The My Crypto Heroes Playbook — Episode 2: NFT Economics
A behind-the-scenes look into one of the most played blockchain games in the world. A written format of a presentation I gave at Blockchain Game Portal in Taipei this year.
Building good games is hard. Building games with an open economy is even more difficult. This multi-part series will explain how we managed to build one of the leading blockchain games out there: My Crypto Heroes.
We will explain how we achieved a weekly trading volume of ~650 ETH, why currently ~6,500 users play the game daily, and how we structured our primary sales that resulted in 13,000 ETH so far.
You will understand how we aligned our incentives with our community and why we designed the digital asset economy the way it is.
Short Recap of My Crypto Heroes
My Crypto Heroes is an auto-battler that features Heroes and Extensions, which are unique assets (ERC721 tokens) stored on the Ethereum Blockchain. Since these assets are stored on-chain, it allows players to buy and sell items for Ether, anytime and anywhere. This creates an interesting economic challenge: How do you make sure these assets stay valuable over time or even increase in value as more players join the ecosystem?
It’s actually pretty complex. I’ve put together a concise overview of the game, along with our different NFT asset classes and game design. If you’ve never heard of My Crypto Heroes, you should definitely read this first! I’ll wait for you here.
Ready to go? Great, let’s dive in!
The My Crypto Heroes Ecosystem
The game economy, quest design, tournament rewards, and hero sales structure are a fine-tuned machinery that keeps the value of unique assets intact. Every decision we make at My Crypto Heroes needs to answer one central question:
How does this impact the value of our users’ assets?
Every update, every new hero, every new quest, every tournament, every raid, every partnership with other companies, and every new project within our company has to answer this question first.
Ecosystem Design Decisions
The Costs of being Competitive
Currently, the cheapest Heroes are traded around 0.22 ETH (~$35.72) and cheapest Extensions around 0.01 ETH (~$1.62).
The most expensive Hero type (Einstein) is traded at 53 ETH (~$8,599) and Extension at 17.5 ETH (~$2,840).
Let’s see how this breaks down for different user groups; from the beginners to the veterans that can afford to invest in Legendary Heroes:
Each team for quests or tournaments needs a total of 3 Heroes and 6 Extensions.
Free-Tier Players (beginner Heroes)
Every player starts with 3 free heroes, which are capped at lvl 40. If they keep grinding the beginner quests, they eventually collected enough in-game currency to buy original, NFT Heroes. Besides quests, there’s not much they can do. (they’re not competitive in PvP tournaments)Low-Tier Players (for quests and lowest tournament)
You can get started with by buying the cheapest Heroes for 0.22 ETH (~$35.72) and cheapest Extensions around 0.01 ETH (~$1.62). For a fairly weak team on the lower end, that’s around ~$117. With this team, you can go on quests but are not very competitive in PvP tournaments.Mid-Tier Players (competitive in middle tournaments)
Rare Heroes are traded around 0.5 ETH (~$81.13) and rare Extensions around 0.1 ETH (~$16.24).
That’s ~$341 for an average team to compete well in the lower class tournaments. (which give original Extensions as rewards)Higher-Tier Player (competitive in higher tournaments)
Competitive Epic Heroes are traded around 3 ETH (~$487.20) and competitive Epic Extensions around 0.8ETH (~$129.92).
That’s ~$2,241 for a very competitive team in the Blue Dragon Cup. (Epic or lower Heroes / Extensions)God-Tier Player ( competitive in top tournaments and Land Battle)
The most competitive Legendary Heroes are traded around 25 ETH (~$4,060) and competitive Legendary Extensions around 5 ETH (~$812).
That’s ~$8,932 to play with the big boys. (and big boy rewards)
Why create such ‘expensive’ assets?
First of all, the price of those assets was not decided by the My Crypto Heroes team. The Price was decided by our players.
In the first few months of the game, Legendary Heroes went up in value from ~5 ETH to ~35 ETH. That’s a great ROI for early adopters that believed in us and helped us grow.
However, we designed the asset supply so that they appreciate in value:
The MCH ecosystem is designed around extreme scarcity of supply. Instead of breeding endless amount of Kitties or releasing too many Heroes into the ecosystem, we kept it exclusive and cozy.
The result: High-value assets. Looking at the weekly rankings on OpenSea, it turns out that the average price per asset is actually a very impactful metric for a blockchain gaming ecosystem. Here’s why:
High-value assets create a liquid market
A Little Case Study
Imagine you want to invest 2 ETH (~$325) into My Crypto Heroes. You would be able to get 2–3 full teams, with which you can compete in tournaments and farm for items in the quests.
However, you’ve committed to certain team compositions.
