Who Loses when Everyone Else Earns in Blockchain Games?

Rex Liu
Rex Liu
Jul 14 · 16 min read

Author: Hanson, Founder of Top Player Guild

TopPlayer (TOP):*The World’s First Professional Blockchain Gaming Organization,* http://topplayer.org

Translator: Linc/天元/香克斯/韭菜花 2018/迷恋猫阿伟/稀饭/Rex Liu

Editor: Rex Liu, NeoWorld Space Station,Lord of №4 Continent

Original Article: https://mp.weixin.qq.com/s/g1XTNaauuN7hJzsxKFrihg

Notes: this article is written almost a year ago after NeoWorld first launched in June,2018. U can see the logic on wealth and all the backbones of virtual world. It would definitely clear your doubts on the development and the reality of currency and everything about it. Hope it helps.

To be frank, before participating the blockchain space, I never thought of the problem who loses money.

I was too young and naïve to focus on learning the technological skills when I graduated from university. My salary was 2000 yuan, but I didn’t really think of the issue that my earning was someone’s loss.

As I recall, it’s true that someone loses money. The answer is the boss because the product we made didn’t make any profit and our boss payed all the cost. Then, it seemed I also lost because I was one of the few employees who were able to code with FLASH program in China. Coinciding with the booming website games, there is a lack of talents of my kind. Previously, my salary could be 10,000 yuan, but I was willing to accept 2,000 yuan to take the challenges which’s the hardest that I could navigate. Then, I became the tech partner.

There’s something interesting that even I earned less salary, the boss didn’t make profits at last. Why? Because this was a negative-sum system that everyone failed.

So, the first conclusion is that it is not true that when someone loses money and others will earn for sure.

The company gradually expanded after going through all kinds of difficulties a startup would face. We got an investment of 10 million yuan. And then, the problem changed again when there’s 10 million yuan added to company’s book capital. It seemed our company made money.

The company did have more money, but the problem was that our company still had no ability to make money and kept burning along the way. It’s still a negative-sum system. If someone makes money, there’s no doubt someone loses more money on a negative-sum system. Who is the guy who loses more money? Certainly, it’s investors.

But it’s funny. It looks like everyone makes money except investors. Company has more book asset. Employees get a raise. And even the boss wins because he didn’t have to burn his own money. Instead, he could throw investors’ money to do whatever he wanted.

Then, the second conclusion is that many people could make money on a negative-sum system.

We went through hardships. A few years later, we finally succeeded to finish the first massively profitable game project. On this project, all the partners made millions. Then the system become a positive-sum system for all participators. Everyone wins.

Therefore, the third conclusion is that everyone can make money and no one loses on a positive-sum system.

Let’s go on with the above example: at the moment we were developing single-player mini games with a simple profit model of charging advertising fees. Thanks to our tens of millions of players, we brought in considerable earnings and every team member made a tidy buck. But the questions are where our profit came from and whether anyone was at a loss?

Since our games were all free, we earned money from advertisers instead of players. In that way, did advertisers lose money just because we were making money from them? Actually, these advertisers were intermediaries just like Baidu advertisement who were only ads facilitators charging some service fees. It was ads owners who really paid the bill. So did ads owners lose money if advertisers’ income was derived from them?

This is a complex question. The ads owners could either make or lose money through advertising. This depends on the product itself and the span of target customers. The effect of advertisement would be very different from each other.

Let’s go back to the question at the beginning: where did our profit come from? It seems not so correct now about the initial viewpoint that we didn’t make money from players because games were free. If there was no player watching ads, we would have made no money from ads owners. Thus, players were attracted to ads owners through our games. Additionally, part of players became consumers and thereby ads owners paid the advertisers who accordingly allocated part of the payment to us.

In this system, both we and advertisers made money while the ads owners could either make or lose money. What about players? In the optimal case, they gained nothing and yet in the suboptimal case, they bought some products recommended by the ads where the best assumption was that they got what they need with high quality and low price while the worst case scenario was that they were deceived into buying some fakes or overpriced products.

Is this question over now? Please wait and consider another question: since the player could get not only superior products but also fakes, in either case, does this consumer gain or lose? Does he definitely gain when buying superior products? If so, where does the ads owners’ profit come from? As to consumption behaviors, should we consider the question of gain or loss?

