On Virtual Swords, Core Loops and the Decentralized Cryptoitem Economy

Or: It’s Dangerous To Go Alone! Take This — And Keep It Forever

Paul Gadi
Paul Gadi
Apr 20, 2018 · 9 min read

There’s always been a universal fascination with swords that, even as kids, we’re easily drawn to them. A tight relationship between swords and play exists, so tight that we’ve coined swordplay as its own term.

Now, with the coming era of decentralized cryptoitems, our relationship with swords — both physical and virtual — will evolve even further.

When we were young, my brother and I would run outside to play on our small porch. While our grandma would be dutifully sweeping leaves away with a walis tingting, we in turn would be busy making a mess, rummaging through the leaves she’s gathered in a pile.

Once we’d found the most awesome leaf, we would then take one stick out of our lola’s broom, skewer our treasured leaf with the stick so it can act as a hilt, then proceed to having sword fights with our make-shift rapiers.

Only kids will think of taking something like this…
And turning them into this! En garde!🍃⚔ Also, yuck, germs.

The sword resonates with kids (and even adults) since it’s an easy tool to understand. It’s just an extension of your arm. It provides immediate feedback— you swing or thrust it as hard as you can and you can feel the corresponding impact. It’s visceral.

It’s also romantic.

In most cultures the sword is more than a weapon, it’s a call to adventure. It’s an essential part of the Hero’s Journey, the tool that our protagonist uses to enact change. In a world full of danger, he relies on himself and his trusty sword.

Disney’s Sword in the Stone

It’s no surprise that, through the years, a majority of video games have focused on letting us live out our role-playing fantasies using virtual swords.

And boy, did the games deliver! As technology progressed, the games kept becoming more complex and more engaging.

We were able to use our virtual swords across a spectrum of genres. From rogue-likes with ASCII graphics, to 2D Dungeons and Dragons RPGs. To fighting games, stealth games and side-scrolling platformers. And further on, to 3D open world Dragonborn simulators and to virtual reality swordplay action games.

Players were enamored with the new graphics and input devices.

But, as technology does, there were other changes occurring that fundamentally changed how we play and design games.

And not all of them have been for the better.

Back when we were making our leaf-stick rapiers, video games were mostly a single-player experience. We get the sword, we use it in our adventure to defeat the Big Bad. We beat him, we lay down our weapons, and live in a time of peace. The focus was on completing the game’s narrative.

Pretty soon we were able to play video games together with our friends. Multiplayer games shifted the focus from the game narrative to player skill. Game designers meticulously balanced gameplay, as the game is more fun for everyone when we all have the same chance of winning. Most of the time, the most skilled player wins.

Then the Internet happened.

With games now being free-to-play, along with the increasing influence of aggregator platforms such as Facebook, video games started to shift focus away from skill and narrative.

Aggregator platforms and ad networks wanted our data and attention, which lead to user login requirements and always-online gameplay.

With attention being the valued resource of the aggregators, games followed suit. A game design mantra that emerged was ‘retention leads to monetization.’ The longer a player spends in your game, the higher chance he’ll eventually pay.

This has become so ingrained in games, that most of them optimize for this metric.

In Fortnite, for example, you can get a ‘Founder’s Blazing Masamune’.

It’s a cool sword. If you had enough time to grind for the resources needed to craft it. Oh, also it breaks when you use it enough times.

A popular retention mechanic in Free to Play games — durability of in-game items

This durability + crafting mechanic is such a good retention strategy that it’s been applied on more narrative-focused single-player games as well.

Breath of the Wild Gif from Kotaku

The platforms enabled in-app purchases, and thus game designers learned to optimize games to monetize in the most effective way possible. Our love for swords and other virtual goods was an extremely effective path for monetization — it plays on our compulsions to collect, our narcissism, and our intense curiosity in finding out what’s behind all those loot boxes.

If I went back in time and told my 5-year old self that, in the future, virtual swords would always be breaking, would require you to hand over your data to use, and would be hidden inside virtual loot boxes unlocked via cash, he would have looked at me in disbelief.

The fact is that games were developed this way because of economics. It’s the path of least resistance. With so much value accrued at the aggregator platforms, it just makes sense to optimize according to their systems.

Consequently, it was the platforms also that informed our game design vocabulary. previously ad or social network terms — retention, monetization, conversion, ARPPU — started moving into game design lexicon.

Another big consequence of this is the core loop. Right now, one of the first steps that a game designer goes through when designing a game is defining this loop.

