Behind the craze of gold farming in blockchain gaming guilds: Many are transitioning from miners, and there are multiple risks involved

Author: Richard Lee

In August this year, as Yield Guild Games followed the leading blockchain game Axie Infinity into a surge in market popularity, few anticipated that "gaming guilds" would become a specialized track, and arguably, a booming one.

In the weekly financing statistics from Chain Catcher over the past month, gaming guilds received funding almost as frequently as the blockchain game projects themselves, with many leading venture capital firms like a16z laying out plans in this space.

"Game guilds," originally referred to online communities of gamers with certain rules and constraints during the early development of internet gaming. With the rise of blockchain games "Play to Earn" (P2E), emerging gaming guilds have gained clearer financial objectives. In the fragile early stages of blockchain game development, their natural ability to aggregate traffic and promote the market has gradually made them an indispensable supplementary role in the blockchain gaming track.

Compared to early leading guilds like YGG, which operate as "Decentralized Autonomous Organizations" (DAOs) with loose personnel organization and high liquidity, many domestic gaming guilds that have emerged are still developing in a rough manner. In interviews with Chain Catcher, it was noted that many domestic guilds have transitioned from former miners, characterized by small scale and an employment-based model. More importantly, do these guilds really bring about a strong traffic aggregation effect today?

As blockchain game projects evolve, what is the future development trend of the guild track? Is the rough model of domestic guilds competitive? Participants and analysts have provided similar answers.

Miners Found Their Place

In a report from Chain Catcher in July, it was noted that Chinese crypto miners were facing a countdown to the end, with sizable Bitcoin miners choosing to go overseas, while smaller miners opted to wait and see. As the year-end approached, these waiting miners also found their answers.

Shen An has noticeably received many more calls in the past half month. Shen An is a member of a crypto venture capital firm that originally operated Filecoin mining activities domestically. This summer, due to regulatory impacts, the firm's mining machines had to either cease operations or be shipped abroad.

Subsequently, leveraging the company's early investments in NFTs, Shen An and colleagues discovered the blockchain game Axie Infinity. Under both internal and external factors, the company began to focus on GameFi, not only "mining" for themselves but also helping clients incubate gold mining studios, with related community organizations now in places like Changsha, Hangzhou, Shandong, Xi'an, and Chongqing.

Also starting to mine in August, Fernando from Shenzhen is another participant in the transformation wave within the industry. Fernando went all in on blockchain education and training in 2018 and had previously participated in projects like Difinity (ICP) and Swarm (BZZ) storage mining. After high-energy-consuming mining activities faced regulatory scrutiny, Fernando's original business became unsustainable, and he did not consider going overseas. "But the capital in the mining circle is relatively large; it has to go somewhere. Later, with the rise of blockchain gaming, a large amount of capital flooded in, creating a wave of wealth effect," Fernando said.

Shen An and Fernando may not be isolated cases. Many industry insiders interviewed by Chain Catcher indicated that a significant portion of those currently engaged in blockchain gaming mining in China have transitioned from mining teams, primarily consisting of miners from relatively secondary mainstream cryptocurrencies like Filecoin and Ethereum, and their mining operations are limited in scale, making it inconvenient to go overseas.

King, who works for a domestic guild alliance, told Chain Catcher that the number of domestic guilds began to surge after the Metaverse concept gained popularity at the end of October. He estimates that there are currently fewer than a thousand established guilds nationwide.

Unlike YGG's online community engagement methods, domestic guilds still rely heavily on an employment model for mining. Fernando has set up gold mining studios in Shenzhen, Xi'an, and Zhuhai, with a total managed capital amounting to 100 million yuan. In various stages of the mining operation, Fernando believes that human resources are the easiest aspect to address.

"Many university students can participate," Fernando explained, noting that the team hardly needs to "recruit externally." For example, in vocational schools and universities near Shenzhen, "just post a recruitment ad, and dozens of people will come." According to Fernando, once the applicants arrive at the studio, "they just need to play the game."

"I just need to teach them how to play and operate. They can finish the game accounts I assign them in a day, and then they can withdraw the earnings. They don't need to worry about anything else," Fernando stated. Based on current blockchain game earnings, an applicant can earn 300-500 yuan for a day's work. The salary varies depending on game operability and in-game earnings, and the mining team conducts "performance evaluations" based on multiple indicators before distributing final compensation.

