How play-to-earn works
On Ethereum and similar chains, a game can store its currency as a transferable token and its items, such as characters, equipment or pets, as NFTs. Some games go further and run their rules and state in smart contracts; ethereum.org calls these fully onchain games.[1]
Because the assets sit in the player's wallet, they can be traded on outside marketplaces and keep existing if the player stops playing. ethereum.org also notes that anyone can build mods, bots or new games on the same open onchain data, and that Layer 2 networks give games faster confirmations and lower fees.[1]
Play-to-earn adds an economic loop on top: completing tasks, winning matches or holding items pays out tokens. Those tokens have a market price, and that price is what turns playtime into earnings, or into nothing.
See also: What is a Layer 2
Where the rewards come from
A game token is only worth what buyers pay for it. When new players buy in to get starter items, their money supports the price of rewards paid to earlier players. When new players stop arriving, reward tokens keep being minted while demand falls, and the dollar value of an hour of play drops.
That dependence on new buyers is why the same token can pay very differently from month to month. Before you spend time or money, look at how the game creates tokens, who can mint more, and what players actually spend them on inside the game.
Game cards in our directory show how differently studios set this up. Big Time caps BIGTIME at 5 billion tokens, with 60% for player rewards and none for the team or investors, and tokens drop only when a player has a charged Hourglass equipped. Pixels pays rewards in PIXEL, so their value moves with that token, and its whitepaper rewrote the reward model after lessons learned. Parallel pays PRIME only to players who own card collectibles.
See also: Big Time · Pixels · Parallel · Best web3 games
Examples from our directory
Gala Games is a web3 game publisher that runs its own GalaChain network and the GALA token. Its GalaConnect portal bridges GALA and other tokens between GalaChain, Ethereum, Solana and TON, and players can sign in with MetaMask, Phantom, TonConnect or a Gala account.[5]
Dapper Labs, established in 2018, builds digital collectibles on the Flow blockchain, including NBA Top Shot, CryptoKitties, NFL ALL DAY and Disney Pinnacle. It reports NBA Top Shot at $1.2B+ in sales and 1.6M+ collectors, and 42M+ wallets on Flow. These are collect-and-trade products more than earn-by-playing games, which shows how wide the category label is.[6]
Gala also shows that token supply is controlled by keys. In May 2024 an attacker used the private key of a privileged minter account, unused for about six months, to mint 5 billion GALA. If a minter key is compromised, new tokens can flood the market regardless of how well players play.[7]
Other games put the chain further in the background. Off The Grid, a free-to-play battle royale on PC, Mac, PlayStation 5 and Xbox Series X|S, makes NFT items optional on the GUNZ platform, whose token is GUN; it has been in Early Access since 2024, with full release planned for October 2026. Parallel's card game needs no web3 wallet to play. Axie Infinity and Pixels run on Ronin, where full Axie play needs Axies bought or bred on that chain, and Illuvium moved its assets to Immutable zkEVM in 2026.
See also: Gala Games · Dapper Labs · Off The Grid · Axie Infinity · Illuvium · Best web3 games
US taxes on game rewards: a worked example
On a US federal return you must answer Yes or No to the digital asset question, and receiving a digital asset as a reward or award is one of the cases that requires Yes. Other ordinary income from digital assets, such as staking or mining, goes on Form 1040 Schedule 1.[4]
The IRS says to record the fair market value in US dollars of digital assets received as income. That value becomes your basis. When you later sell, the gain or loss is the sale price minus that basis, and it is short-term if you held the asset for one year or less.[4]
Example with made-up numbers: a game pays you 200 tokens when they trade at $0.05 each, so you record $10 of income. Eight months later you sell all 200 at $0.03 each for $6. You still owe tax on the $10 of income, and you have a $4 short-term capital loss. Earned tokens that fall in price can leave you with income on paper and less cash than that income.[4]
Brokers must report certain digital asset sales on Form 1099-DA for transactions on or after January 1, 2025, so sales through a US exchange are increasingly visible to the IRS.[4]
| Event | Dollar amount | Treatment |
|---|---|---|
| Receive 200 tokens at $0.05 | $10 | Ordinary income; basis becomes $10 |
| Sell 200 tokens at $0.03 after 8 months | $6 proceeds | Short-term: held one year or less |
| Result of the sale | -$4 | Capital loss |
Common risks before you start
Many P2E games require buying starter NFTs before you can earn. That is a purchase of a volatile asset, and the FTC notes that a crypto investment worth thousands of dollars today might be worth only hundreds tomorrow, with no guarantee it will recover.[2]
Wallet hygiene matters too. Game sites ask you to connect a wallet and approve contracts; use a separate wallet for games, and check token approvals afterward so a compromised game contract cannot reach your main holdings. Never share a seed phrase with a game's support channel.
See also: Solana wallets explained · Best software wallets
Where onchain gaming is heading
Games use the chain to different degrees. ethereum.org describes a range from games that use the blockchain for specific features, such as tokens and NFT items, to fully onchain games where rules and state live in smart contracts that anyone can read and build on.[1]
Its gaming page, last updated July 20, 2026, says most games still use Layer 2 networks for lower fees, and points to game frameworks that make onchain development easier. It also notes that as Ethereum's base layer scales, games are starting to return to Mainnet, citing Asphodel: Prologue, a fully onchain game launched on Ethereum L1 in July 2026.[1]
For players this changes where the risk sits. A fully onchain game cannot quietly change its rules on a server, but a bug in its contracts is public and exploitable by anyone, which makes the contract audit as important as the game design.[1]
See also: Smart contract security
The bottom line
Treat a play-to-earn game as a game first. If you would not play it with the rewards switched off, the token price is carrying the whole experience, and that price depends on new buyers. Keep a record of the dollar value of every reward on the day you receive it, because the IRS taxes it as income then, even if the token later drops by half.[4]
Educational content, not financial advice. Crypto assets are volatile; do your own research.