Play-to-earn gaming is the newest craze in the crypto world, but unless you have thousands of dollars, you probably won’t be able to participate.
Enter a concept called scholarships—a way for players to rent the non-fungible tokens used in games as tools, creatures, or skins. These NFTs, for short, are often required for playing or they give players an advantage. In exchange for renting the NFTs, players pay the lenders a cut of whatever cryptocurrency they earn while battling, farming, or racing online. Essentially, NFTs are already maturing to the point where they have de facto landlords.
To play the most popular of these games, Axie Infinity, players need a minimum of three NFTs in the form of axies, or fluffy virtual Pokémon-looking creatures that can cost $250 to $600 for the entire set. Anyone who meets that bar can form a team that can battle other teams and earn cryptocurrency that can be converted to cash through a crypto exchange or other means.
Players who lack the money for axies—often in low-income countries—can rent them from individuals or groups. Recently, some lenders have started trying to turn that demand into a big business.
In August, a major provider of these so-called scholarships, Yield Guild Games, received a $4.6 million investment led by the crypto-focused arm of venture capital firm Andreesen Horowitz. In November, another scholarship provider, GuildFi, raised $6 million in a funding round led by venture capital firms DeFiance Capital and Hashed.
In contrast, Maxim de Clippelaar and Mick de Bock, two 20-somethings from the Netherlands, started their rental service, Axie University, in August with about $12,000 out of their own pockets. So far, they’ve signed up 50 scholars, all of whom are in the Philippines.
Scholars, who pay no up-front cost, are required to play every day and meet a steadily rising minimum daily threshold of earnings that starts at about 85 smooth love potion, or nearly $1 in Axie Infinity’s cryptocurrency. De Bock said players must game for about two hours daily to meet their quota, but they may eventually be able to devote less time if they improve. Players who frequently miss the quota can be dropped, de Clippelaar said. There is no cost to players for being dropped or for quitting.
As part of the financial end of the arrangement, players keep 40% of the crypto profits they earn from gaming while Axie University and its four investors hold onto the remaining 60%.
The founders of Axie University say their company grosses $5,000 monthly before paying scholars and some private investors their share. What’s left over, Axie University says, is reinvested into expanding the company’s operations, with the goal of having 200 scholars by summer.
Critics have pointed to the renting of NFT assets to play a game as gambling or exploitation, because of the low earnings for scholars, who are mostly in Southeast Asia. Yet, de Clippelaar countered that Axie University gives players an opportunity for players to supplement their low wages. He said players choose whether to participate and that many say the scholar program is an added perk that comes with playing a game they enjoy.
Jonry Estrara, a 19-year-old Axie University scholar and a student at Rizwoods Colleges in Cebu City, Philippines, said he earns $100 to $250 every two weeks, after Axie University takes its cut, from playing Axie Infinity for three-to-four hours daily. In Cebu City, where the minimum wage is 404 Philippine pesos —$7.80 daily, or about $109 per two weeks— his earnings go relatively far, Estrara said.
Estrara said he had been in a scholar program before with a different lender but ultimately quit when he saw the opportunity to take on more responsibilities with Axie University and earn more money. He was the fifth person to sign up as an Axie University scholar, and has since started to help manage a part of the operation, for which he gets some extra pay.
Estrara said he has helped recruit people he knows to become Axie scholars. At first, some friends thought the whole set-up was a scam.
“But when I got my money, my salary that I received from Axie, they were like, ‘Whoa, how do you do that? How do you play Axie?’” he said.
After earning enough money, scholars can buy their own team and “graduate.” At that point they can either set off on their own or stay with Axie University and become a manager, meaning they would still get the 60/40 revenue split as a scholar but also a 50/50 split, or a higher cut if they decide, by loaning out their own team to someone else.
Estrara said getting his own team is something he’s working toward by saving money he earns from Axie University to buy his own team and rent it out.
In the end, de Clippelaar said Axie University takes on a lot of risk by renting out teams of axies.
Axie Infinity only allows one account per person. So, for example, scholars who use two different accounts to play Axie Infinity—thereby increasing their opportunity for earnings—could be banned and all the axies they rented lost. If so, Axie University could lose hundreds of dollars.
“They can do one thing wrong and we lose everything,” said de Clippelaar.
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