We can skip this question first and further expand this issue. As a result of this series of business activities, a large amount of capital flows have been generated. Game developers, advertisers and manufacturers all generate profits, so they need to pay taxes. As for the state tax affairs, no matter who makes or loses, the tax affairs will surely make a profit. So the question arises again. Is the tax plus the previous system a positive sum or a negative sum game as a whole? This will not be addressed here temporarily.

We continue to expand the scope. As the series of commercial activities and the business activities of other industries are very frequent in China today, there are many opportunities for making money in the middle, even foreign capital is attracted. So now standing in the larger macro perspective of China, no matter who gains or loses in China, as long as China can introduce foreign capital, is it a game of positive-sum system?

What is your first intuitive answer to the question above? If your answer is positive, then the problem arises again. Foreigners who come in with these investments, why did they come here to invest? They are to support the construction out of charity? Certainly not, they must also come to make money! Who is willing to do businesses that loses money? But the problem is, if they are investing to make money, then who are they making money from? If they make our money and we make money ourselves, who is losing? If no one loses, where does the extra money come from?

No matter what the answer is, a magical reality is in front of everyone. In the decades of reform and opening up, no matter who we are, or the foreigners who come to invest here, almost everyone makes money. The wealth and living conditions of most people are much better than that before the reform and opening up!

Here, we will not continue to expand the scope, and can draw a conclusion.

Considering earning and losing, it is necessary to set the boundary. When we continue to expand the border, this problem will become more and more complicated, and ultimately beyond the scope that we can personally understand!

With the above deduction and four conclusions, let’s revisit the issue. We will find that there are two core points that need to be highlighted:

What is the Origin of Wealth?

On earning and losing, as long as we follow up all the way, it will eventually lead to this ultimate problem. I have been thinking about this for a long time. From the perspective of metacognition, my personal conclusion is that wealth is from the people themselves!

First of all, the concept of “wealth” is a concept only cared about by human beings. Without people, there is no matter of wealth. Therefore, human beings themselves are the origin of wealth. But human behavior will produce a lot of wealth subjects. One of the cores of these subjects is that humans must recognize their value and then give a corresponding price! If those subjects increases, in the contemporary financial system, a Country will issue more currency to correspond to the wealth of these subjects to ensure the liquidity and activity. It is due to the logic that if the wealth of those subjects is increasing with no more currency, then the value of the currency will increase accordingly, and the currency will become the biggest subject of appreciation. Eventually, everyone will be reluctant to use the currency and wait for the appreciation. Therefore, it will inevitably affect the circulation of wealth and the activity of economy.

What are the main categories of human behavior that produce wealth subjects? At present, there are three main types:

The first is the human body itself. Most of the babies and the elderly can greatly stimulate social consumption and create wealth. They can completely create wealth without do anything. A more intuitive example is that in any country, the population can be stable or growing, but if it is reduced, it will be a big problem, to put it more exaggerating, if you reduce the number of people by 10% every year, no matter how powerful this system is, it will not last for long because they are the source of any wealth.

Second, the physical wealth that created by people, or is valuable to people. This is easy to understand, such as the products produced by workers, minerals, etc. As long as we can see and use them, man-made objects and natural resources that are valuable to humans can be considered as physical wealth.

Third, attention and time. This kind of wealth is often expressed as virtual commodity, which is very different from the physical commodity. The wealth scale of the virtual commodity is very subjective. For example, a blade named Dragon Slaughter in the game is priced at 100,000 yuan, then the weapon is worth 100,000 yuan? If someone buys it, then it will worth that much! Unlike physical commodities, there is usually a cost price as reference. Even if it is expensive, it is not too exaggerating. It can be twice as expensive as the cost. The 100% profit business is so hard to find. But the virtual commodity in games is different. Although creating a blade in a game only costs the attention and time, but its profits can be very high and can not be calculated, in the narrow sense calculation mode, the cost of a 100,000 yuan blade can be ignored.

To give another example, a painter spends one day to complete a painting and then prices it 100,000 yuan. Now interesting things happen: first, what is the cost of this painting and how to calculate? Then, when the painting was completed and the artist called for 100,000, are there more wealth in the world? It may not be for others, but for him, it is indeed 100,000 yuan more, and when he really sells this painting to a second person, then for both of them, it is indeed 100,000 yuan more, and if more people have recognized this price, and we can think that the human society really has 100,000 more wealth. The source of all this is only derived from the painter’s bid, and he has the ability to make everyone finally achieve a consensus!

