I think what people imagine will happen, if they're thinking about the economic conundrum at all, is something rather like the Warframe economy. Players with real dollars to spare buy platinum (the premium currency), which they then either use to buy things directly from DE, or trade to other players in return for loot those players want to sell. Effectively, players flush with time grind on behalf of players flush with dollars. If there was a way to convert platinum back into dollars, it could be imagined that a player in a country with a weak currency might make a living from selling rare mods and prime parts.

In practice the reason this doesn't work is because DE would lose a huge amount of their income if players could cash out platinum. Any dollars put into the system for the purpose of buying things from other players would then leave the system when those players cash out. So there's no incentive for DE to do this. There's also the problem that you need to make a game that is actually worth putting real dollars into, and these crypto games are universally dogshit (ideal time to plug Jauwn's YouTube channel, his crypto game reviews are hilarious and really highlight what utter trash the entire field is). So no one has any incentive to buy the tokens that the play-to-earn players are trying to sell. That's a big part of why the price always instantly crashes.

The only way to make cashing out work is to have players directly sell their tokens to other players, instead of the money coming out of the developer, but that means now the players are competing with the developer on price. Whatever price the dev sells the token for becomes the ceiling. And if course, every token sold by a player basically steals income from the developer. If the dev instead gives the token out for playing the game, then there's no mechanism at all for the dev to make any money from the token, other than issuing large amounts to themselves and ultimately crashing the price by cashing out. None of these options work, and the model these games actually go with basically guarantees rug pulls as the only actual way for the developers to make any money.