Shift from Play-to-Earn to Challenge-and-Earn Models

26 Feb 2025

Play-to-earn (P2E) was one of the first Web3 gaming models, later heading to challenge-and-earn (C&E), where players earn rewards through skill-based challenges.

P2E games are appealing to people desiring financial advantages yet these incentives are often exchanged or sold for real money — a model that contributed to declining player numbers when rewards dried up.

But as time passed, the P2E model developed problems consisting of risky markets, a heavy focus on earning, and uninteresting, boring gaming — part of a wider set of controversies surrounding Web3 gaming.

The challenge-and-earn (C&E) concept has started to benefit hobby as a solution to these issues.

C&E focuses on rewarding gamers for their performance and skill rather than just for playing — a shift away from the play-to-earn gaming guilds that defined the early P2E era.

Because this method involves not only earning money but also mastering the game and completing challenges, it provides gamers with a more competitive and attractive gaming experience.

Let’s evaluate the P2E and C&E models, discuss the advantages of the challenge-and-earn strategy.

Play-to-Earn to Challenge-and-Earn Models

Understand the Challenge-and-Earn Model

A new method to gaming, challenge-and-earn (C&E) model rewards players consistent with their overall performance and skill in place of simply how regularly they play.

Whether it is winning a match, setting a high score, or finishing a challenging mission, the prizes are obtained by successfully completing these tasks.

Players are encouraged by this model to concentrate on improving their skills and competing in a more interesting manner.

A) Key Features of the Challenge-and-Earn Model

Skill-based Challenges

Players receive rewards for their abilities in challenge-and-earn games. A player profits growth as their overall performance improves.

Challenges like identifying puzzles, finishing hard goals, or defeating tough opponents are meant to position player skills to the test.

Competitive Gameplay

Competition is highlighted in the challenge-and-earn model. Players frequently compete with one another, and the prizes are based on their achievements or positions.

The game is more thrilling because of this competitive aspect, which also motivates players to improve.

Real-time Rewards

Challenge-and-earn games provide players instant prizes based on their performance, compared to traditional models where rewards may take a while to appear.

The thrill is increased by the pleasure of receiving rewards in real-time, whether it is winning a game or finishing a chore.

B) Examples of Games Using the Challenge-and-Earn Model

Illuvium

Players engage in turn-based combat and strategic gameplay in this popular Web3 game.

Instead of only finishing daily tasks, players can win incentives based on how well they perform in the game.

Thetan Arena

Players in this competitive skill-based online game can earn rewards by taking part in team battles and other tasks.

C) Comparison with Play-to-Earn

Challenge-and-earn games are more advanced than play-to-earn (P2E) games, which only provide players tokens for playing and earning them.

They improve gameplay’s focus on skills and engagement. Players in C&E models are advised to become experts at the game and compete for greater stakes and rewards rather than slaving away at boring duties.

The Shift from Play-to-Earn – Why Change Was Needed

By permitting gamers to earn real world benefits, the play-to-earn (P2E) version converted the gaming industry, but it quickly became clear that it had some of drawbacks.

A move towards extra sustainable and engaging processes, like challenge-and-earn (C&E), became increasingly more important because of those troubles.

A) Limitations of P2E

Economic Sustainability Issues

The value of cryptocurrencies or in-game tokens forms the basis of the P2E model.
Economic instability may result from a decline in the total worth of tokens as more people join and earn them.
When the supply of tokens exceeded the demand, many games experienced inflation and token devaluation.
Players got discouraged as a result of the circumstance where awards gradually lost value.

Lack of Engagement Due to Repetitive Tasks

P2E often highlighted players performing boring chores, including farming resources or grinding through levels, to get rewards.
While some players were attracted to this model, it soon lost favor.
Due to the lack of excitement and variation in the games, players would eventually burn out.
Many players were dissatisfied since the priority was on money rather than playing correctly.

Dependence on Token Speculation

The value of in-game tokens in a lot of P2E games was directly related to market speculation.
The prizes that gamers received changed in tandem with the cryptocurrency market.
Because of this, the environment became unstable and players’ earnings may rapidly decline in value.
Many found relying on market trends to be annoying and ultimately unsustainable.