Through the examples of games and paintings, you can see that the attention and time are actually wealth. Games and paintings are attracted by people’s attention, satisfying the spiritual consumption. Even if they don’t consume directly, they can be indirectly turned into wealth. For example, the one that I used to make free games earns advertising fees. The players who play our games don’t directly pay for it, but we succeeded in attracting their attention through the game. As a result, we can create wealth through advertising, and these players, as well as their time and attention, are actually an important part of this wealth. But unfortunately, in the traditional business model, we will not pay the players a penny, and even the ads will be harassed by tricks, and advertisers will have to pour their money through fake products. So on the surface, they played the game without spending money and earned it. In fact, their attention and time were bought cheaply, and after they were converted into more wealth, they were not given to them! And in the token economy model, it will be completely reversed because these players can directly obtain the tokens when playing the game, which is equivalent to the wealth generated by their attention and time. At the same time, they will have a piece of cake.

However, gamblers are still likely to lose money. This is something that cannot be avoided by any system. The gamblers will use these tokens to do the short-term trading and finally lose money, and even invest money to continue to speculate and continue to lose money.

When we understand that the origin of wealth is human, then there is a new question: Isn’t there more people, the more wealth there must be? Why is India poorer than the United States? This just leads to the second core point.

What is the Carrier of Wealth?

The comparison between India and the United States has been put in front of us with the fact that it is not the more people there are, the more wealth there will be. Doesn’t it contradict our previous discussion? The reason is that there is another important point that has never been said, namely, the quality of the population!

In war movies, there is always a saying: A strong general is better than a troop! The same is true for countries and systems. If the population quality of one system is generally higher than that of another system, and the wealth-creating ability can be up to several, then the system with fewer people is likely to surpass the system with more people.

Then the question arises: why is the population quality of one system higher than that of another? The reason is simple: the system is more benign! An excellent system can not only improve population quality in the system, but also attract more outstanding talents from outside to join. On the contrary, a malignant system will worsen population quality, even the fratricidal fighting among relatives and friends. In this case, excellent talents will be silent or leave, but also basically lose the ability to create wealth!

Then the question arises: what is a good system and what is a poor system? Systems that are open, fair, reasonably distributed, forward-looking, stimulating goodwill and progress in human nature are generally regarded as good systems, while systems that are fraudulent, exploited seriously, inanimate, malicious and retrogressive in human nature are regarded as inferior systems. In an inferior system, everyone loses money, or the wicked makes money, the honest loses money, and the wise at most are to keep peace without loss or gain; in a good system, the kind and diligent person can also get the reward they deserve, and the wise and kind person can get more, while the wicked person will be suppressed.

Therefore, the source of wealth is the population, and the carrier of population is the system!

Personally, the mainstream population system can be classified into three categories:

Political system;

Financial system;

Business system;

Political system: In the principle of never talking about state affairs, I will not elaborate the political system. In short, this is the largest and most advanced system in the world. If this system is not reliable, the financial and commercial systems under it will not be better.

Financial system: In fact, people who are not engaged in finance or who do not care about investment generally do not consider much, and they do not systematically study and think. But the people in the blockchain space are different. Almost everyone knows at least one other currency system, that is, the Bitcoin system, and should think about the advantages and disadvantages of this system relative to the traditional currency, and then understand the excellent currency as well as how the financial system attracts talent, and then absorbs the wealth corresponding to these talents.

Business System: Our focus is on the business system, which is easy for every ordinary person to understand. Whether we join a company to work, use a company’s products, or invest in a company’s stock, the logic is definitely to recognize the company’s business system and be optimistic about the future. And what is an excellent business system? What is a good company? In fact, there is a whole set of consensus logic, such as:

The founding team must be trustworthy;

Business model is reliable;

The product is easy to use and is just needed;

The market is large enough and promising;

Strong execution and not afraid of competition;

Considerable profits;

The leaders have remarkable story-telling capabilities…….

If you can meet the above conditions, more people are willing to join the company, and increasing users will buy the company’s products and consume. More partners are willing to join this company. Their cooperation will lead to profit in the process. This company will gradually form a huge business system and everyone in this system may make money because this is a powerful positive-sum system! (Please review the third conclusion)

Someone may argue that if this system earns, others would lose? for example the competitors? Maybe, but never forget our fourth conclusion: to discuss the issue of earning and losing, there must be a border, otherwise there will be no conclusion. The boundary should be the system in which we are and have a direct relationship.

