Loot Arena: Gamified Tokenomics
A few months ago, we undertook the ambitious task of using advanced gamified theory to self-regulate the circulating supply of the Lootian native token, the TIX. This entailed pushing the boundaries in the field of applied tokenomics. This experiment is still ongoing.
Many tokens in the cryptocurrency space are issued primarily for the purpose of raising capital, with their utility being an afterthought. We did the opposite; we began focusing on utility and did not conduct any capital raises. Moreover, we do not own any TIX, which is unusual in the industry.
Token issuance typically follows a similar pattern: a fixed supply (like Bitcoin) or an increasing supply over time (like Doge), with various variations (e.g., asymptotic, identical to the behavior exhibited in Ethereum, namely a reduction in the rewards per block but without any caps).
Several strategies regulate the circulating supply at a secondary level, such as team lockups, gradual releases over time, taxes, staking, and burning. More exotic types of lockups are available as well.
At NeoWorlder Co, we experimented with something different.
Arena showcases a mining protocol that chains work by talented creators together and, at the same time, rewards the winning miner with an NFT while all miners receive TIX. Instead of paying for hardware or electricity, miners pay creators for their work. Miners mine according to their mining ratio (i.e., the number of bids they place in the game in return for TIX). Mining ratios are reduced with NFTs won.
TIX is burned with economic interaction in Lootverse. Currently, the circulating supply of TIX is around 30% of the total TIX mined.
Playing in Arena necessitates understanding somewhat complex dynamics, such as redemption efficiency, internal exchange rates, practical bid value, and game rules. It is also time-consuming and, consequently, only for some. As a result, it will become increasingly more difficult and expensive to access the Arena.
This creates a market for those who cannot access the arena or do not wish to spend time mining to purchase the same from an exchange. Therefore, a highly exclusive Arena is necessary for the ecosystem’s health by design.
Miners play a crucial role in controlling the circulating supply of the TIX. They are akin to economists who calculate a currency’s predicted supply and price to achieve an acceptable balance within an ecosystem. Moreover, they are compensated for their work (as an income on the value added).
For example, if the price of the TIX is too high, it could price out ecosystem participants from burning or using the TIX, which could serve as a signal to turn on the mining engines to increase the supply. On the other hand, if the price of the TIX is low, this might indicate to mine less. Nevertheless, at the same time, those with higher mining ratios may view certain conditions as opportune for winning NFTs and collecting degrees (to lower their mining ratios).
Without a cap on the supply of the TIX, miners consider economic velocity and the burning of tokens before taking action to ensure market stability. It allows for expansion and contraction at certain times based on what miners value. This is like replacing central banking functions to control monetary supply with a decentralized game. A game that, in turn, bolsters the career of talented creators.
The first part of our experiment is nearly complete, with the implementation of 42:1 mining ratios and the imposition of a significant joining fee in TIX to join the arena. The second and final phase of this experiment is managing the decoupling of the perceived mining value to the market value of the TIX based on the wider Lootversian economic activity.
Moreover, since Lootverse has introduced a Type S pool (redemption pool aimed at exchanging products for the burning of TIX), a floor can be applied to the value of the TIX (where applicable). For instance, if TIX falls below a specific value, the Type S pool can intervene to buy and burn the TIX.
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Learn more about Lootverse: lootnft.io
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