HOW WILL PLAY-TO-EARN COMPANIES

AVOID STRIVING TO SURVIVE?

Play-to-earn (P2E) games are a new concept in the gaming world and have become
extremely popular in 2021. As in every potentially lucrative segment, hundreds of new
companies and projects surge, seeking for growing fat on the hype, as well as users who
want to coin it in.

The biggest challenge for companies in this sector who want to take the project seriously is
to create the perfect ecosystem to survive in the long term. Day after day, the token of
a P2E project plunges, and the incentives that users had to play — solely monetary, in most
cases — fade away. Then, the project is discontinued.

Play-to-earn games wedge issue for the crypto enthusiasts: on one side, a group believes
this is an unsustainable business model, such as Jason Schreier, a Bloomberg reporter
focused on the video gaming industry. On the other side, another group believes it will take
the traditional gaming market, such as Alexis Ohanian, Reddit founder, who assumes 90%
of games will pay users to play them in 5 years.

There are four main points that gaming companies need to evaluate about their business
model to be likely to survive:

1. gaming persona;
2. community engagement & growth;
3. tokenomics sustainability;
4. company & franchise goals.

GAMING PERSONA
First of all, it is vital to understand if the game behind the play-to-earn projects can
drive the attention of loyal, long-term players or if it is more likely to attract short-term,
profit-seeking ones.

The latter player's behavior is cyclical: the P2E gamer enters the game he perceives as
valuable in the short term, withdraws his payback, keeps playing until it is profitable at a
certain level, and then moves on to the next game. This type of player was simply for profits
and was not engaged with the game itself. If the token price plummets, he will have no
incentives to hold the token or invest his playing time.

COMMUNITY ENGAGEMENT & GROWTH

A vital surviving point for any gaming company is to have an engaging and constantly
growing community until it reaches a stable gaming fanbase. Concentrated efforts in
nurturing the community create a loyal community, especially at the early stages while
developing the game. The positive network effects are naturally perceived when it happens,
and the growth follows a snowball effect.

Matheus Brandão
TOKENOMICS' SUSTAINABILITY
If the economy behind the game is not sustainable, there is no reason for institutional
investors to finance the project, and there is no reason for new players/investors to join the
game.

Regardless of the actual mechanisms involved, companies have to build up a solid

framework for their token economy. Satisfying the following constraints, when applicable,
might be of great value:

1. Develop a multiple token economy, which allows a project to have at least a

governance token and a utility token. It will enable investors to have a long position
in a project without necessarily playing the game and provide a more robust token
structure where token liquidity and burn strategies can be performed in the utility
coin.
2. One of the tokens should generate value that is not found in fiat money.
3. Make sure that at least one token appreciates in value and happens sustainably:
burning tokens per se is not sustainable and is more of a forced mechanism to
generate inflation.
4. Enhanced utility, allowing different use cases in the ecosystem, not only for the
token itself but for what might be purchased in-game with the token
5. Develop an independent secondary marketplace where users can trade their
items and negotiate market prices.

COMPANY & FRANCHISE GOALS

Players, in general, won't play the same games for decades, not even years, with few
exceptions. For example, The Rockstar Games fan base started with the first Grand Theft
Autos, especially GTA: San Andreas, which made people play GTA's sequels and games
like Bully and Red Dead Redemption is the trust that they had in the company and the
games they produced.

Since a game is generally finite and players will eventually move on to new ones, it is a
smart move to provide not only a token but items that could be used or swapped in
future games from the same company. This would be an extra incentive for players to
move to other games but within the game publisher ecosystem.

CONCLUSION
Listening to investors' feedback and delivering the expected product updates is vital.
Companies must keep iteratively innovating and adapting their business model to what is
suitable at the moment.

Matheus Brandão