Ethereum: The Money-Game Landscape

Ethereum is a place to build things that all compete for value

David Hoffman
Jan 8 · 16 min read

A quick note before we get started. Gitcoin is running their 4th round of CLR-matching grants. There is a $75K grant pool for Media and Education, which my articles fit into perfectly.

The way CLR grants work is by quadratically matching the number of unique donors to a particular recipient. The $75K grant pool is coming from the Ethereum foundation, and the more unique, individual donors to a particular grant, the more is matched by the EF.

CLR grants are a way for you to vote, with your money, where you think the EF should send their funds. If you think I deserve some EF cash, from the Media and Education pool, please consider donating!

Right now, donating just 1 Dai means that the EF will donate 46 to match!

Please consider donating just a couple Dai, it would really help me be able to write more of these, more often!.

The link to donate is here:

Now, onto the article!

Life is a Game

Learning more about game theory, one discovers its parallels to the living of life itself. We are all rational agents, interested in bettering our lives. We all must make decisions about which direction to take, at the cost of all other possible directions. This makes every decision that we make a sort of game.

  • “If I buy Apple instead of Google, will my portfolio go up?”
  • “Do I throw a fastball, or a curveball?
  • “If I date Alice, instead of Sarah, will that make me happier?”
  • “What do I want more: pizza, or hamburgers?”
  • “Do I become friends with this individual, or is it not worth it?”
  • “Do I drink that extra beer, when I have work at 6:00am?”

This are all single match games that we play inside the big game of life.
Life is the cumulative set of many individual games.

Life is about maximizing value. Game theory (or specifically, decision theory) is about the choices that rational agents make in order to achieve that purpose. As you progress through life, you make decisions that are either conscious choices, or unconscious ones, about how to best find value in the world. “If I buy Apple, will it grow in value?” is a choice that is very obviously about how to maximize value. “If I date Sarah, will that work out?” is still about how to maximize value, but in different terms. “Is this too much jam on my PB+J” is also about maximizing value, but less obviously so.

A ‘rational agent’ doesn’t necessarily mean a conscious individual. Yuval Noah Harari in his masterpiece book Sapiens illustrates how all organisms are “survival and reproduction maximizing algorithms”. We are all algorithms that make choices to best optimize for survival and reproduction. When we haven’t eaten enough, our algorithm makes us hungry; if we haven’t drank enough, we become thirsty. If we are lonely, we seek others.

Yuval uses the example of a hungry monkey, hanging from the trees in a jungle. He sees a banana, and wants to eat it, but it’s next to a lion. The monkey must make a choice… a calculation about what decision to make. Is the risk of being eaten by the lion too great? Can he find bananas elsewhere? Maybe the lion just ate, and isn’t interested in more food. How fast can the monkey grab the banana? These decisions are reflected in the emotions of the monkey, and will ultimately determine what choice the monkey chooses. Evolution will determine if they made the right choice or not.

The Game of Life

The goal of the Game of Life is to capture value. There is only so much value, to go around, so this effort ultimately converges in competition. Animals compete for mates, food, shelter. Humans do the same thing; the dating market, real estate market, stock market… (we don’t compete for food anymore, but we’re also systemically obese). Humans have evolved to compete inside of markets, rather than the Serengeti.

Establishing New Rules for Life

But that makes people upset, and so humans have banded together to create these institutions called ‘governments’ that have the power to add new rules, called ‘laws’, to the game of life. Now, in addition to having to follow the laws of physics, you also have to follow the laws of government.

This is the role of Government, distilled: Generate and enforce a new set of rules that allow for fair competition of value.

Life, Liberty and the pursuit of Happiness

Analogue Value

Since the beginning of time, humans have only played games that are analogue games. Competition for food and mates being the most analogue. Things begin to transition away from ‘analogue’ in the modern world. Companies aren’t digital, but they’re not exactly a tangible either. Tangible fiat money only has value because of this intangible belief-layer on-top of it.

Shared beliefs are the precursors to digital value.

Bitcoin: The First Digital Game

It’s also an accumulation game. Who can accumulate more BTC? I wrote about this in an old article: Bitcoin: Prosecutor of the Prisoners Dilemma. In summary, Bitcoin is one big game of reverse Chicken. The last person to buy it loses; the first person to buy it wins.

Bitcoin is the universe’s first digital value. All previous forms of value were analog, real world, tangible forms of value. However, it was a digital form of value with just one game: the Bitcoin game.

Bitcoin = A digital game of accumulation. Bitcoin the most simple version of digital games. Bitcoin says to the world: “There are these digitally scarce things! Go find them!”. Bitcoin’s game started as a proof-of-concept, and turns out a decent number of players want to play Bitcoin’s game.

Are there more digital games that we can build and play?

Developing Ethereum: The Landscape for Infinite Games

Ethereum is two things:

  1. A native system for scoring points (Ether)

Ethereum is referred to as ‘turing-complete’. What this means is that any game that can be imagined can be built. This maps onto the real-world: every single decision you ever make is a small little game inside the Big Game of Life. The combination of the molecular components of matter, and the laws of physics, makes the universe itself ‘turing complete’. The universe is the playing field for all possible games.