Unlike Fernando's team, the gold mining studios incubated by Shen An's company already have their own teams (e.g., former mining machine operators) and do not require additional hiring. Shen An's own gold mining business, when needing manual completion, typically adopts the operational model of overseas guilds, posting tasks on the Discord platform to recruit "scholars" for operations. Similar to YGG, the revenue sharing between Shen An's team and operators is also "70-30," with staff estimating that a working individual can earn 1800-2000 yuan per month by playing two hours of games daily.

The need for extensive manual operation is still a minority situation. According to interviews with Chain Catcher, using script programs for mining is common in the industry. "If a gold mining studio manages a capital amount in the millions, the cost of operating everything manually will be high; using scripts is definitely better," Fernando stated.

The ratio of scripts to manual operations depends on the type and content design of the mining game. Both Fernando and Shen An indicated that their own gold mining businesses typically choose relatively mainstream blockchain games like Axie Infinity, Raca, Thetan Arena, and Cyber Dragon, while also screening other niche early blockchain game projects to experience their economic models and gameplay. In Shen An's view, blockchain games with poor playability are essentially no different from Ponzi schemes, and the team cannot invest large amounts of capital in them.

Axie Infinity, due to its "everyone vs. everyone" scenarios, usually requires actual human operation for mining. However, if it is merely a level-clearing mode, Shen An stated that scripts can accomplish it. Nevertheless, Shen An also revealed that due to the quick return period, many gold mining teams choose to play less playable "Ponzi scheme" games, which are primarily completed by scripts, with manual work being supplementary.

"Right now, in the early stages of blockchain gaming, it's somewhat like the 4399 mini-games; they are all web games, particularly simple. If you play them seriously, they can be quite boring since they are time-consuming. But if you have scripts to help, it actually saves time and increases efficiency, allowing for a quicker return on investment," Fernando said.

Return on investment and risk are proportional, making the choice of game projects for mining crucial. Both Fernando and Shen An believe that "investment research" is the most critical aspect of blockchain game mining.

According to Shen An, colleagues in the company's primary market investment team filter out more than ten games daily for the Shen An team to study their overall attention, the backgrounds of project parties and investment teams, and the games' playability. Only when these three points are satisfied will the blockchain game project be handed over to the technical team for gameplay design, script development, and configuration of scripts to mining devices (phones, computers). Ultimately, this technology is systematically output to various gold mining studios.

"If you don't conduct investment research or make corresponding preparations, many people will actually get hurt because it is essentially still an investment," Fernando also stated.

Layered Risks

"The risks of blockchain games are still very high at present," Shen An stated, emphasizing that the level of "addictiveness" of mining games and the rationality of their economic model design are significant risk points.

Due to the popularity of the blockchain gaming track and the generally good performance of related cryptocurrencies, Fernando observed that many participants do not conduct very detailed research, "It's quite common to just jump in first and see what happens."

Basics Capital analyst Yi Yi analyzed for Chain Catcher that the current blockchain games are supported by two segments—"play for fun" and "play to earn." Due to the lower performance of infrastructure like blockchain, in the early stages of blockchain game development, "play for fun" usually cannot meet the needs, so "most of the vitality supporting blockchain games comes from play to earn."

When the mindset of making quick money meets poorly made projects with irrational economic system designs, the risk of losses is magnified infinitely. In Shen An's view, recently popular games like Farmers World and Spaceship lack playability and are essentially "Ponzi schemes," so their lifespans are not long. According to feedback from Fernando and Shen An, the lifespans of such blockchain game projects typically range from two to three months. "If you enter with the expectation of a 15-day return period, and it turns into two to three months, it could harm your principal to some extent," Fernando said.

Taking Farmers World as an example, DapprRader data shows that its NFT average price has dropped nearly 60% in the past seven days.

Shen An believes that "Ponzi scheme" type blockchain games will not exit the historical stage; they will always have a place, but the mainstream will return to "value." He observed that some of his friends who previously promoted "Ponzi schemes" are now also promoting Thetan Arena and Axie Infinity.

Beyond selecting good projects, there are also risks in the actual mining process.

Fernando emphasized that using scripts for mining requires avoiding potential backdoors left in the programs. He explained that scripts sold on the market may have trojan programs implanted during development, which can read account private keys and important information during user operation, ultimately resulting in reduced earnings or even theft of account assets.

Therefore, both Fernando and Shen An's teams use self-developed scripts.

After the blockchain gaming track exploded in popularity, many domestic miners have rushed into gold mining guilds. Are there concerns about triggering new regulatory risks? When discussing legal risks, both Fernando and Shen An were relatively optimistic, emphasizing that traditional games also have gold mining industries, and compared to mining, the sources of funds and investment directions are more critical.

