Five developers of games with tokenomics have discussed the past, present, and future of blockchain-powered games, shared their ways of dealing with industry-related issues, and answered some burning questions regarding the topic.
Each day, the topics of tokenomics, NFTs in games, and the metaverse are becoming more and more discussed. Some people think that they are just a passing gimmick, others believe blockchain-powered games to be the future of the game industry. Our recent survey proved once again that these topics remain controversial to this day and showed that most people express skepticism about the metaverse. But no matter where you stand in this debate, no one denies that the metaverse has already changed the industry, for better or for worse.
To learn more about NFTs in games, token release mechanisms, the legal basis of it, and get a clearer picture of what tokenomics are, our 80 Level Research team conducted a series of interviews with tokenomics experts, directors and CEOs of studios that create such games and asked them a series of burning questions related to the topics. In this article, you can read some bits from this report and download the full version of it by clicking this link.
The first topic our team addressed is the building of a token economy for the game. The respondents were asked to share their ways of choosing a blockchain platform, creating a wallet that supports the cryptocurrency of the blockchain, and working with smart contracts.
Product Manager at Powder Aaishwarya Jain, for example, had this to say about minting their own tokens and choosing the right blockchain platform:
The process of getting into NFTs or tokens is, firstly, choosing the blockchain system. It can be Solana, Ethereum, or any other blockchains that support NFTs. Once you select the blockchain, then you create a wallet. Solana's wallets include the Phantom software; Ethereum has MetaMask. Developers always need a wallet that contains that specific currency.
Solana coin (SOLs) or those kinds of tokens can be used to then mint NFTs. Minting usually works with smart contracts. The developer who creates the smart contract adds the different stakeholders in the contract, adding the specific code that allows the transfer of money between different wallets. Then you would need a web developer who sets up the correlation between the wallet, the smart contract, and the main blockchain.
Blockchains have nodes and, essentially, web developers create a system so that every time a person mints an NFT, a pull request is sent to the smart contract; this calls the blockchain and creates the minting process on that blockchain. This is a real-time process that links the smart contract, the user's wallet, and the blockchain. So, there are three main elements of the vending process.
Another question the interviewees were asked was about payment protocols used for games. It's important to keep transaction processes fast and transaction costs low while also retaining a low level of energy consumption. It is known that the most popular protocols for blockchain gaming are Solana (standalone protocol) and Polygon (L2 protocol on Ethereum), and the respondents told us why it is so.
Here's what Ada Jonušė, CEO & Co-Founder of Lympo has told us regarding the matter:
We learned really fast that it didn’t make sense for users to mint NFTs, especially for low-value assets, due to the high transaction costs. For example, take a simple NFT that costs $5 and the user wants to utilize it in games in the future. However, to mint the token, the user has to pay $50, so it doesn’t make any sense.
Speed is key. Games don’t typically use the basic Ethereum protocol, as the transactions take too much time (only a few minutes — but it still isn’t good enough for games). Last autumn, Lympo migrated to Polygon. It also works on Ethereum, but it’s the application on top of it with a separated protocol that makes the transactions cheaper and faster.
The respondent also addressed the “token first” vs “game first” issue. From the tech angle, it is easier to integrate tokenomics into a gameplay-ready game. Though, building a blockchain economic model and creating tokens before developing gameplay allows developers to create a community around the NFTs as well as do pre-sale activities to raise funds long before releasing the game. On the other hand, a “token first” game may be of poor quality due to a lack of focus on gameplay development.
Jure Grahek, Head Of Marketing at ZEBEDEE, explained the company's approach to this issue:
Lots of gamers are quite averse to play-to-earn gaming, because many play-to-earn games are bad games. Developers put the economics first and lose the gameplay element.
Economics first can be a great approach for the game developer, because if they have a token or an NFT and do a pre-sale, they can use that to fund their game and possibly even make a profit before launching anything.
But if the developer is more focused on making a successful token then maybe they're not very focused on making a good game. Creating a really good game is very hard, which is what makes gaming such a competitive industry. It's much easier to integrate crypto into a game that's already good than build a good game around crypto.
Our team has also asked the interviewees what a game token is from the legal perspective and whether or not it can be considered an investment in the game.
Mathieu Nouzareth, the CEO for the U.S. at Sandbox, has told us how his company designs tokens as a utility:
Sandbox believes that the center of tokenomics should be the utility approach. A token is like a commodity in a way because it's not meant to be used for speculation or investments in the long term. SAND tokens are meant to be used in the game to buy stuff, to create stuff. Sandbox wants to create a circular economy where creators, on the one hand, create things they sell and have players, on the other hand, who buy and rent stuff made by creators.
The main goal for Sandbox as a company is to make sure that players have fun. They’re constantly trying to improve the game and come up with new tools for creators to provide amazing experiences and for players to enjoy and buy them. Balancing demand and supply is crucial in order for the token to be a real utility.
And, of course, the respondents were asked how to build a sustainable game token economy that will work for ages.
Here's what Lewis Grafton, the COO at SolChicks had to say about developing a long-lasting game:
An open game economy is a living system, so it’s important to closely monitor and model out many different scenarios and be dynamic in the approach to setting key variables such as the pricing of items and actions within the game and the frequency at which they can be done. To do this well, one must have the mindset of a data scientist or economist and think of the governance of the game economy as being similar to that of a central bank.