Market

First gen:

Since 2017 when the first NFT game launched on the Ethereum network, there have been waves of evolution, complexity, and market reception. But then a groundbreaking concept took off in 2019: Non-fungible tokens (NFTs).

The innovative element they offer is the capacity to create provable digital scarcity for the first time in history. It is easy to understand why the gaming sector saw a great use case for this innovation.

The first wave of NFT games had a passive game experience, relying on players' actions that resulted in the collection of resources over time with a more significant focus on educating the audience about Decentralized Finance (DeFi) through basic gamification mechanisms.

Quickly, the projects started to integrate more complex concepts that enhanced the usability of NFTs within games, around the ability of the NFTs to merge and "breed" new, more complex, and rarer ones that players would own and, therefore, be in total capacity to trade and profit from.

Still, first-gen NFT games lacked long-term player engagement, proper in-game economy, and concerns over digital scarcity.

Second gen:

The second generation of NFT games saw the rise of the Play-to-Earn concept; with games built on dApps, developers started focusing on improving long-term player engagement through their in-game digital economies. These in-game tokens or rewards can either be used in-game, traded on exchanges, or used to trade or mint more valuable NFTs.

Incentivising players with an innovative play-to-earn ecosystem brought more players into the crypto ecosystem and drove up engagement as the game essentially became part of a person's life and income stream.

Economic sustainability:

Usually, during the early launch of Web3 games, developers tend to emit higher rewards rates, resulting in players earning so many tokens that they can do it for a living or even get richer and can afford real-world luxury assets. That was enough to attract the masses who were not well-educated on cryptocurrencies and tokenomics. Most people joined and dug through every loophole, both in-game and DeFi, to manipulate the price and make as much money as possible. As a result, as it has been observed in the past year or two, many games could not sustain authentic gameplay, and their values were abused; the game token price went through a hype, then pump-and-dump, and then game developers either left the project or staged a rug-pull event. Play-to-Earn games can work, but they need much more quality, better balance, better gameplay, and much better thought-out tokenomics and use cases equally distilled into the game ecosystem.

Play-to-Earn is the driver for the current generation of NFT games; the upcoming third generation of NFT games will need a larger community of real gamers, together with balanced economic incentives. The next generation of NFT games is expected to come with a more refined gaming experience, leveraging the strengths of play-to-earn tokenomics, game economy balance, well-connected DeFi ecosystems, and NFT markets which, while having fun in the game, increase the value for the entire ecosystem. It should not be a zero-sum game, as productivity is created with engaging gameplay and a continuous launch of new games with ever-expanding use cases. Thus, it should be categorized as "Play & Earn," as this underlines earning as a simultaneous event with playing. Playing should be a fun experience for Web3 players rather than a prerequisite to earning.