Web3 Games and the Resurrection of Staking

The evolution of staking

• Network validation: “Proof-of-stake is a type of consensus mechanism used by blockchains to achieve distributed consensus. In proof-of-work, miners prove they have capital at risk by expending energy. In proof-of-stake, validators explicitly stake capital in the form of ether into a smart contract…” (ethereum.org). Peercoin(PPC) was the first project to implement Proof of Stake back in 2013.
• Revenue distribution: Let’s take Immutable X, for example,

• For more information on how revenue distribution became a form of staking for Immutable X, check here: Immutable staking.
• Liquidity providing: Participants allow DeFi protocols (e.g., Uniswap) to use their assets as a source of liquidity by staking them. In return, they receive a portion or the entirety of the fees produced by the users of that liquidity.
• Staking to inflate token price artificially: As Cobie blatantly puts it, “Somehow, over time, the word ‘staking’ has been repurposed and redefined. Instead of receiving rewards for contributing to chain security with collateral at stake, modern “staking” just seems to mean idk we give you more coins as a reward if you don’t sell your current coins lol.” (ApeCoin & the death of staking).

It is important to note that staking can be applied to any cryptocurrency or NFT. Since there is a direct link between NFTs and web3 games, this is vital to remember.

Staking in Web3 games

Staking in web3 games tends to fall under the last category. So far, we haven’t seen a gaming project where staking serves the purpose of securing the network or providing liquidity. The core value propositions that are often utilized in DeFi are essentially nonexistent. As a result, staking in web3 games wasn’t designed to provide sustainable value. Below are two of the most-played web3 games and their staking programs.

Crabada is a popular web3 game built on Avalanche. As we can see below, these are the potential rewards for stakers. Do the staked tokens have any purpose?

Another example is Thetan Arena’s staking program. They explicitly state that the purpose of the program is to artificially inflate the token price, although they dress it up as “THG holders can contribute to stabilizing the THG token’s value by decreasing the token in circulation.” (https://doc.thetanarena.com/economy/thetan-stake)

Do we even need staking?

This begs an important question: does staking, in its current form, serve a purpose in gaming? Not really.

The implementation of staking was purely to appease web3 users/speculators that couldn’t fathom that a game could take several years to develop and offer some short-term “utility.” It was also used as a marketing trick, as P2E’s rise revolved around the buzzword “earning.”

Even if we accepted rewarding early community members/supporters as staking’s sole purpose, a significant issue would still lie in the tokenomics of gaming projects. Let’s assume a 50/50 split between insiders (team, investors, advisors, etc.) and outsiders (community, players) of a game’s token. It is almost certain that the bulk of staking rewards will end up with the entities holding the most tokens at the earliest. Who are these? Not the players.

If we do use a staking mechanism, how should we implement it?

But let’s not renounce staking just yet! Once we remove the financial motive, staking as a concept isn’t all that foreign to gaming.

I’m playing a football game where I train a highly rated talent so hard that I can’t use it in the upcoming match in three days. It got better by +2 strength and +1 acceleration, though.

Now, let’s rephrase: I’m playing a football game where I stake a highly-rated talent for three days. I can’t use it in the upcoming match, but afterwards, it will have +2 strength and +1 acceleration.

If we remove the outside financial motive, binding in-game assets, either in the form of currency (fungible) or assets (non-fungible), to receive some kind of benefits/rewards is quite common and can take many forms. We just don’t call it “staking.” So, the mechanism isn’t inherently harmful or unnecessary and has been used with a different name before.

Newer gaming projects have started altering the staking mechanism of just rewarding more tokens. Fresh ideas are on the table. Do we stake fungible tokens or NFTs? Could staking become a form of subscription, and if it did, are we still talking about staking or gating? Staking doesn’t generate hype anymore, so it‘s due for a makeover.

Outliers that use staking innovatively

The shortcomings of Illuvium’s sILV2. (Illuvium)

Locking tokens to receive more in-game currency would enhance players’ gaming experience, as it would naturally help them advance further or faster (or both). That was the thought behind Illuvium’s sILV2, where stakers of ILV received sILV2 that was only meant to be spent on Illuvium NFTs and other in-game purchases. A valiant effort. Where did Illuvium take a misstep? sILV2 is still an on-chain token, and while the team didn’t list it in any exchange, a sILV2/ETH pair was created in Uniswap, bringing the financial motive back in.

Domi Online comes for access and special NFTs. (Domi Online)

To use the words of Domi’s team from their Medium article about staking (Staking Arriving Soon for Holders of $DOMI on Avalanche!), “Through staking $DOMI, holders will earn cTOKENs, which may, in turn, be redeemed for exclusive NFTs, skins, cosmetics, titles, and other items with use in the game” ($DOMI is, of course, the game’s token).

Not only that, but their Whitepaper states that staking $DOMI will allow players to access exclusive areas of the game. Players will complete objectives to win NFTs, titles, or even rare guild houses in those areas.

Is there a financial motive behind staking here? Yes, if the NFTs and other items obtained are tradeable, but it is undoubtedly much more oriented towards enhancing players’ gaming experience.

The curious case of Champions Ascension. (Champions Ascension)

Champions Ascension enables the staking of their Prime Eternals NFTs. The financial motive is much more apparent than with Domi Online or Illuvium. Staking Primes yields two tokens, $MASSINA and $DIAMONDS. Both tokens will be tradeable outside the in-game use cases (Land, Diamond Shop, etc.), both have their specific use-case in-game, and both are also not the core token, which is $ESSENCE. In its simplest form, this staking mechanism does follow the “stake your tokens to get more tokens” paradigm. On the other hand, it’s included in this section because it is an intriguing experiment, considering it uses two tokens as staking rewards which aren’t the core token!

Shrapnel inserts User Generated Content into staking! (Shrapnel)

Shrapnel will enable the creation of Maps and NFTs (Gear) from the community (User Generated Content). How is this relevant to staking? Well, the Maps created will have a ranking. They will need a combination of two elements to reach the Podium (highest level). One is player activity, and the other is tokens staked on the Map! If the Map climbs to the Podium, the players that staked on that Map will start earning staking rewards. If you believe in a map or a creator, you will be able to support them.

This is possibly the most unique staking mechanism to-date, and it’s exciting to see the insertion of UGC. The financial motive is there, but it aims to promote quality content creations that, in turn, enhance gameplay.

Could a large group of players, possibly motivated by an influencer, coordinate to stake and play the same map (quality aside) to manipulate the mechanism and earn staking rewards? It’s possible, and according to Shrapnel’s team, they are considering and working on possible solutions.

Web3 gaming drifts further and further away from play-to-earn and closer to sustainable economic models. In the same fashion, web3 games will find productive ways to utilize staking to enhance their gameplay. We shall see in the future how many ways are going to be invented and which ones are going to dominate, but for the time being, early experiments are giving us signs of hope.