Designing a sustainable game economy
Part 3: Analyzing various design elements in existing games
In previous blog posts, we have mainly focused on various challenges web3 game economies have experienced thus far. In this post, we are shifting to highlighting some of the more sustainable design elements used by existing web3 games and what they mean for each economy. Games frequently mentioned in the examples here, such as Splinterlands and Gods Unchained, are some of the longest-running NFT games and serve as proof that these designs can have a meaningful impact when it comes to sustainability. Note that the design elements covered here are not the only sustainable ones currently being leveraged and we continue to see new, creative elements introduced at a rapid pace.
1) NFTs > tokens
Overall, games that focus more on NFTs as the main purchase and reward item (earning and trading) over tokens have experienced increased sustainability. These games also tend to focus on play-driven demand rather than token-driven earnings which are entirely about price; token-driven earnings are a very one-dimensional method of selling and rewarding. In general, having a variety of NFTs (like trading cards) allows value to be spread out in a more efficient manner than a single, variable type (Axies).
Splinterlands and Gods Unchained provide good examples of more sustainable, NFT-driven Trading Card Games (TCGs). Both games still include tokens, but the primary drive is towards reinvestment in NFTs, with the selling of NFTs acting as a trading mechanism to buy (or rent) other desired cards. In contrast to Axie Infinity where you don't need more than your team (3 NFTs), TCGs strongly encourage owning a large variety of NFTs of various rarities and levels which adds to the collectability of a game. There are often game design elements that actively pressure players to play with a variety and will constrain rewards based on it.
These types of games also don’t present uncapped breeding systems to mint indefinite NFTs and create oversupplies. Cards given out as rewards are from a limited, low-value set for playing purposes rather than trading, and other cards are generally minted arbitrarily from purchased “booster packs”. The cards for each set will not be minted once the packs run out, which are typically fixed in supply per card set leading to scarcity and increased demand. There is typically a fixed number of these packs available per card set and the cards of that set will not be minted once the packs run out. This not only sets a limit on the number of a given card NFT available but also leads to increased value as the market supply of useful cards dwindles.
Reward Pool systems
Many games like Axie Infinity give out a somewhat fixed reward for playing/winning that does not prevent supply inflation as the player count scales up. Instead, many games have begun implementing systems like reward pools, out of which players are paid a semi-fixed daily reward. This allows the game to control roughly how many reward tokens can be minted or distributed with some flexibility to pool size. There are a few different approaches to managing the reward pool size and distribution that we have seen executed.
Splinterlands defaults to an available pool of 1 million tokens daily but inflates or deflates the size of the pool based on how far the token price is from a soft peg of $0.001 - doing this allows the available supply to try and scale dynamically. Despite the inability of this system to directly address inflation in the sense of burning tokens, the price has remained above the soft peg consistently for over 6 months! In addition, there are a number of other variables that determine how much you can earn from that pool including how many battles have occurred over the last 24 hours, diminishing individual returns (that recharge over time), and spending-based bonuses.
Gods Unchained uses a scaling pool system for its “Weekend Ranked” weekly rewards system. Rather than earning immediately post-match, the user accrues points over the course of the entire weekend. Once the weekend is over, players receive a portion of the rewards pool relative to the points gained. The pool itself scales up or down based on player count relative to the previous week. This system works in steps with a low 20% -/+ max and a capped total which helps prevent players joining/leaving from skewing the rewards too much.
ICE Poker uses a different system than a pool but still incorporates scaling based on how players play each day. The daily token rewards you receive are made up of two components:
First, a base reward amount, which is accrued by completing daily challenges of various difficulties (and other factors) and
Second, a multiplier on this base amount, which can range from 0.05x to 2x depending on your daily percentile ranking in net profits.
The multiplier is based on your position on a “score” leaderboard for the day comparing your total poker chips gained against everyone else in the metaverse. With no fixed cap/pool for the rewards, it does expand the supply distributed based on the total number of players but does so in a way that evens out amongst players based on daily score variance. It’s necessary to call out the fact that the current price of ICE Poker’s reward token is at its all-time low at the time of writing despite this implementation, but this is largely due to the base reward amount scaling more or less linearly with the number of players.
As referenced in our first blog, it will continue to remain true that as a general rule, in the long run, sustainable economies cannot pay out more value in rewards to players than the value that is brought into the game from players and external parties. Clever rewards pool systems were invented to limit the value in rewards being paid out by game devs, but without significant value being brought in from players and external parties the design systems will prove futile.
NFT durability systems
Many games see NFTs being bought or minted as a value inflow into the game economy that helps justify the value outflow, but unfortunately in a way that’s typically unlimited over the course of time. At some point, the purchaser of the NFT manages to exceed the break-even point and when this happens en masse it creates inflation. Some games are capping and taxing NFT earning through “durability” systems that simulate the idea of wear and tear or diminishing returns. Usually, these NFTs dual serve as a cosmetic item so that when the earning durability is depleted the cosmetic can still be utilized and enjoyed. Unfortunately “repair” costs that can be done indefinitely or don’t scale up over time (the way breeding costs do) could still contribute to indefinite inflation and act as a tax that already gets factored into earnings calculations. There exists a possibility where, on average, the players would need to pay more to repair the NFT than they would earn after repairing and before the next repair, meaning that only skilled players earn enough to be able to “repair” thus alleviating inflationary pressure, however, this is only speculation as this repair mechanism hasn’t been implemented in a live environment yet.
