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

Web3 gaming can take inspiration from esports economics — and improve on it with SocialFi.

If the swift rise and equally precipitous fall of token prices in Web3 play-to-earn games like Axie Infinity and Pegaxy proved anything, it’s that the traditional P2E token models do not work. Relying heavily on a continuous stream of new users for growth, even when P2E tokens stage large rallies, they inevitably drop — and struggle to recover.

We can’t build the future of Web3 games on broken token models. But we can look to esports and extend the success of its economics by blending it with a Web3 innovation — SocialFi.

To create Web3 economies that will stand the test of time, we must rethink how they produce returns. Instead of creating models that rely on attracting new players, we can monetize the relationships players have with one another already; and in doing so, give 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 tech 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 lets users make money from 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 novel approach that initially garnered 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 surge in transactions gave way to a steep fall just weeks after its debut, and it has faced criticism for its dependence on social and para-social relationships formed outside its own ecosystem.

But love it or hate it, Friend.tech did prove something important: That decentralized, token-based systems can effectively monetize our connections with one another.

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 did not start life with its own social ecosystem. Instead, it siphoned off the connections people had formed on separate platforms, such as X. But gaming ecosystems come with the crucial 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 boost player retention and expand gameplay 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 one another to boost earning potential — most commonly, through guilds: Groups of players that team up to share resources, train new players and earn rewards.

These community elements in games are precisely where the mechanics of SocialFi can be applied. The SocialFi rails that monetize social and para-social relationships in Friend.tech could 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, potentially for a profit), players could buy and sell guild memberships.

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

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

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

I believe this kind of infrastructure has the power to create blockchain game economies that last and that SocialFi will inevitably become a crucial element of blockchain games. By allowing a broader swathe of users to reap rewards from Web3 games, adding these rails will attract a whole new population of participants — not only new players, but an army of engaged supporters and stakeholders, too.

That’s why the fusion of SocialFi and gaming is not just a fleeting trend: It’s 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 delve deeper into the possibilities that SocialFi presents. Let’s collaboratively shape an era where gaming isn’t just about play, but also about forging beneficial connections with one another.

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

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