Play-to-earn’s future is being decided in Brazil by Gunstars

On July 8, Mark Venturelli beamed onto the main screen of Brazil’s International Games Festival. The game developer was set to present on game design, but he began his address with a twist. “I fooled you guys. The name of my talk is not ‘Future of Video Games,’” he announced. “It’s called ‘Why NFTs are a nightmare.’”

NFTs, or nonfungible tokens, have become one of the primary currencies in a growing model of games called play-to-earn, where users receive in-game digital rewards such as weapons or clothing that can be sold on crypto marketplaces. Critics like Venturelli argue that the rise of play-to-earn games like Axie Infinity has, in rampant speculation and a worsening design among online games.

“Play-to-earn does something that was never done before, which is to turn games from an activity about entertainment into an economic activity,” Venturelli told Rest of World. Nevertheless, there is a lot of money to be made in this model of gaming, where users are encouraged to spend money consistently as they progress through the game. Investors have poured billions into play-to-earn games — including over $2.5 billion globally in the first quarter of 2022 alone — because of the early success of titles like Axie Infinity. Venturelli said that he worries that play-to-earn is coming to dominate the Brazilian gaming ecosystem, as venture capitalists rush in and push the model despite gamers’ protests. “It’s almost like an invasion,” he said.

The next wave of invaders is now coming. In Brazil, one of the world’s biggest markets for mobile gaming, the powerhouse Brazilian gaming companies Loud and Snackclub recently launched a new title called Gunstars that it hopes can succeed in retaining players where the first generation of play-to-earn games failed. By keeping costs lower and making the mechanics more accessible than other play-to-earn games, Gunstars’ developers hope it can avoid the pitfalls that sank predecessors such as Axie.

Through interviews with 11 developers, gamers, and analysts, Rest of World has tracked the first month since Gunstars’ soft launch in early July in Brazil, learning that it has achieved initial traction with gamers alienated by previous play-to-earn titles. Fifty-thousand users downloaded the game in its first week, according to Snackclub, the crypto-focused gaming company. Still, some in the gaming community remain skeptical about its ability to actually retain users, which is necessary for the nascent play-to-earn sector that is now worth billions of dollars.

Vitor Gamez, an early Gunstars player in Brazil, who also considers himself an aspiring gaming influencer to his 273 followers on Twitch, watched Axie Infinity’s rise during the early days of the pandemic. People in countries from Brazil to the Philippines turned to the title as a way to earn money, but it seemed like a pyramid scheme to him. When one friend started investing in Axie, he told her she was crazy. He turned out to be right: Axie’s value and engagement plummeted in 2022.

“Despite the hype, [play-to-earn] has much more of a bad reputation than good,” said Gamez. “They’re not very fun.” He’s not alone; gamers worldwide have remained lukewarm on the model. Even the popular game Minecraft was recently announced that it would not support NFTs, in part due to gamers pushback.

“[Play-to-earn] exploits the worst characteristics of games,” said Rique Sampaio, a Brazilian gamer and journalist. “These are games that are born from a purely capitalist vision, based on speculation.”

Even so, investors and Web3 entrepreneurs have remained bullish on the sector, believing it is still in its infancy and offers value to gamers. Matthew Ho, the co-founder of Gunstar’s parent companies, Snackclub and Loud, argues the play-to-earn model gives autonomy back to gamers, who might not have been able to capitalize on their winnings previously. For example, with similar smash hits such as Clash of Clans, users can spend real-world money to level up, but any rewards they collect are kept within the confines of the game. Gunstars allows players to customize their avatars too, but these purchases, such as character equipment and weapons, can then be sold outside of the game on NFT marketplaces.

“These are games that are born from a purely capitalist vision, based on speculation.”

Angelo Cazzola, Ho’s co-founder at Snackclub, attributed the early failure to speculators extracting value from play-to-earn games and then leaving. Cazzola and Ho decided to design Gunstars with the lessons of Axie Infinity’s decline in mind, including making it free-to-play (with enticing add-ons, of course) and simplifying the in-game economics. “We never targeted the crypto space,” Ho said. “It’s very much directed at casual mobile gamers.”

After its Brazilian soft launch on Google Play in early July, Gunstars found immediate success, with around 10,000 daily active users despite minimal marketing from the company. Ho said they’re planning on launching across Latin America in mid-August.

Significantly, it was able to attract gamers who were normally guarded against play-to-earn games, like Gamez. Rest of World monitored the Gunstars Discord server in the days following the launch. Aside from complaints of early bugs, to be expected in a soft launch, the majority of users that Rest of World spoke with were enthusiastic.

One Brazilian gamer, Augusto Caramelli, said he had negative experiences with other play-to-earn titles. With Gunstars, he felt the developers were actually listening to user feedback. “My expectations were very high as the game had been in production for a long time,” he told Rest of World. “It is delivering what it promised, even exceeding expectations.”

Another player, Moisés Marques, said he had previously had negative experiences with play-to-earn, even losing money, but enjoyed Gunstars despite encountering early bugs. “Gunstars has a lot of good things to come,” he said.

For Gamez, Gunstars did not achieve the sweet spot of enticing his attention with rewards to keep him playing. He said that after three days of playing, he lost interest. “It’s not a game that scales for fun,” he said. “Every round is the same, the map is always the same… I didn’t feel rewarded.”

Experts like Venturelli, who authored the ‘Why NFTs are a nightmare’ lecture, would not be surprised by Gamez’s disappointment. The repetitive nature of play-to-earn games is baked into its model, which Venturelli said emphasizes “earn” over “play.” He argues that introducing a real-world economy into games takes away the artificiality of games that makes them enjoyable. If you lose your house in The Sims, there is no consequence. With play-to-earn titles, people are drawn in by the allure of making actual money, but they can also spend real money and lose their house in real life. “It makes it really hard to convince people to do things because they’re fun,” he said.