Upcoming Netmarble game Golden Bros pre-sold all of their cosmetic character costume NFTs prior to the release of their now live, early access period. These NFTs have capped earnings in a few different ways.
First, they can only earn from a fixed number of matches per day (energy gating)
Second, they need to be repaired after a period of time which sinks some of the earned token
Lastly, there is a cap on the number of times they can be repaired, which restricts the max amount that can be earned
The amount earned also varies on win/loss so daily earnings likely won’t hit the maximum every single day. Interestingly, Golden Bros are giving unlimited durability during the early access period to encourage early adopters to reach the break-even point before the game launch. This remains gated by the energy system and there is a specific, limited number of NFTs so maximum supply creation during early access is known. They do also continue to have token sinks in the early access to help constrain the supply further.
Thetan Arena uses a similar system, albeit without the repair cost. Each NFT has a fixed number of matches they can earn from each day and a total number of matches that the NFT can earn over its lifetime. The amount earned still varies based on performance (so you can’t predict your exact return) but you can predict the maximum rewards generated by that NFT. Unfortunately, overall earning potential in the game is generally break-even at best and is more than likely a net loss.
Tournaments with total entry costs that exceed the prize pool are a good way to remove supply and distribute rewards based on skill at the same time. Not only that, tournaments, which have always existed in games, serve as a form of investment where it’s expected and common that a majority of participants will end up net negative. There are different ways to implement reward systems in tournaments, such as “pot systems”, whereby games take a cut from the entry costs or hand out rewards in a different token or as NFTs/cosmetics. In addition, tournaments don't require more than two players as a PvP system can have a per-match entry cost where both players' entry goes to the winner, minus a fee to remove some tokens from circulation. This introduces extreme flexibility in how tournaments are implemented and opens the door to a myriad of possibilities within each game. These systems do need to support a variety of skill levels and provide participants with the hope that they could place high enough to earn, even if the majority is losing.
Splinterlands has a built-in tournament system for both player and developer-run tournaments. Most importantly they have ways to set entry costs, prize pools, entry requirements, and a variety of custom rules including total players and how asynchronous the matches are. Interestingly the player-run tournaments are often promotional ones for sponsors or streamers as a community-oriented event.
Crypto Raiders recently ran a “permadeath” tournament where 64 players were invited and required to mint a new NFT to play. Only the top 16 players earned anything and the remaining 48 players had their NFTs burned. This was a great example of using an NFT as a sunk entry cost, especially for a game with very tightly controlled minting of new NFTs. Games with uncapped breeding should consider something like permadeath tournaments as a good way to motivate NFT burns.
Skyweaver has a “conquest mode” which constitutes how many matches you can win without losing. They charge $1.50 (in USDC) or a Silver NFT card as an entry fee and the rewards can range from nothing (if you lose your first match) or Silver/Gold cards, depending on how well you do. Since it’s PvP this means some players will likely earn nothing for their entry fee and keep the Silver (tradeable) card economy somewhat in balance as well as bring in additional revenue. This is another great example of using/burning NFTs for entry to help keep the supply in check, especially since the reward itself is unknown (you may get a card you want to play with, trade, or use for another entry).
ICE Poker will also be running tournaments through their upcoming Sit-n-Go tournament mode, where tokens will be burned as an entry cost with the goal of earning various rewards such as
staked governance tokens
future free tournament entries
In addition to burning tokens through entry fees, ICE Poker is implementing NFT tournament durability in the sense that if you place low enough in the tournament your NFT is then dirtied and will require cleaning (by burning tokens) before entering another tournament. If this new game mode succeeds in serving as a significant token sink, providing a more competitive and higher stakes gameplay, and introducing a quicker path to player ownership then it will mark a new chapter in ICE Poker’s progression. As a side note, poker is a good genre for this implementation as it’s expected to sometimes lose your entry in IRL events.
In Golden Bros players can enter battle royale events by paying an entry fee with only the winner of these rounds getting a reward. 50% of the total entry fees are being burned, with the final player winning 5 times his entry fee, which should give players enough incentive to enter those events. Additionally, also players not owning an NFT can participate, which increases the effectiveness of this mechanism.
Minor elements of pay-to-win mechanics have been successful in driving revenue in F2P games (especially on mobile) and are accepted practice (to some extent) in certain genres like TCGs. The key here is to keep these minimal or temporary advantages that continue to require skill or knowledge to leverage well. Pay-to-win elements that can be done with game earnings not only encourage reinvestment of earnings into the game but also create more demand for token purchases, which keeps earnings higher. With systems that allow investing earnings, you can always grind your way to power which keeps it more fair.
