At 18 years old, Kevin Hoang dreamed of being paid to play video games. Ten years later, when he first saw the play-to-earn NFT game Axie Infinity, it felt like his childhood dream had burst into life. He quickly steered AcadArena, a Philippines-based esports community he had built years earlier, into the wide-open frontiers of “game guilds” — companies that propel new players into the game with funding, then aim to keep them inside with training and management.

An NFT game like Axie Infinity requires players to own or access three Pokémon-like creatures called Axies, each a unique NFT that can be battled, traded, and bred. Their cost has typically hovered around $1,000 for a team of three — far too high for the average player, most of whom are based in the Philippines and Venezuela. Guilds grew to fill the gap, loaning the creatures out as “scholarships,” which have become one of their multiplying range of services.

Before, a company like AcadArena relied on ad hoc brand sponsorships and tournament prize pools; now, offering scholarships for blockchain games, AcadArena has reaped $3.5 million in seed funding. Remodeling in the direction of a guild was a step toward stability, said Hoang. “The guild model itself,” he told Rest of World, “for scholarships, people being able to play using the assets for free — it was very enticing.”

But even as NFT games proliferate, by various indicators, Axie’s easiest growth — and that of the guilds heavily involved in the game — may already be behind it. This month, the game is set to suffer its first decrease in monthly players since the game exploded in 2020. Axie prices start as low as $26. Other games like Star Atlas and Aurory, both hugely anticipated, are in development. As Axie struggles to manage its own popularity, battling rocketing in-game inflation and falling monthly revenues, the guilds that drive players into the game are already diversifying into what they hope will be the next successes. 

Guilds draw players into NFT-based games, where they can quickly earn money by converting in-game tokens into cryptocurrency, then, in a game like Axie Infinity, into hard cash. In under 12 months, around $80 million in investor funding has flowed into AcadArena, Yield Guild Games (YGG), and similar game guilds in Southeast Asia — an extraordinary flood for a type of business that’s existed for just over one year. 

The same funding flood is driven by hopes that Axie Infinity can provide a model that grows into an entire, profitable sector of play-to-earn games — and perhaps, as guild founders and investors claim, even set standards for the so-called “metaverse,” a notoriously undefined concept. Longer term, guilds aim to provide the “infrastructural and economic rails” by being among the first movers into the space, said Piers Kicks, crypto lead for venture capital firm Bitkraft Ventures. YGG, one of the earliest and largest of its kind with over 10,000 members, has rapidly expanded to invest in more than 30 games. 

Of the $80 million that has poured into guilds in Southeast Asia, around $30 million has been directed at YGG. In the Philippines alone, more than 500 guilds of varying sizes have sprung up, according to Axie Archipelago, a guild tracking project acquired by YGG. In total, the wave of investment into guilds accounts for around 45% of all funding into Southeast Asia’s gaming sector over the past 11 months, according to analysis by Rest of World based on media reports and Crunchbase data. 

For players, creatures like Axies aren’t the end goal but, rather, the means to acquire the in-game token — in this case, Smooth Love Potion (SLP) — which is the real prize; buyers of SLP are often crypto investors, who trade the coin like any other investment. In late 2020, as prices rose, guilds came in, buying Axies and renting them to players for a cut of their earnings. Over 2021, Axie Infinity went from having around 700,000 daily active users to more than 2 million.

At the game’s peak, guilds based around the game saw rapid returns. Unlike earlier local startups like Go-Jek and Grab, which went through long periods of cash burn, guilds can generate considerable income as soon as their players earn.

Five-month-old Good Games Guild (GGG) — whose tagline is “gaming for a living” — was established after seeing the success of YGG. Co-founder Aditia Kinarang said that GGG offers a split of 50/50, and, on average, spends around $1,500 on three Axies, expecting a return on that investment in four months. It spends $2,000 on average for each “scholar” it enters in the game Pegaxy and expects those returns in about two months. “We have spent around $1 million on scholars,” Kinarang told Rest of World. He added that he expects to break even in five months from the total scholar investment so far.

But guilds are seeing their return-on-investment period from Axie Infinity lengthen, due to the falling price of SLP, and high inflation as users cash out, Kinarang also said. “If it continues,” he added, “it won’t be good for the game.” GGG is working on expanding its scholarship scheme to WonderHero, a newer play-to-earn mobile role-playing game, while at the same time incubating three others in-house, in a bid to develop more promising products.

“[The industry] is sustainable, as long as only a few games fail and the others keep going.”

Guilds began by being crucial to the swelling user base on which NFT games rely. For investors, it makes guilds a complementary investment to the games themselves, said Yan Liberman, co-founder of venture capital fund Delphi Digital, which has invested in YGG, Axie Infinity, and other blockchain games. 

The play-to-earn ecosystem is full of these kinds of interlinked investments. In 2021, Andreessen Horowitz’s venture capital firm a16z invested in YGG and Axie Infinity developer Sky Mavis. In January 2022, the firm announced a $10 million investment in BreederDAO, a group that breeds NFT creatures for the games Axie Infinity, Crabada, and Pegaxy, which are then sold to guilds. 

Delphi Digital, on top of YGG, has also invested in BreederDAO, as well as the developer Laguna Games, in which YGG co-founder Gabby Dizon has a stake. Animoca Brands, a Hong Kong–based gaming company, has built stakes in around 10 guilds so far, including GGG, Singapore’s Avocado Guild, and YGG South East Asia. Even the venture capital arm of Indonesian state-owned Bank Rakyat Indonesia entered a $15 million investment round in YGG.

Of the burgeoning play-to-earn model, it’s assumed that some games will fail and others will succeed. Early this month, Sky Mavis started taking steps to save Axie Infinity’s in-game economy, announcing it would remove daily quests and the challenge-based “adventure mode” in order to reduce the creation of SLP. In September 2021, the developer introduced a breeding fee revision, similarly aimed at rebalancing the game’s economy. Guilds will need to continue to bring in players and create incentives for them to play and hold the tokens, rather than simply cashing out. 

“[The industry] is sustainable, as long as only a few games fail and the others keep going,” said Mihai Vicol, analyst from games market data and insights provider Newzoo. “But if the whole market goes down, players can’t make enough money, the assets will lose their value, and basically everything crumbles in a severe downturn or economic crash.”

Kicks of Bitkraft Ventures said that he believes funding for guilds is likely to stabilize, if not decrease in the near future — and that that’s a good thing for an ecosystem with a limited number of games for players to jump into. “Games take a long time to develop,” he said. “We now need to give the game developers time to catch up.”