Guo Yatao, head of a blockchain legal team, analyzed for Chain Catcher that the activities conducted by blockchain gaming guilds revolve around what is currently defined as "virtual currency" by regulators, which is not encouraged in regulatory tone. Although there is a principle of "what is not prohibited by law can be done" in the civil domain, if it involves the criminal domain, it must be regulated and adjusted by criminal law. For instance, if a guild helps clients solve deposit issues or issues tokens, these actions are considered illegal financial activities.

Moreover, in the development process of guilds, if their operational model involves "fraudulent" attributes and team compensation methods, they are likely to violate laws related to pyramid schemes. Guo Yatao analyzed: "The most essential characteristic of pyramid schemes is their fraudulent nature. The high returns promised or paid to members essentially come from the 'entry fees' paid by new members, as their activities do not generate economic benefits or additional earnings. To maintain the operation of the pyramid scheme, new members must continuously increase at a certain multiple, but since the number of members cannot increase indefinitely, the funding chain will inevitably break."

Additionally, he pointed out that team compensation mainly refers to situations where "the number of personnel developed is used as the basis for compensation or rebates."

What does the future of blockchain gaming guilds look like?

Basics Capital's Yi Yi analyzed that blockchain gaming guilds are a segment that will inevitably grow as the industrial ecosystem develops to a certain stage.

He believes that based on the game's layout stage, in the first stage, game distribution platforms and game technology service providers emerge and develop first. In the second stage, various terminal games will flood the market, marking a period of competition among terminal games. By the end of this year or early next year, a large number of conceptual games will be launched, and the most important aspect after these games go live will be operation and development, which will rely on various "guilds" to provide substantial support and services for game project parties. Thus, the guild track in blockchain gaming is gradually seeing more competitors emerge.

However, despite the currently considerable mining profits, the commercial logic of domestic guilds' rough operational model still raises questions about its validity.

In terms of industry operational logic, the greatest value of gaming guilds lies in their ability to attract and organize real traffic. However, according to the aforementioned industry insiders, due to the simplicity of current game content, guild mining primarily relies on scripts, and the actual number of real players involved is not high. Therefore, in the early development stage of blockchain gaming, the operational methods of existing domestic guilds may have a diminished "traffic attraction" effect.

Nevertheless, Fernando observed that some university students who come to work part-time at his offline studio also start playing blockchain games on their own after returning to their dorms, engaging in solo "mining." This radiating phenomenon may reflect the current market value effect of gold mining studios.

But due to the sensitivity of policy regulation, will domestic blockchain gaming guilds maintain their current form?

Yi Yi believes that domestic blockchain gaming guilds do not possess the ability to "productize," and ultimately, these organizations will connect with overseas guild platforms that truly have productization and data capabilities.

"The positioning of guilds is like YFI (Yearn Finance) in DeFi, similar to 'yield aggregators' (note: yield aggregators in DeFi refer to systems that automatically switch strategies through smart contracts to achieve higher yields)," Yi Yi metaphorically stated.

Only with productization capabilities can they control the operational data of all users, understand, and connect with popular games, thereby bridging the ecosystem between the demand and supply sides of games, making market existence necessary. "If it's just a scattered studio or a group of people doing something, it lacks the market development momentum," Yi Yi said.

Shen An also believes that more guilds will shift towards DAO organizational forms in the future, "This is a trend and the future." He mentioned that due to regulatory and policy risks, domestic practitioners "are not bold enough to openly engage in (guild platforms and DAO organizations)." According to his understanding, teams intending to launch similar platforms domestically usually choose to go overseas.

What does a mature "productized" guild look like? Yi Yi gave an example: when players log into a guild platform, the platform can recommend which games have higher mining efficiency and what the risks are, and even facilitate item trading and NFT rentals on the platform.

However, Yi Yi believes that domestic guilds are still a supplement to the current ecosystem, "These guilds are essentially doing market education in advance; they gather this group of miners together, and in the future, these mature products can be directly connected to what we call Chinese guilds."

He predicts that future guild products will target both ends: on one hand, providing a set of internal customer management systems for B-end merchants in the scattered market who have their own organizational groups; on the other hand, there will also be services aimed at C-end consumers in the scattered market.

Nevertheless, regarding the development progress of mainstream guild platforms, the aforementioned prospects still seem distant.

Even for the leading guild Yield Guild Games, its plans in the white paper—such as lending functions and YGG token lending contracts—have yet to materialize, and most similar competitors remain in the financing stage.

"It is not something that can be accomplished overnight; it all comes gradually," Yi Yi stated.

(Names like Yi Yi, Fernando, and King are pseudonyms at the request of the interviewees.)