NFT gaming and play-to-earn: how it works and what went wrong
Games where your items and rewards are tokens: the promise, the Axie Infinity boom and bust, and what's left.
NFT games, also called blockchain or web3 games, make in-game items, characters or land into NFTs that players own in their wallets and can sell, and some pay rewards in tokens. "Play-to-earn" games promised players an income. The best-known, Axie Infinity, boomed in 2021, especially in the Philippines, then collapsed in 2022 as its reward token's value crashed and its Ronin network lost about $625 million to hackers. Most play-to-earn economies needed a constant flow of new players to keep paying existing ones.
What makes a game "blockchain"
- Items as NFTs. A sword, a character or a plot of land is an NFT in your wallet, so you can sell it on a marketplace outside the game. See what is an NFT?
- Token rewards. Players earn a fungible token for winning or playing, which can be sold on exchanges.
- Governance tokens. Some games have a separate token for voting on the game's future and, often, for speculation.
Owning items outside the game is the genuine new idea. The catch is that an item is only useful if the game it belongs to keeps running and other people want it.
The Axie Infinity story
In Axie Infinity, players needed three creatures called Axies, each an NFT, to start. Battles earned a token called Smooth Love Potion (SLP), which could be sold. Because the starter Axies became expensive, "scholarship" groups lent them to players, many in the Philippines, in exchange for a share of their earnings.
- 2021: Daily players climbed through the year and peaked in November 2021. For a while, SLP earnings were enough to matter as income for some players.
- The economics: SLP was created by playing and used mainly for breeding new Axies. Players sold far more SLP than the game used up, so its price depended on new players buying in. When growth slowed, the token's price fell steeply, and so did earnings.
- March 2022: attackers took control of five of the validators securing Ronin, the blockchain Axie ran on, and withdrew about 173,600 ETH and 25.5 million USDC, roughly $625 million. In April 2022 the FBI attributed the theft to North Korea's Lazarus Group. By late March 2022, daily active users had already dropped about 45% from the peak.
Axie's developers later reworked the economy and reimbursed users for the hack, and the game still exists, but the original play-to-earn boom didn't come back.
What the boom taught
- Rewards need a real source. If earnings come mainly from new players' money, they stop when new players stop. That's the same question to ask of any crypto yield; see where yield comes from.
- Bridges are a weak point. Ronin's bridge was secured by a small group of validators, several controlled by one company. Many of the largest crypto thefts have hit bridges.
- "Play-to-earn" can turn a game into a job. Many games now say "play-and-own" or "play-to-own", emphasizing fun first and ownership second.
Before you play a blockchain game
- Treat any item or token you buy as money you could lose entirely.
- Check the game's official website and contract addresses; fake game sites and fake "beta access" downloads are common, and some carry malware.
- Be wary of games that require a large upfront purchase to start earning.
- Use a separate wallet for games, and never enter your seed phrase into a game or launcher. See seed phrases.
- In the US, token rewards and item sales can be taxable; see crypto taxes.
Related reading: Bridges and interoperability: how they work and why they get hacked · Smart contract exploits and bridge hacks
Frequently asked questions
What is play-to-earn?
A game model where players earn tokens or NFTs that can be sold for money. In practice, most play-to-earn economies depended on new players buying in, and earnings fell sharply when growth stopped.
Is Axie Infinity still around?
Yes. The game still runs and its economy was redesigned after 2022, but player numbers and earnings are far below the 2021 peak.
What was the Ronin hack?
In March 2022 attackers took over five of the validators securing the Ronin network used by Axie Infinity and withdrew about $625 million in ETH and USDC. The FBI attributed it to North Korea's Lazarus Group.
Can you make money playing NFT games?
Some people did during the 2021 boom, but most play-to-earn incomes collapsed with token prices. Treat any money you put into a game as entertainment spending you might not get back.
Do I really own my in-game NFT?
You own the token in your wallet and can sell it. Whether it's useful depends on the game continuing, and the artwork or game rights usually stay with the developer.
Where to next
Sources
- Popular blockchain game Axie Infinity suffers a $625 million exploit (Web3 Is Going Great, March 29, 2022)
- FBI links largest crypto hack ever to North Korean hackers (BleepingComputer, April 2022)
- Axie Infinity daily active users drop 45% since 2021 peak (BeInCrypto, March 2022)
- Non-fungible tokens (ethereum.org)
Written for beginners and checked against the sources listed. Last reviewed November 4, 2026. This page is educational and is not financial, tax or legal advice. How we write and check pages.