Play-to-earn as we know it is dead: Long live SocialFi

Web3 games can take inspiration from eSports economics – and enhance it with SocialFi.

If the rapid rise and equally rapid fall of token prices in Web3 play-to-earn games like Axie Infinity and Pegaxy have proven anything, it’s that the traditional P2E token models don’t work. Relying heavily on a continuous stream of new users for growth, even when P2E tokens stage huge rallies, they inevitably fall – and struggle to recover.

We cannot build the future of Web3 games on broken token models. But we can look at eSports and expand the success of its economy by mixing it with a Web3 innovation – SocialFi.

To create Web3 economies that will stand the test of time, we need to rethink how they generate returns. Instead of creating models that rely on attracting new players, we can monetize the relationships players already have with each other; thereby giving more people the opportunity to participate in these economies. In other words, Web3 games don’t need P2E. They need SocialFi.

For the uninitiated, “SocialFi” refers to the use of blockchain technology to monetize social interactions – one of the most talked about trends in blockchain this year.

The world was introduced to SocialFi in a big way in August when Friend.tech – a social token platform that allows users to monetize the digital communities they build – burst onto the scene.

Despite the fanfare, Friend.tech wasn’t the first attempt to merge blockchain with social relationships. Decentralized social media has made it possible for creators to monetize their content for years. But Friend.tech was the first social platform to introduce a model that monetized relationships rather than content: A new approach that initially gained a significant user base and feverish media attention.

Since then, the platform’s popularity has fluctuated, along with public opinion about the likelihood of its long-term viability. An early boom in transactions gave way to a sharp decline just weeks after its debut, and it faced criticism for its reliance on social and para-social relationships formed outside its own ecosystem.

But love it or hate it, Friend.tech has proven something important: that decentralized, token-based systems can effectively monetize our connections to each other.

Building SocialFi rails for the gaming ecosystem

So what does this new social phenomenon have to do with eSports and the Web3 gaming world?

Friend.tech is struggling because it didn’t start life with its own social ecosystem. Instead, it took away the connections people had formed on separate platforms, like X. But gaming ecosystems come with the essential missing component for successful SocialFi already installed: Community.

Relationships have been critical to many of the world’s most popular games for years. In both Web2 and Web3, team systems increase player retention and expand game options for studios and players. In esports, teams and fans engage in a familiar economic dance: Fans support teams through merchandise, ticket sales, and viewership, while teams provide entertainment and community. And in blockchain games, community plays what is arguably an even more crucial role. Players in Web3 games rely on each other to boost earning potential—mostly through guilds: Groups of players who band together to share resources, train new players, and earn rewards.

These community elements in games are exactly where the mechanics of SocialFi can be applied. The SocialFi rails that earn social and para-social relationships in Friend.tech can be used to do the same for guild communities in SocialFi for games. Just as people buy “keys” to connect with others on Friend.tech (and sell them, possibly for a profit), players can buy and sell guild memberships.

It doesn’t end there: SocialFi for games can also open up game economies for people who don’t play games or even interact directly with games. In addition to the seats players buy in guilds, anyone can buy a “faction” of the guilds they want to support.

Read more from our opinion section: Hey gamers, blockchain isn’t so bad

We have FinTech and now Friend.tech, and I call these new game mechanics “GuildTech.” As guilds earn rewards, its fraction owners can also receive a portion of them, or choose to buy and sell more fractions as speculative tools.

I believe that this kind of infrastructure has the power to create blockchain gaming economies that last and that SocialFi will inevitably become a crucial element of blockchain gaming. By allowing a broader range of users to reap rewards from Web3 games, the addition of these rails will attract a whole new population of participants—not just new players, but an army of engaged fans and stakeholders as well.

This is why the fusion of SocialFi and gaming is not just a passing trend: it is the key to unlocking untapped potential and ensuring a strong future.

I urge developers, industry leaders and the broader crypto community to take inspiration from eSports and dig deeper into the possibilities SocialFi offers. Together, let’s shape an era where games are not just about playing, but also about forging beneficial connections with each other.

Corey Wilton is the co-founder and CEO of Mirai Labs, a leading international Web3 game studio headquartered in Vietnam. Mirai Labs’ first release, Pegaxy, was recognized as the second most popular crypto project in the Philippines in 2022.

Don’t miss the next big story – sign up for our free daily newsletter.