This is why Ethereum is so important. It is the digital universe for digital games. The entire possible set of all digital games are able to be built on Ethereum.

Ether: The Point System

This is the Ethereum leaderboard.

In David Graeber’s excellent book “Debt: The first 5,000 years”, he illustrates how modern monies and economic systems unfolded.

  1. Governments issue money to the public
  2. Governments announce that they going to charge taxes, denominated in that money
  3. People need to find ways to make money to pay taxes
  4. People build businesses that generate revenue in order to pay taxes

In this new digital economic system:

  • Ethereum is the government
  • Ether is the money
  • Transaction fees are the taxes.

Enforcing the Rules

Laws of Physics : Laws of Government :: The EVM : Smart-Contracts

But there is a second set of rules also being developed. Standardized tools like ERC20, ZK-Snarks, state-channels, Plasma, Rollups, Meta-Tx, or any other piece of infrastructure built on Ethereum represent rules for how value is managed. These tools are not built into the protocol, in the same way that government laws are not laws of physics. But following them where appropriate will generally make your life easier and more successful. These rules are able to be combined, ordered, stacked to generate operating structures inside Ethereum.

We call these structures “applications”

Applications Capture Value

DeFi on Ethereum has found product/market fit because it leverages the two components of Ethereum, the landscape (the EVM) and the value (Ether), to produce some product or service that is relevant to the users of Ethereum.

Lets go through the list of Ethereum Games that are currently succeeding in capturing ETH.

Application: MakerDAO

MakerDAO is also Ethereum’s most interesting application, because it generates an entirely new dimension inside of Ethereum. Where Ethereum is the landscape for ETH-Lockup Games, MakerDAO generates a whole new landscape: DAI-Lockup Games. A whole second plane of value to exist in.

When applications capture DAI, MakerDAO captures the ETH needed to satisfy DAI demand.

Application: Compound

If you have 10 ETH, and you need some cash, but don’t want to sell, you can put your ETH inside of Compound

Application: dYdX

If you have 10 ETH, but you want it it’s price to behave like 40 ETH, then give dYdX your ETH.

Application: Uniswap

Uniswap V2 is coming, and I’m willing to bet that the second largest token by market-cap inside of Uniswap V2 will be Dai. (Take the other side of this bet by DMing me. You won’t).

Application: PoolTogether

DAI capture mechanism: Subsidizing Compound lending rates by gamifying the system
DAI captured: 300,000k in the app; 53,000 Dai permanently removed from supply

Money Games

Applications like MakerDAO, Compound, Uniswap are Single-Player Games. You are playing by yourself; any winnings or losses you get is because of your actions, and your actions only.

Money Games are Multi-Player Games. A ‘Money Game’ is an application that enables winners and losers, in regards to earning more money. In playing a money-game, you are trying to win other peoples money, and they are trying to win yours too.

Money Games are Games in the traditional sense of the word. It is a competitive, player-vs-player game, with a set of rules, possible moves, and clearly defined winners and losers (defined by how much Wei you won!).

Game: Proof of Weak Hands, PoWH3D

The Proof of Weak Hands game is centered around a bonding-curve that issues a token, P3D, for a certain price, as determined by the bonding-curve. When you buy P3D from the bonding-curve, you are changed a a 10% exchange-tax. Buying 10 ETH of P3D tokens is taxed 1 ETH. This 10% of ETH is then distributed to all P3D token holders. In fact, all transactions (buy/sell/transfer) of P3D token incurs a 10% fee, with the fee being paid to all other P3D holders.

When enter the game, you enter at a 10% loss. If you exit the game, you are hit with another 10% loss. If you buy 10 ETH of P3D token, you receive 9 ETH of P3D token. If you then immediately sell all your P3D tokens, you’ll receive 8.1 ETH. If you do this, you suck at this game.

If, however, you enter the game with 10 ETH, and receive 9 ETH of P3D tokens, and you hold onto the P3D tokens, and never sell them, then you will receive constant dividends from all other players who buy/sell/transfer their P3D tokens.

This is why it’s called Proof-of-Weak-Hands. P3D token rewards people who buy early, and never ever sell. (Bitcoin?). You are win the game if you exit PoWH3D with more ETH than you started. You lose the game if you don’t.

The team behind PoWH3D also have layered on additional buying incentives, to further add to the power behind the P3D token. The first is a “Masternode” system, in which if you have 100 P3D tokens, you can receive a referral link that gives you a larger share of all new buyers first 10% buying fee.

So that’s a small incentive to buy lots of P3D tokens. Even if you don’t want to participate in sharing a referral link, if you think others will, you still benefit by buying P3D tokens before everyone else, and from holding on to your P3D tokens longer than everyone else who gets referred.

… but the PoWH3D game doesn’t end there. The P3D token has a whole entire separate game built on-top of it!

