guild.  
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Implications of P2E Gamer Consolidation

The consolidation of gamers under separate P2E guilds, both those formed as DAOs and those more informally organized, has noteworthy implications on crypto and NFT markets as well as real-world economies at large.

For one, the model of onboarding potentially less advantaged gamers through lending the guild’s in-game assets drastically reduces the P2E ecosystem’s barriers to entry. In the case of a game such as Axie Infinity, the minimum starting requirement for newcomers is a team of 3 Axies which must be purchased in the marketplace. While Axie prices vary according to market sentiment, the cost of admission into the game has historically been in excess of USD$200. Naturally, such steep prices can keep a substantial target segment of P2E games from ever enjoying the economic benefits of playing. By enabling gamers to enter the market at no upfront cost, guilds are paving the way for P2E games to achieve a critical mass that can rival that of traditional gaming communities.

Closely related to this elimination of barriers to entry is the fact that the existence of P2E guilds can alter the prevailing narrative surrounding crypto technologies. In public discourse, there is an increasingly hostile divide between those who believe in crypto markets as media for achieving economic freedom, and those who demonize them as unsanctioned securities markets rife with dangerous speculation and financial crimes. The role of P2E guilds in uplifting less fortunate gamers from economic ruin and granting them access to an ever-expanding labour market will be instrumental in changing the optics that surround crypto. Taking the example of Axie Infinity’s in-game currency – known as Smooth Love Potion (SLP) – it appears that Axie players in certain developing markets would have been more economically advantaged by farming SLP in mid-2021 rather than earning in their national currency. By enabling access to P2E games, guilds are in a position to directly address poverty and solidify crypto as a force for positive change.

Finally, P2E guilds serve a more social function in helping to enrich the user experience of GameFi and unite P2E gamers under a common banner. By serving as a gateway to emerging and established P2E games, guilds help such games attract audiences at-scale and by extension improve their product. Also, in order to rival more traditional gaming communities and development studios, it is imperative that P2E gamers can organize themselves in a unified manner. Guilds allow for this by inviting P2E gamers to invest in DAO tokens and partake in community governance decisions. 


Closing Remarks  

According to Messari, the market capitalization of Axie Infinity would position it as the 5th most valuable video game company in the world, trailing behemoths such as Activision Blizzard and Nintendo. The continued growth of P2E games such as Axie will in no small part be driven by further consolidation of gamers under guilds. Ultimately, the community-oriented approach to developing P2E games – which has been characteristic of crypto projects at large – will prove crucial to further scaling the landscape and solidifying P2E as a dominant gaming business model.

References

Li, B. (2021, June 25). Yield Guild Games Whitepaper. Retrieved from Yield Guild Games: https://yieldguild.io/

Ready Player DAO. (2021, August 30). Ready Player DAO: The Game Has Changed. Retrieved from Ready Player DAO: https://medium.com/@readyplayerdao/ready-player-dao-533c16dacf2f

Simpson, A. (2021, August 19). Investing in Yield Guild Games. Retrieved from a16z: https://a16z.com/2021/08/19/investing-in-yield-guild-games/

Yield Guild Games. (2021, September 17). YGG: 10 Games We're Invested In. Retrieved from Yield Guild Games: https://medium.com/yield-guild-games/ygg-10-games-were-invested-in-f1e7b452565f





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