Why Play to Earn Games Are Failing

Adam Fern, co-founder of PoP, recently sparked renewed debate around the play-to-earn (P2E) model in web3 gaming with a candid article titled “Play to Earn is Dumb and Here's Why.” His main argument challenges the sustainability and design of P2E, suggesting that blending fun with financial incentives can harm both elements of the gaming experience.

The Core Argument: Fun vs. Finance

According to Fern, when games introduce earning as a key mechanic, it competes directly with the notion of fun. Citing Maslow’s hierarchy of needs, he notes that income generation addresses more pressing human needs than entertainment does. As a result, financial motivations inevitably take precedence over enjoyment. This shift, he argues, distorts the purpose of games and undermines the long-term value of player engagement.

Fern references his own experience with Pirate Nation to illustrate this. Initially, the project saw strong post-token generation event (TGE) metrics. However, over time, tokens became concentrated in the hands of parties with misaligned incentives, ultimately resulting in sustained sell pressure and a declining in-game economy. According to him, this pattern is common across most P2E and play-to-airdrop (P2A) campaigns seen in the past year.

His conclusion is clear: game developers should aim to build titles that are inherently worth playing (even ones players would be willing to pay for) rather than games that pay players to participate.

Why Play to Earn Games Are Failing

Alternate Views: Can P2E Be Repaired?

Other voices in the web3 space have added layers of nuance to this ongoing discussion.

Loopify, another industry commentator, agrees with Fern on some fronts. He proposes that token distribution should be treated as a marketing expense rather than a long-term user retention strategy. He points out that few web3 games have successfully leveraged token rewards for user acquisition (UA), citing Sleepagotchi as a rare example with a positive return on reward spend (RORS). In his view, most of the success seen in this area comes from crypto games designed for a web2 audience.

Heimdall, the chief economist at Citadel, offers a counterpoint. He believes fun and finance can coexist - but only under specific conditions. The key, he says, is competition. In Citadel's approach, which is inspired by EVE Online, token rewards are tied to real risk, such as asset destruction, which introduces meaningful stakes and interdependencies. For Heimdall, earnings should emerge naturally from player-to-player value exchange in a functioning in-game economy. “Earning is just a byproduct of having a real economy,” he notes.

Why Play to Earn Games Are Failing

Token Design and Long-Term Incentives

Apix also joins the conversation by highlighting that the problem may not be the presence of tokens themselves, but rather how they are integrated into the game. He notes that token-based rewards often feel artificial and are complicated by the existence of locked tokens held by teams and investors, which can create downward pressure on token value due to their incentive to sell.

Apix brings up examples from existing ecosystems like Gigaverse and CS:GO, where players can “earn” through item economies driven by demand, not token speculation. These models, while not explicitly tokenized, demonstrate that sustainable in-game economies can thrive when value is created organically through player activity and demand. However, he also concedes that these economies may still be indirectly influenced by the prospect of future token allocations.

BEN.ZZZ of Cambria echoes similar concerns around the impact of utility tokens held by teams and investors. He questions whether the existing token-based incentive structures are capable of supporting long-term value creation without causing volatility or encouraging short-term thinking.

Why Play to Earn Games Are Failing

Toward Better Incentive Design in Web3 Games

This growing body of critique points to a broader consensus: the play-to-earn model, in its current form, is flawed. While some argue that the entire premise is unsustainable, others believe the model can work if redesigned thoughtfully. Whether through competitive in-game economies, better reward distribution systems, or entirely new incentive mechanisms, the path forward will require a shift in how web3 games approach value creation.

As Charlie Munger once said, “Show me the incentive and I'll show you the outcome.” In the context of web3 gaming, that quote serves as a reminder that the design of incentive systems will ultimately determine the success (or failure) of any game economy.

Source: GamingChronicles