Non-fungible tokens are one of cryptocurrency’s hottest trends of 2021. However, at the moment, NFT markets have taken a serious downturn. Finance Magnates previously reported that NFT markets have crumbled since their peak in early May. However, some analysts say that the crash is actually a positive thing for the space, now that the hype is over, the real innovation can continue.
While NFTs are most commonly known for their use in the art world, they have also been increasingly used and developed in gaming.
Recently, Finance Magnates spoke to Beryl Li, the Co-Founder of Yield Guild Games, a Philippines-based firm that is exploring the potential of NFT marketplaces in virtual economies. Yield Guild Games describes itself as “a decentralized gaming guild of players and investors who generate yield from NFT-based games.”
YGG announced earlier this week that it raised $4 million in a Series A investment led by BITKRAFT Ventures, a venture capital firm that focuses on gaming, esports, and interactive media. This round was joined by incoming investors including A.Capital Ventures, IDEO CoLab, Mechanism Capital, and ParaFiCapital. Previous investors include Animoca Brands, Ascensive Assets, and SevenX Ventures.
Building DeFi Services for Communities Who Need Them the Most
Beryl explained that the inspiration to create Yield Guild Games came when her and her Co-Founder, Gabby Dizon, started yield farming. Yield farming is the practice of locking capital in smart contract-based lending and liquidity platforms in exchange for interest payments.
At the same time, the COVID-19 pandemic was wreaking havoc on the most economically vulnerable people in the Philippines, where both Gabby and Beryl are based.
“When the pandemic hit in the Philippines, a number of people lost their jobs. Most of these people are factory workers and bus drivers,” Beryl explained. In other words, “they don’t have a lot of savings. They wouldn’t last like a month without work, because they normally get paid weekly, or even daily. So there’s really a need for them to make income.”
For these people, the economic consequences of COVID were dire. “Parents, for example, don’t have anything to feed their kids. Sometimes I’d hear extreme stories, that they’re forced to feed their kids instant coffee because they could not make a living.”
If you’re not watching the Play-to-Earn trend, you’re missing out big.@gabusch and @YieldGuild‘s Axie Infinity scholarships are empowering thousands of players with a way to make a living from their gaming skills.@deantak‘s ‘Leisure Economy’ is cominghttps://t.co/1N1zyheAdR https://t.co/UQQdZDbGOc
— Maxime Eyraud (@max_eyr) June 16, 2021
As a result, many of the people who were affected by COVID in extreme ways began seeking alternative streams of income. And they found them in gaming.
Specifically, a game called Axie Infinity began to ‘spread like wildfire’ in some of the Philippines’ poorest communities. Beryl explained that the goal of the game is to collect NFT-based assets called ‘Axies’ and to earn in-game rewards called ‘small love potions’ or SLP.
“This SLP can actually be converted to Philippine pesos and through localized exchanges in the Philippines,” Beryl explained. As a result, time is spent playing and collecting in-game rewards and converting them into cash: “that’s how they’re able to provide milk for their kids.”
However, as the game has grown in popularity, the barrier of entry has become higher. “The price of the NFTs required to enter a game increases over time,” Beryl explained. “Having a $100 Axie team is not possible” for many people, which prevented them from entering into the game in the first place.
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This is where Yield Guild Games steps in. YGG provides ‘scholarships’ that allow players to enter and start earning cash in virtual economies, not just for Axie Infinity, but for a growing number of other games.
“It’s about More than ‘Banking the Unbanked.’”
Beryl explained that while YGG’s strategy is heavily involved in the world of blockchain-based play-to-earn games, the company’s greater goal is to onboard new populations into the decentralized finance (DeFi) ecosystem more generally.
“It’s about more than ‘banking the unbanked,’” Beryl said, “because to be able to bank somebody, they need to already have savings so they can make deposits; they need to have income to be able to get loans, and they need to have a long credit history to have access to better rates.”
“That’s not possible for a lot of the population in the Philippines,” she continued. Very few people in certain populations have credit ratings; because of COVID, many have lost their jobs, and don’t have savings. In other words, in order to be able to provide financial services, you need to make sure that people have access to finance in the first place.
Thousands of lives around the world have already been changed by games such as @AxieInfinity, as we have documented in our @playtoearn_ documentary. With this additional funding, we aim to further scale the impact of play-to-earn across communities around the world.
— Yield Guild Games (@YieldGuild) June 16, 2021
“The first step toward being able to really provide financial services to this kind of population is helping them generate yields through playing,” Beryl said. “[So we said], let’s start with a group that doesn’t have anything yet, and let’s help them produce something. And then, later on, we can provide all these other financial services.”
Building Secondary Marketplaces and Lending Platforms for In-Game Assets
What will these ‘other financial services’ look like?
Beryl explained that at the moment, YGG is acquiring and lending out the NFTs that are needed to play and earn in Axie Infinity and other blockchain-based games.
“The second stage of what we’re going to be doing is opening up that marketplace to other NFTs holders,” she said. “So, it’s not only going to be YGG’s NFT assets, but we’re opening up a platform where individuals that also hold assets in games that we’re supporting can actually lend their own NFT assets.”
“Our algorithm will match them with a ‘scholar’,” or someone who is just starting to learn how to earn in-game assets that can be traded for real-world money.
This marketplace will also act as a way for NFT holders to earn with their tokens without selling them: “[the value of] these NFTs goes up over time, and their holders don’t necessarily want to sell them because they believe the assets will appreciate.”
So, in the meantime, “they can earn yield by loaning their NFTs out on this marketplace, where players in the Philippines would be able to use them to actually play and earn rewards.”
Beryl believes that in-game NFTs could have lifespans that extend beyond individual gaming platforms.
For example, if a game is based on a centralized platform, any assets that are produced or earned within that game vanish if or when the game stops operating. However, NFTs produced in a game can continue to exist independent of any singular gaming universe.
“Ideally, these assets can actually be used in another game. It’s possible to migrate compatible assets from one game to another game, and so on and so forth. I think that is the future of gaming.”