Sample Core Loops from Deconstructor of Fun for Puzzle Fighter, Fire Emblem Heroes, and Game of War. While each one has different elements, they all follow the same format —

This is the base core loop of a traditional game — a set of activities that either give or take away resources. It’s designed to get players accustomed to going through the loop as long as possible (retention), and getting value from them by triggering a scarcity of a resource that they’ve been accustomed to spending (monetization). Events such as daily logins are also regularly done to make sure people build the habit.

Designing with retention core loop in mind has been the status quo for the past few years. Recently though there may be a new pattern emerging.

In November last year, Axiom Zen released Cryptokitties, causing shockwaves in the crypto community. This was the first polished Web 3.0 game, playable by even those who didn’t have much of an understanding of cryptocurrencies.

Interestingly, this game didn’t rely on the same core loop retention driven design. Retention didn’t lead to monetization, it seemed like it was the other way around.

Also, being built on the Ethereum blockchain, it allowed Cryptokitties to be tradable like Bitcoin, and have a correspondingly market determined value. This opened up the game to not just players, but also traders who were looking to make a profit.

At it’s height, people were buying cryptokitties for upwards of $100k, and doing millions of dollars in transactions. This was a level of success similar to being in the Top 10 lists of the app stores.

Cryptokitty # 8 — Selling for 888 ETH

Cryptokitties has shown us a possible new model and a possible new market. The game wasn’t designed around retention and free-to-play players.

Trading and making a profit was itself the game.

Instead of convincing players to pay for resources in a closed economy in which they’re invested their time, we now have a model where buying and selling items is the core gameplay itself.

Cryptokitties’ popularity may have waned though, and arguably one reason for this is that buying and selling isn’t as an effective retention mechanic to entice people to come back.

The reality is, even if the player core loop is formulaic, it’s a formula that works. It has been tested over years of game development. Analytics and psychology have shown this retention loop to be effective in monetizing people, even without the monetary incentives provided by the trader loop.

So what if inside this trader loop, we embed games with traditional retention mechanics? And to make it even more exciting, what if while playing the game inside the traditional game loop, the item’s value changes?

A loop within a loop. Cue Westworld reference!

We’ve actually seen this model, and it already existed 25 years ago.

A Black Lotus Magic: the Gathering card — sells for $5 to $100k depending on condition. via CNET

Magic: The Gathering and other collectible card games are perfect examples of having a trader loop that works on top of a core game loop.

Not only in physical items, that model has already been proven to work with virtual goods as well. The Steam Community market has enabled a trader loop to exist around CS:GO (although its centralized nature has made it vulnerable to policy changes), creating an economy of items that can reach tens of thousands of dollars in value just for a single item.

Autographed CS:GO skin sold for $61k, via Polygon

With these items being priced so high, we see a lot of players balking at the prices. One thing the cryptocurrency revolution teaches us though, is that value is really determined by how much people will pay for it. It may seem exhorbitant, but $61k to a player who plays games for free values it differently to a collector who loves the game, loves the items, and earns $50k a month.

And this I feel is another missing piece of an effective decentralized cryptoitem economy. With Cryptokitties, the game’s meta eventually settled around trading. There’s a subset of players though, whose end goals aren’t to make money, but to collect. These collectors find so much value in these items that they’d happily pay more than the market price.

The Trader-Player-Collector Core Loop

The high-value collector loop has traditionally been relegated to gray markets, and is an untapped opportunity for game designers.

Decentralization and Cryptokitties have shown us that games can be designed outside of the retention loop. As cryptogames continue to evolve, more games will be made that more effectively make use of all three loops, ushering in a new era of games that have no design dependence on in-app purchases and ads.

The new decentralized cryptoitem economy is an exciting frontier, and has the potential for massive growth. Just imagine if we introduced user-generated content into the loop — The IKEA effect would not only further increase cryptoitem value in our collection loops, but we would provide opportunities to an increased audience of creators as well.

There has to be a balance though, cryptoitems may lead to more developer opportunities, but it’s easy to introduce the same dark patterns we’ve seen in previous platforms. Cryptoitems by their nature can lead to an increase in materialism, and having a trading metagame leaves it open to exploiters of the system such as scalpers.

As software designers in a post-Facebook world, it’s our responsibility to be mindful of the social architecture of our systems and how they affect our users.

It’s promising to be in a community of developers who regularly bear this in mind though. The cryptogame development community has been a great source of knowledge and inspiration in building decentralized systems. This gives me hope that we’ll be able to break out of our centralized loops, and create a future where our 5-year-old selves would tell us we’ve designed the swords of their dreams.

A virtual sword future my 5-year self would be excited about! from Vice


Empowering game developers to create crypto rewards driven…

Paul Gadi

Written by

Paul Gadi

CTO and Co-Founder at Outplay.games (Alto.io) | Into Game Design x New Technologies



Empowering game developers to create crypto rewards driven games

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