Splinterlands, like most trading card games, allows you to simply buy some of the most powerful cards in the game from other players. They have a lot of balancing elements to minimize the advantage such as varying rules per match that exclude cards (which gets more complex at higher ranks) and prevent players from relying on strong cards. They also have entry rules for tournaments and competitive ranks that control the power level of cards. Having balancers like this encourages both paying for powerful cards and paying for a larger variety of cards.
Axie Infinity has done a decent job with the varying price of Axies combined with dominant “metas” to create a bit of a pay-to-win market on Axie prices. This combined with the changes in Origin that encourage some upgrading to body parts and runes/charms will incentivize more spending (of earnings and cash). It is critical that the game devs also add elements to encourage a variety of Axies moving forward, introducing further collectability.
In Golden Bros players can use in-game tokens to buy chests that contain upgrade points for characters. These upgrade points can only be found in chests and allow players to boost the stats of their characters. Furthermore, players can boost some stats of their characters for one season (one month) by paying game rewards. This creates a pay-to-win dynamic as players can improve their characters by investing fiat money to buy chests and boosts, however paying is not necessary as you can also earn/buy the chests and boosts by playing well.
F2P without P2E
Having a way to play the game for free without earning (or at least very minimal earnings) is a great way to build up engagement without breaking the economy. Having free, non-earning players also allows for an increasing number of opponents for paying players. Making sure the game is fun enough to play without earning is an important step to creating a more deflationary economy overall if you can get players to spend without earning too. As we mentioned in our second blog, the best way to assess the pure player demand of a game is to evaluate if players would still be willing to spend time and money in the game even if there was no earnings potential for them - F2P without P2E introduces just that.
Skyweaver is completely Free 2 Play with a focus on earning non-tradeable cards to expand your collection. It also allows buying/selling cards and ways to earn tradeable cards through weekly leaderboards and paid competitive events. The focus of the game is on playing for fun with the market being a more direct way to buy/sell minted NFT cards.
Golden Bros is completely free to play and available on the App Store and Google Play Store (with geographical restrictions), only if players want to earn on top they have to buy an NFT. This paves the way for other traditional gaming studios to enter the space as they can add these functionalities on top of their existing games.
Gods Unchained is completely Free 2 Play with minimal earning - most of the earning is from non-NFT cards. The majority of earning is focused around the weekend ranked event so the rest of the week is both about playing for fun and earning the “soulbound” cards to improve your game. Allowing the ability to earn non-tradeable cards lets players grind for fun and for more good cards. There is also a way to mint NFT cards using duplicates and spending some token which acts as a token sink and a way for players to then be able to sell a card (although the profit is usually small or negative).
Splinterlands can be played completely F2P, but to earn you’ll need to spend at least $10. The way the earnings are reduced as you play (the “energy capture rate” system) without gating actually playing allows for a good balance between playing for fun (while still possibly ranking up!) and playing to earn. Playing for fun allows you to practice which in turn improves your ability to earn, but without breaking the economy
Axie Infinity Origins is introducing F2P with starter Axies and the ability to play without earning to focus on enjoying the game. It’s unclear what non-earning play elements may be possible, but if there are ways to play without needing energy or earning SLP in return then that will be a step in the right direction.
Having cosmetics that allow players to express themselves without it affecting earnings can help sink earnings back into the game, however, they don’t generally work as the primary revenue for a game unless the game already has huge brand recognition or a strongly engaged player base. Only strong fans and whales will spend a significant amount on cosmetics so they need to be well integrated into the game and have a decent amount of depth/breadth to work.
Metaverses, along with games inside metaverses like ICE Poker (Decentraland), the upcoming Rumble Kong League (Sandbox), and Otherside (to name a few), present unique opportunities for cosmetics to flourish. As you are representing yourself within these digital worlds through avatars, you are able to more easily express your fashion taste through cosmetics in the form of clothing and accessories. The notion of social flexing will exist in the same way that luxury clothing will always remain popular, but users will be able to mint cosmetics that connect with them on a personal level, regardless of price, and is representative of how they want to come across in the digital world. In the case of games within metaverses, cosmetics can be used as a reward mechanism that may or may not be available only through said reward.
Splinterlands has card skins that allow you to show off some spending. They also have gold foil cards that do, very slightly, boost your earnings when used, while also being a good flex. Improvements to the cosmetics available will likely increase spending in this area significantly.
As the examples in this post demonstrate, sustainable NFT game design innovation has come a long way and continues to progress week over week. However, simply having one or more of these elements incorporated into a game does not automatically lead to a stable economy as there is a multitude of other factors that determine the sustainability of a game. There is no clear recipe (so far) as to what elements make up a sustainable economy, and the one constant in the history of gaming that has, for the most part, yet to enter the NFT gaming space at large is extremely fun gameplay. Once players get past the initial excitement and novelty of a web3 game, the only thing that will keep them engaged and willing to spend on sinks is an addictive gameplay loop.
With that said, we remain bullish as ever on NFT gaming and believe the best is yet to come as the space continues to build in production. With the upcoming influx of games and gamers (from the 3b gamers worldwide), it can be challenging to determine which teams are making the right moves. We are working on something to relieve the struggle and cannot wait to share more about that in the next blog post 🌊.