Game Tokens Part 1: Definition
This is a Part 1 of 3 in a series about Game Tokens. My goal is to define them, describe their utility, discuss how to balance them, and finally discuss what I’m calling the “Value Extraction Dilemma” we have with them.
Most of this comes from a Twitter thread but there’ll be some additional information as always.
What are Game Tokens?
Game Tokens are the ERC-20 token rewarded for playing a game and are used in many parts of their respective game. SLP from Axie Infinity and VIS from Pegaxy both fall into this category and have distinctly different properties compared to other tokens in Web 3.
Above is a chart that shows many of the various types of tokens in Web3. On top of Game Tokens being unlimited in supply they also have a unique way that they are created and distributed. They are not mined, not allocated by the creators for specific purpose, not redeemable for a specific asset, and do not have specific emissions over X years.
Instead they are rewarded for playing a game. They are also a critical pillar in their game’s economy and used to grow the number of users for their respective games.
Fundamentals
Game Token’s properties make them so different from other tokens, that their prices are largely disconnected from the broader Web3 ecosystem. They may see some short-term spikes, but their unlimited supply, emissions, and demand based on in-game utility makes them uncorrelated in the long run.
To be clear their use cases are not fully developed. Axie Infinity is the largest Web3 game, but still in Alpha as of writing this. That means most of their economy is unreleased. Balancing these tokens at a large and developed scale has never been done before…period.
There are currently few use cases for Game Tokens except for adding more players to a game through mechanics like breeding. With limited uses, games need to continue to grow to balance their economy since an increase in players also means an increase in Game Token Emissions
This may look like a Ponzi that needs growth to survive, but that’s only because all P2E games are in Alpha. More utility is planned, and games must have roadmaps for additional applications of their Game Tokens that will make them not reliant on user growth alone.
This will be a continuous balancing act and hasn’t fully played itself out anywhere.
Glimpse of the Future for Game Tokens
Tweaking the economy through emission rates, burn mechanisms, and game utility is going to be complex. Dynamic systems may need to be constructed to handle rapid user growth or the volatility that comes with Web3.
It may be possible Game Tokens could be used in more novel use cases in the future such as across P2E games/economies. Imagine if WoW gold could be used in Skyrim for special items. P2E Game Economies may find synergies with each other to grow together.
Everyone is still figuring this out, but Game Tokens are here to stay as a fundamental pillar of P2E games. Economies only become more complex the larger they get, and we are all still early.
This isn’t even our final form…
Part 2 will be suggestions to balance Game Tokens for the long term