B) Player Feedback

Players frequently voiced their dissatisfaction with the absence of genuine engagement and were outspoken about the shortcomings of P2E models.

Many gamers expressed their opinions on gaming platforms such as Reddit.

“I don’t mind playing for rewards, but it’s just the same grind every day. It’s not fun anymore.”

“There’s no challenge. Just play and earn. I miss the excitement of actually mastering a game.”

A growing desire for games that provided more than simply financial incentives is seen in these responses.

Instead of just spending time in the game, players wanted to feel challenged and rewarded for their abilities.

C) Developer Insights

The move to challenge-based systems makes sense from the standpoint of game developers for several reasons.

According to many creators, the traditional P2E model frequently restricts user pleasure and inventiveness.

Developers were clear in interviews that challenge-and-earn models,

Prioritize skill over prizes to promote more player engagement.
Provide a more sustainable economic model since incentives are given out according to performance rather than speculative markets.
Result in a longer player retention period since players take pleasure in the competitive element and experience a sense of achievement.

This change produces a more fun and balanced gaming experience, which benefits both creators and players.

Benefits of the Challenge-and-Earn Model

With its many advantages, the challenge-and-earn (C&E) model is a fun and long-term choice for Web3 gaming.

C&E gives gamers a more interesting, equitable, and well-rounded experience by promoting skill-based challenges and in-the-moment rewards.

We must discuss some of this model’s main advantages.

A) Enhanced Engagement

Increased involvement is among the challenge-and-earn most important benefits. Players are frequently rewarded with repetitive tasks in traditional play-to-earn models, which can quickly result in burnout.

The C&E method, on the other hand, places a high value on difficult gameplay, which keeps players interested and motivated.

Players can compete against other players in skill-based challenges, which increase the sense of accomplishment from each win. Players are advised to advance their strategies and abilities as they gain experience, which adds excitement and passion to the gaming.
As players try to overcome increasingly challenging obstacles, constant development becomes an important aspect. Players keep coming back to the game because they feel like they have achieved something, which promotes user retention.

Playing the game is enjoyable in addition to being a means of obtaining rewards.

Longer, more pleasurable gaming sessions result from players’ enjoyment of solving problems and pushing their limits.

B) Fairness and Accessibility

Unlike P2E games, where early token or NFT investments can provide an advantage, the challenge-and-earn model focuses solely on player skill, ensuring fairness and accessibility for all players, no matter their initial investment or experience level.

Rewards based on skill

Instead of being compensated for their time or money, players are rewarded for their performance.
Instead of just buying their way to success, this makes the game feel more equitable and rewarding to those who put in the effort to become proficient.

Inclusion of non-crypto users

While C&E games can be more inclusive, many Web3 games are restricted to participants who are familiar with cryptocurrencies or NFTs.
Because they do not have to purchase or trade tokens to receive prizes, players who are unfamiliar with cryptocurrency can still enjoy and actively engage in the game.
As a result, the player base grows and the atmosphere becomes friendlier.

C) Economic Sustainability

Also, the challenge-and-earn model offers a more profitable strategy for Web3 gaming.

A more stable and long-lasting economy is produced by C&E games’ focus on performance-based rewards, rather than play-to-earn games that mostly rely on unstable token markets.

Reduced reliance on speculative token markets

The benefits in P2E models may be unpredictable because token values frequently change in parallel with the cryptocurrency market.
Instead of token speculation, players in challenge-and-earn games receive awards depending on their in-game achievements and skills.
As a result, the player experience is less affected by market swings.

Balanced game economies

Developers may create more equitable economies since incentives are based on performance.
Without compromising the stability of the game’s economy, they can adjust the system to make sure that incentives are given out equally and that players are encouraged to keep playing.

D) Community Building

Building a community is another advantage of the challenge-and-earn model, which is essential to any online game’s success.

By placing a high value on success, skill, and competitiveness, players join to create competitive and encouraging communities.

Competitive spirit

This strategy can work well for those who like to compete and show their abilities.
They collaborate to improve their tactics and gain knowledge from one another, creating a positive competitive atmosphere.