If the principles all above are understood, then we can finally talk about the core issues: The blockchain games! The reason why I discuss at the end is because the problems discussed in this article really have nothing to do with the game, mainly in the field of economics and sociology. But if I come up to talk about academics, I guess I can’t articulate well enough. I know that there are not many people who are willing to be patient enough. So I use my life stories in plain language and I hope it can help you understand this academic problem.

Games, especially blockchain games, I prefer to classify them individually as a new type of population-bearing system: virtual world system! Relative to the three systems mentioned above, the biggest difference is that it is a completely fictional system. All the rules, content, and characters involved in the game are fictitious by game developers. But as the game developers are still commercial entities, this system is essentially a commercial system, especially blockchain games that center on moneymaking as the core gameplay.

In this case, the blockchain game system still satisfies the basic indicators of many commercial systems, while also satisfies the underlying principles that superior systems can attract population and wealth, and inferior systems can expel population and wealth.

Now everyone can understand why the Ponzi scheme blockchain game like F3D can’t last long? Because its rule setting is doomed to be a poor system,even the game developers themselves claim that the game is a scam.

All the people involved will inspire the evil of humanity because of this bad rule, and eventually it is a leech-cutting scam, how can such a system last? And wealth inflows will be limited and short-lived because no one will have the confidence to trust a scam system with a-long-term and large-scale investment.

Coupled with developer’s commission, the F3D has become a negative and inferior system, and eventually the population and wealth will flow out. In the case of reduced wealth, such a system, as long as someone earns, it will inevitably suggests that someone loses.

Let’s take another look at the positive case after I am done with the counterexample. It is the NeoWorld that I have been recently addicted to. The blockchain game is quite different from those Ponzi games. NeoWorld is dedicated to creating a healthy, stable, profitable, infinitely scalable and sustainable in-game ecosystem. At the same time, the development team is very competitive from a business perspective. The performance of the game which has been running for three months also proved their execution. In this way, it becomes a high-quality positive system, which will continue to attract more people to join and survive. The average monthly retention rate of 70% or 80% also explains everything. And as the population and talents settle in this system, the system will become a wealthy system. As mentioned earlier, the positive-sum system has the opportunity to create wealth for everyone. Of course, gamblers may lose money at any time. This is also mentioned before. It belongs to a special group and will not be discussed here.

Even if the players who participate NeoWorld do not produce direct consumption, then the large amount of attention and time precipitated will certainly attract foreign investment. They can use these attention and time to sustain wealth because these are the origin of wealth and only need to be transformed. It can be a commercial value. Of course, this is the worst assumption. Normally, the opposite may be true. Games are one of the most stimulating products, even if many blockchain players are rushing to make money. However, when one has been playing a game for months or even years, who can guarantee that they will not be impulsive for several times, and consume once? If the tokenized games can’t make money-seeking people consume, then I can’t even imagine other products at all. The token economy may become a false proposition!

For a positive blockchain game system, there is only one real crisis: whether players can continue to grow, at least to an order of magnitude, not to scale down. There are four main reasons for the decrease: 1) self-destroying; 2) strong competitors; 3) changing circumstances; 4) the upper system population has a negative growth. The former three is a topic of entrepreneurship and will not be elaborated today. We still don’t talk about state affairs, like the fourth.

We will summarize in the end: games are spiritual consuming product, and the blockchain game can build a virtual world that is more realistic than the traditional game. The world can attract the attention of the population and people, and human beings are the source of wealth. So blockchain games can constitute a wealth bearing system. The wealth of this system depends on the strengths and weaknesses of the system. An excellent system can continue to attract newcomers to participate and survive, and become a positive system, and everyone has the opportunity to make money. An Inferior system will eventually become zero and even negative and games. Once this is done, as long as someone earns, there will be people who lose, and even a vicious situation in which all are lost! In the end, it is the underlying logic of business and entrepreneurship. It is the entrepreneurial team, the business sense, the product ability, the system building ability, the angelic advantage, and the market and user consensus based on the above conditions!

If you need more information about the game, you can check the following links:

Rex Liu

Written by

Rex Liu

Blockchain and NeoWorld Enthusiast, Founder of NeoWorld Space Station.

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