Let’s say you finally figured out the meta and want to buy Pocahontas, to win in the weekly cups that are restricted to ‘Rare or less’ Hero types.
Since you don’t want to invest more than 2 ETH in total, you’re selling one (or more) of your Heroes to buy Pocahontas.
This means: Whenever a player wants to change his/her team combination, the player needs to trade the Hero on the market. Therefore, high-value assets lead to a high trade frequency on secondary markets, which, in turn, lead to higher commissions from secondary trades.
That’s why we rank so high on OpenSea’s volume charts. The amount of DAU don’t matter if there’s no incentive to switch Heroes and Extensions.
High-value assets are our secret to very active secondary sales.
The Primary Sale Auction
In My Crypto Heroes, the way new Heroes enter the game is through a Sale Auction. Each Hero Auction starts with a certain starting price, which is half of the ‘ending price’ of the (same rarity) Hero that was sold in the previous auction.
Note: Unlike Heroes, Extensions (items) do not get sold in primary auctions. Each Extension was either found in quests or won in tournaments. Therefore, they can only be bought from other users.
The key mechanic of each Hero Sale Auction: Whenever a new Hero type gets sold, the price of that Hero increases a little. Each 5 minutes that have passed without selling a version of that Hero, the price decreases slightly. This creates a fair market value of the Hero during the auction. Players can buy the Hero directly from us during the 2-week auction. Once the auction is over, however, the Hero can only be bought from other users. This means, the total supply of this Hero is the amount of Heroes sold during the official auction window.
Putting Heroes to Work: The Questing System
Similar to how to evaluate stocks that return dividends, NFTs can be evaluated by the expected returns the player received through playing.
The Hero’s value is the Net Present Value of the expected (perpetual) returns of Quests, Weekly Cups, and Land Battle.
Confused? Good. Let me break it down for you what that means. It’s time to introduce “Stamina”, “Crypto Energy”, and “TOKU”:
Stamina
Stamina are like energy points. Each Hero has Stamina and Stamina gets consumed with every quest run. Stamina gets recovered over time. This means: The amount of quests per Hero per day are limited. The higher the rarity of the Hero, the higher the stamina cap.
Crypto Energy (CE)
CE is like XP in other games. Every time you quest, your Heroes and Extensions get CE and level up, becoming stronger with each level. The higher the difficulty of the quest, the more Stamina the quest run consumes, the more CE your assets (Heroes + Extensions) gain for completing the quest.
TOKU
TOKU points are like a loyalty system in My Crypto Heroes. Players can:
a) consume their Hero’s / Extension’s Crypto Energy in exchange for TOKU points.
b) sell their Replica Extensions (Replica = off-chain copies of the real Extensions), which they received from Quest runs.
By accumulating TOKU points, users can get rewarded with our in-game currency GUM (off-chain currency), which in turn buys them Heroes and Extensions that can be sold on OpenSea for ETH. You can look at it as a ‘proof of play’ mechanism. The amount of TOKU points scale with the amount of Heroes and Extensions a player invested into the game. By giving players a steady stream of ‘income’, it explains the rather high value per Hero and Extension.
The Net Present Value of the NFTs’ expected returns
As mentioned, NFTs can be compared to stock returns. Every reward in the game is like a dividend for the NFT investment.
Here are the return categories in My Crypto Heroes:
a) TOKU rewards (get In-Game Currency, Replica Extensions, Replica Heroes)
b) Quest run loot (get CE, Replica Extensions, Original Extensions)
c) Tournament rewards (get Original Extensions)
d) Land Battle rewards (get In-Game Currency)
e) … and more
Let’s say the two teams you bought for 2 ETH can loot 1–2 Original Extensions per month and get you enough In-Game Currency (from TOKU rewards) to afford 1 more Extensions on the market.
That’s in total about 3 x 0.01 ETH = 0.03 ETH (~$4.86) as a monthly reward.
Extrapolating this to a year, that’s 0.36 ETH (~$58.32) for your 2 ETH investment. That’s about a 18% p.a. interest on your investment.
You literally put your money to work, in a very playful way.
The My Crypto Heroes Community
Games are better together, especially if you can support each other. Our engaged player community is another key piece for why players are so passionate about the game. Continue with Episode 3, which introduces our community, our incentive structures, and why MCH is so big in Japan:
Build with us!
At My Crypto Heroes, we’ve spent the last 18 months building, launching, and growing this game and our community. If you’d like to get in touch, reach out to me on Twitter or join our Discord.
If you need support with your economy design and want to work closer with us, have a look at our MCH+ accelerator. This a program aimed to support game projects to dive into the crypto world:
PS: If you’re looking for a referral code when creating your MCH account, feel free to use mine: 5yXJ
