Building and Maintaining a Virtual Game Economy Using Blockchain

Supply and demand is one of the more basic and fundamental concepts in economics. Put simply, a higher supply of an item with less demand results in a lower price. Conversely, when an item is scarce but with high demand, the price is higher. The law of supply and demand is graphically represented here:

Not every item follows the same curve paths, but supply and demand says that with every good there is an equilibrium point where the supply and demand curves meet. This is where the quantity and the price match the demand and willingness to supply the good. It is where an economy is most efficient and results in no surplus or shortages in inventory.

Economists have used this basic but powerful idea to explain the real-world market behavior of consumers and producers. How can this concept be applied in gaming to fuel a virtual economy? And what are the impacts of a virtual game economy when there are real world implications?

Applying the Law of Supply and Demand in a Blockchain Game

CryptoRome, on its surface, is a battle game. Take your armies into battle and crush your enemies! Yet, the strategy of the game goes much deeper. While a massive army is something to strive for, it’s the production and consumption of the goods produced by players that form the backbone of the game — a virtual economy built directly into a smart contract on the Ethereum blockchain.

Resources and goods are used throughout the game. For example, use iron to build a fortified wall in defense of your newly conquered land in battle. Use raw materials like wood and stone to construct a new building on your village. The actual value of these items is clear, derived from a smart contract-driven market, which in CryptoRome is known as Trajan’s Market. This single sided market allows players to purchase and sell both resources and goods. The price and quantity in the market is determined solely by supply and demand mechanics.

When resource production on villages and Trajan’s Market first launched in December of 2018, the starting value of the resources and goods took a sharp decline while the quantities available on the market spiked. At time of launching the market, there were fewer use cases and therefore less demand for the resources and goods from other players. This resulted in many players selling their resources into the market (to make real ETH, of course). As more and more resources were sold into the market, the prices dropped. For anyone who has studied economics, this makes sense and it was fascinating to watch. The market did drop to a point where the entire value of the CryptoRome commodities market settled at around $75 USD. When this drop occurred, the cost for players to continue selling resources to the market was not economical. And so, as opposed to selling resources at a low price, players refined them or did not harvest them, waiting for demand (and price) of the resource to increase. In fact, some began purchasing resources with the expectation that higher demand would return.

Creating Goods Consumption and Increased Demand

CryptoRome has always taken a “game-in-progress” approach in its development. Instead of waiting months and months for a massive release (or, in the case of some other games, we’re still waiting!), CryptoRome follows a fast and agile release cycle. With each update, especially after the release of Trajan’s Market, new uses for goods and resources are introduced into the game. With each update and new use case for resources and goods, this still young and volatile market can see some wild swings in demand and supply.

Here’s one example: one of the strongest allies a player can have in battle is the Centurion. These soldiers are unique in not only the benefits they bring to the battlefield but also in their design. Centurions are ERC-721 upgradeable tokens. This means a player can level up the Centurion through training, upgrading it and bringing an even stronger advantage in battle. Because these are blockchain tokens, players can also sell them to other players. As a player upgrades a Centurion, they can presumably sell it for a higher price from what they originally purchased it for (e.g., a Level 4 Centurion is worth more than a Level 1 Centurion). When a new Centurion training arena was announced, the price of goods and resources in the market doubled. That’s right — when it was announced. Prices of goods jumped purely on speculation.

Why did this happen? Supply and demand. When new use cases were announced, players began buying up resources from the market to stockpile in anticipation of training their horde of Centurions. As players showed increased demand and purchased more resources, the supply in the market went down. Higher demand with lower supply means a higher price.

More uses for goods and resources in CryptoRome will be added as the game evolves. Each time this happens, players can sit back and observe the dynamic changes to the market system. Or they can choose to capitalize on these swings in the market. A fun, vibrant, competitive battle, where most goods consumption occurs, is critical to the game (and again, it’s fun!). However, just as much fun can be had in playing the game of supply and demand in CryptoRome.