Game: FOMO3D

  1. FOMO3D is centered around a timer. When the timer runs out, the game is over, and it resets and begins again.
  2. Every time someone purchases a “key” (token) from the game (contract), 30 seconds is added to the timer (24 hour hardcap). The game continues forever until the timer runs out.
  3. When the timer runs out, the pot of ETH that has been growing from all key-purchases is split equally between all key-purchasers.
  4. Key prices go up for each sale (another bonding curve).
  5. Owning Keys grant instant dividends on all ETH from further Key purchases, meaning you will constantly receive a stream of passive income from the game as keys are bought. Buying Keys early = good. Buying keys late = bad.
  6. BUT buying the LAST key is AWESOME. The last player to have purchased at least 1 full key when the exit-scam timer completes its countdown, immediately drains half of the Ethereum seen in the pot and ends the round.

There’s always incentive to be a late buyer; you might be the last person and win 50% of the pot! There’s incentive to be an early buyer, because you get dividends from all later purchases. There’s ALWAYS incentive to buy. The game basically guarantees ETH lockup in the game.

Additionally, between 0–10% of the pot is paid to P3D token holders, which adds more incentive to play the Proof-of-Weak Hands game, and to buy the P3D token.

More details in the overview.

Game: Liqui3D - Game of DEXes


  1. Every trading pair in a DEX takes a transaction fee on every trade
  2. The transaction fee goes to a reserve; the ‘POT’ (think ETH lockup)
  3. POT runs on a timer. Every trade adds time to the timer, with a 1-hour cap.
  4. If/when the timer runs out, the 50% of the POT is distributed to the last person who made a trade. 25% of the POT is distributed back to traders, pro-rata their contribution. 25% of the POT is retained for the next cycle.


This money-game is a way to drive liquidity to DEXs, which are notorious for being illiquid. The possibility of winning a lot of money rewards traders to come trade on the DEX, providing more liquidity, and therefore attracting more traders who want to use the exchange, simply because its a liquid exchange. The game makes the product better.

Ethereum: The Landscape for Value-Capture Games

One of Placeholder VC’s best articles is DeFi Liquidity Models. The TL;DR is: Peer-2-Peer applications don’t do as well as Peer-2-Contract applications, when it comes to volume and liquidity.

Peer-2-Peer Apps

  • 0x Exchange

Peer-2-Contract Apps

  • Uniswap
  • dYdX
  • Compound
  • PoolTogether

The difference between P2P apps and P2C apps is that, with P2C apps, you don’t need to find a counter-party to use the application. In MakerDAO, you can just submit ETH into a vault. In Uniswap, you can just swap ETH for a token. In Compound, you just put up ETH, and borrow any other token. It’s the contracts that makes things liquid.

However, this means that all contracts must have plenty of reserves. The way that DeFi is trustless is through over-collateralization. Excess value must be available, so that there can never be a “run on the application”.

As a result, applications must lock-up ETH.

Each application has the incentive it creates to place ETH inside of it. Good applications create good incentives to place ETH inside. Great applications create better incentives, and lockup more ETH.

The Future of Ethereum is a Landscape of P2C Apps

The bull-case for Ethereum is an endless landscape of autonomous protocols that are freely accessible to anyone. These autonomous protocols provide services and products to the users of Ethereum.

Because Ethereum is first-and-foremost a trustless financial system, all of these autonomous protocols must have a native supply of ETH in order to provide their services. Trustlessness is achieved by collateral, and ETH is the only native asset on Ethereum. All protocols on Ethereum need ETH to provide their service.

Ethereum: The House

Ethereum has its own native application: Staking

When an individual submits ETH to a DeFi app, they are saying “The ETH that I place inside Maker/Compound/Uniswap will provide greater yield/utility/returns for me, than if I were to Stake it to Ethereum.

All Applications compete with Staking.

Bitcoin’s Game vs Ethereum’s Game



The computer players on Ethereum (apps) are trying to collect as much ETH as possible, just like how many humans are. In fact, the applications on Ethereum collect ETH by making useful products and services that convince other humans or computers to part with their ETH.

The game never ends. The is no end-game scenario on Ethereum. It’s a constant, bottomless dungeon-crawler. There’s always new Ether to be captured. There’s always new applications that can be built. There’s always new people able to play Ethereum’s game.

There’s always a reason to play Ethereum’s game.


Ethereum is a new plane of existence, with a new value system, and new players. Value on Ethereum is denominated in ETH, and is totally objective. Organisms on Ethereum are open-source applications, and each compete to capture ETH.

Ethereum has its own value-capture mechanism. It is “the house” of a casino, and has an unfair advantage over all other applications; Ether issuance to stakers. Ether issuance makes application competition for ETH more difficult, in a similar way that higher interest rates from a central bank makes access to capital more difficult.

The Universe : Ethereum :: Value : Ether

David Hoffman

Written by

Chief of Operations @realtplatform. The Ethereum side of @POVCryptopod. Bringing Ethereum to the world through writing and speaking. Read my medium👇🏼

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