Supportive interactions

Challenge-and-earn games frequently promote a positive community despite their major focus on competition.
Gamers support one another, provide advice, and acknowledge each other’s accomplishments.
The game feels less about individual rewards and more like a social experience because of this sense of community.

As they build relationships with other players, participate in competitions, and take pride in their common accomplishments, active communities in turn motivate gamers to stay with the game.

Real-World Applications and User Feedback

With encouraging outcomes, the transition to the challenge-and-earn (C&E) model is already being applied in a number of Web3 games.

A) Case Studies

Game X: Illuvium

Illuvium is a blockchain-based game that has changed player involvement and is among the most famous cases of the C&E model.

Skill-Based Gameplay

Players intentionally place their in-game creatures, known as Illuvials, in auto-battler settings in Illuvium’s skill-intensive battles.

As a result, learning methods and tactics become more important than slaving for rewards.

Impact on Engagement

Because their incentives are closely related to their skill level, players say they are more engaged in the game.

Illuvium’s focus on challenges has resulted in a devoted player community, as players spend more time learning the game than just finishing routine tasks.

Balanced Economy

The makers of Illuvium have put in place a reward system that adapts to player performance, providing equal access to resources and maintaining financial stability.

Success Stories from Lesser-Known Games

The effectiveness of the challenge-and-earn strategy is also shown by smaller titles, like Thetan Arena.

Real-time incentives are combined with competitive multiplayer combat in Thetan Arena.

Tokens are awarded to players according to how well they perform in matches, guaranteeing that talented players are acknowledged.

Player Feedback

Competitive players benefit from the highly skilled atmosphere, while casual players value the chance to make money without having to make significant financial commitments.

Developer Benefits

According to the crew at Thetan Arena, the C&E system improves player retention because players are driven more by the challenge than by immediate financial gain.

B) Player Testimonials

Player feedback clearly reflects the C&E model’s success.

The following are some observations from the gaming community,

Positive Experiences

The challenge-based system has been welcomed by many gamers as making games more fun.

Comments including,

“I love how my effort and strategy determine my rewards. It feels fairer compared to pay-to-win or grind-heavy games.”

“The competition keeps me hooked. Winning feels so much better when it’s earned through skill, not just time spent.”

These testimonies indicate how the C&E model develops a feeling of achievement, boosting the enjoyment of gaming.

Inclusivity and Accessibility

The fact that people may take part without having to make big early commitments is another benefit that players value.

One person on Reddit posted,

“I was skeptical about Web3 games because of all the NFT hype, but games like Thetan Arena focus on fun and skill. It’s nice to play without feeling pressured to spend money upfront.”

C) Developer Perspectives

In addition, game creators have discussed their preferences for the challenge-based approach and how it overcomes the drawbacks of P2E systems.

Enhanced Creative Freedom

By concentrating on user experience rather than solely economic mechanics, developers discover that the C&E model allows them to create games that prioritize fun.

A developer from Illuvium mentioned in an interview

“Our goal was to create a game where people stay for the gameplay, not just the earnings. C&E lets us do that.”

Challenges in Integration

Since there are hurdles connected to implementing the C&E model, developers view these challenges as chances for innovation.

Balancing Rewards

It is essential to make sure that prizes are distributed fairly. Performance metrics are used by developers to improve the system and maintain financial stability.

Player Learning Curve

It might be challenging to introduce new players to skill-based systems, but the transition is made easier with the help of simple tutorials and challenges that are easy for beginners to complete.

Building Long-Term Communities

Developers understand that devoted communities are created through the C&E concept. Players are encouraged to create teams, take part in competitions, and fully interact with the game’s ecosystem through competitive components. As a result, the player base grows steadily, adding to the game’s longevity.

Real-world uses of the challenge-and-earn concept have already shown its capability.

Challenges and Future of Challenge-and-Earn Models

The future of Web3 gaming may include AI-powered personalized challenges, AR/VR integration for immersive experiences, and global tournaments that reward skill in real time.
Dealing with challenges while using innovation will determine the success and evolution of C&E models in the gaming industry.
The challenge-and-earn (C&E) model faces several challenges, such as balancing rewards for casual and competitive players and ensuring fairness in reward distribution.
To address these issues, developers require organized challenges and transparent blockchain-backed systems with blockchain support.