The rise and fall of “to-earn” projects

People have always been greedy to make easy money through gaming, movement or tapping, but often this ends sadly. Is there a future for making money from daily actions?

The Hamster Kombat airdrop upset thousands, if not millions, of users. However, this scenario is not new; The crypto community has already seen the rapid rise and fall of several mechanisms that supposedly allow making money through simple actions. What did we learn from this?

Early view: hope for stable earnings

The emergence of Web3 games has aroused great interest in earning cryptocurrencies with fairly simple actions. Play-to-win (P2E) games have become a new genre where users can earn cryptocurrency and NFTs through events.

Axie Infinity was a pioneer in this field. To get started with the game, users needed startup capital to purchase Axie, a virtual NFT pet. Users could earn coins by completing missions, participating in battles with other players, and passing levels in the game. Tokens were exchanged for other digital or fiat currencies and items could be sold on crypto exchanges and NFT marketplaces.

And no joke, the pioneering game was considered an option for real earnings for a long time. It has gained great popularity especially in the Philippines. In 2020, when the whole world was covered in pandemics, borders were closed and people started losing their jobs, enterprising Filipino crypto enthusiasts created guilds and started offering ordinary users the opportunity to make money from P2E games.

However, Axie Infinity was ruined by in-game inflation. As a result of its continuous growth, the price of the utility token Smooth Love Potion (SLP) began to decline. To maintain the high demand for SLP and AXS (governance token), an endless number of new registrations are needed, including from players who own neither one nor the other.

If the number of monthly active users (MAU) was over 2.7 million at its peak, by July 2024 the number was just over 310,000. The decline in Axie Infinity indicators occurred during the correction period of the entire digital asset market after Bitcoin (BTC) reached its all-time high (ATH) on November 10, 2021.

Axie Infinity monthly active users. Source: Active Player

The game’s widespread hacking in March 2022 played a significant role in its decline in popularity. The lack of exits and new users resulted in existing users no longer being able to monetize. The stories of some platform users turned out to be even sadder. Some players who wanted to make money from their investments in the game got into debt. They couldn’t make money from the project.

Healthy habits are replacing gaming, but it won’t last long

In an environment where the era of P2E gaming is in decline, a new type of earnings with win-win mechanics has entered the web3 arena. The most famous example of such a game is STEPN.

However, its profitability dropped significantly due to the influx of users, and some experts found signs of a financial pyramid in the mechanics of STEPN.

At the same time, doubts about the project do not change the fact that the first players of the platform actually managed to earn good money. Users were able to get a return on their investments, but the losses of those who participated in the excitement phase significantly exceeded their earnings.

Why did a game aimed at teaching healthy habits fail? The cost protection mechanisms put forward by the project team did not justify themselves. STEPN was devastated by its popularity: instead of using in-game tokens, Green Satoshi Token (GST), users converted them to Green Metaverse Token (GMT), actively tradable tokens, in the hope of further growth, especially after the rally in 2014. In the spring of 2022, the token reached an ATH of $4.11.

According to Dune, there was also a significant decrease in the project’s MAU; In May 2022, this figure was over 705,000, then in September 2024 it was already below 19,000.

STEPN monthly active users. Source: Dune

The creators of the project state on the official website that the win-win format can be considered an element of the Ponzi scheme, but STEPN has nothing in common with it. According to them, the developers have built strong tokenomics into the platform, which ensures the stability of the cryptocurrency value of the project.

But at its core, STEPN had no real economy and lived off the money of new users who bought virtual objects for thousands of dollars in the hope of getting their investment back in a few months while doing imaginary, useless work.

To maintain the necessary audience effectiveness, there needs to be a steady influx of new players who will purchase in-game currency and NFT artifacts from old players. Such projects are possible with the influx of large numbers of new participants. However, the principle of profit distribution in the make-win method is different from the classic Ponzi scheme and is more similar to retail trading.

STEPN has been around for a year, and its offer of doing something simple and getting paid for it appeals to those who like easy money. At the time of this writing, the price of the native GMT token is $0.1464, which is 96% lower than ATH.

Mechanics become simpler

Another branch of evolution in the “to win” segment was the tap to win mechanics. These games have made it easier for users to earn money than their predecessors. If previous players have been offered at least some gameplay, with the touch-to-earn feature, users can earn money by simply touching the screen.

One of the most popular projects in this segment was Hamster Kombat: with the support of millions of users, the project faced a huge wave of discontent due to the size of the airdrop.

Were there any signals that could signal the end of Hamster Kombat? Of course, it is enough to look at the tokenomics and target audience of the project.

Thus, 75% of the token supply is directed to the community. At the same time, a significant part of the audience consists of newcomers or freebie lovers. Such an audience may tend to sell tokens quickly, which can put intense pressure on the price of the coin after listing. Moreover, the project team practically did not disclose the long-term value of the coin.

Due to its manipulation mechanics, Hamster Kombat has built an impressive base of millions of users. However, this also created an additional risk of the project collapsing as users rushed to get rid of the tokens after listing.

Can society learn from past failures?

Yat Siu, co-founder and executive chairman of Animoca Brands, explained in a comment to crypto.news that a key issue for blockchain games is the lack of established mass distribution channels. Major platforms like the Apple App Store and Steam often restrict games containing NFTs and limit their mass reach.

“However, as more gamers interact with blockchain through easily accessible Telegram Mini Apps, we can expect the growing popularity of these products to encourage mainstream game developers to invest more boldly in the web3 gaming industry. “This path is similar to how early mobile games evolved from a niche disdained by much of the traditional gaming industry to a dominant gaming business model.”

Bozena Rezab, co-founder and president of GAMEE, on the contrary, is sure that the phenomenon of such games is primarily due to the fact that they stimulate the mass adoption of cryptocurrencies, and this is good for the industry. For example, he reminded that 131 million users purchased Hamster Kombat tokens; This figure is much higher than previous web3 engagement rates, which often exceeded thousands or perhaps tens of thousands of participants.

“This is a clear indication of the potential for casual gaming and Telegram to drive crypto adoption.”

Is there any hope of making money?

Who makes money from for-profit projects? Typically only project creators and early participants. The benefit of receiving real money to the user of web3 games is quite controversial. On the one hand, there have been cases of successful withdrawal of in-game currency; On the other hand, there are so many active users that the developer company cannot cover all the money earned by the players.

Play-to-win, move-to-win, or touch-to-win projects eventually die out due to their rapid popularity. Many of these popular games are dominated by a pyramid scheme: new players fund old players until interest runs out. At this point the project is doomed to failure.

Are all easy money projects doomed to failure? Of course not. The main disadvantages of such games are poorly thought-out tokenomics and dependence on a constant flow of new users. Therefore, the future of projects with profit mechanics will depend on the implementation of sustainable business models. However, even though the mechanics are predominantly based on a pyramid, the world of web3 games has witnessed many high-profile ups and downs.