A Paradoxical Problem: Speculation and Accessibility of Game Objects
A paradoxical problem is created when game objects are bought and sold in real world markets. Speculation of an object’s value will draw players to the game but as more players join the best objects will become inaccessible because of cost. This problem is not new. Collectible Card Games (CCGs) have demonstrated that rare cards that give players the most strategic advantage become the most costly and hardest to acquire. A good example of this is the Power Nine in Magic the Gathering.
The rise of crypto-games and Non Fungible Tokens (NFTs) have compounded this problem. Increased valuation of a game object happens not just because it gives the player an advantage but also because the technology itself drives speculation. This means that traditional ways of balancing speculation and accessibility will not work (e.g. traditionally CCG designers might limit the use of powerful cards in a tournament).
One untried solution is to use cryptoeconomic primitives. Using cryptoeconomic primitives may give game designers new tools to not just better balance speculation and accessibility but to maximize both. Below is an elegant solution to maximize both speculation and accessibility for cards in a crypto CCG. I am using a game called Mythereum as an example because it is rife with potential to implement this (full disclosure, I know the creators).
The Solution: Re-fungible Tokens
The core of the solution is based on a theoretical cryptoeconomic primitive known as Re-Fungible Tokens (read Billy Rennakamp’s article on them here). Below I have done my best to describe in non-technical terms the concepts that you will need to know to understand Re-Fungible Tokens. Feel free to skip this section if you already have a grasp on ERC-20s, ERC-721s, Continuous Token Issuance, and Re-Fungible Tokens.
Fungible Tokens (ERC-20)
A good analogy for these are currency. This is not to say that the utility of ERC-20s is currency as they can have many different functions. It is analogous to say that the characteristics of an ERC-20 is similar to currency.
For example, if I have one ERC-20 token and you have one token, they are essentially the same. It is as if we each had a dollar. We can trade dollars (or tokens) with each other and the characteristics of what we have and its value do not change. We can also break them up into pieces and they still retain their value. I can divide a dollar and give four quarters to four friends. I can also divide an ERC-20 and give 0.25 to four friends.
Non Fungible Tokens (ERC 721s)
A good analogy for these are baseball cards. If I have a Babe Ruth card and you have Mike Trout baseball card, they do not have the same value or characteristics. Mine is very different from yours and it’s more valuable because of its characteristics. I also cannot divide mine up into pieces, doing so would destroy it.
Continuous Token Issuance (Bonding Curves or Bancor Protocol)
These are contracts that manage the buying and selling of a limitless amount of an ERC-20 token. A formula determines the price based on the amount of tokens that have been purchased.
A good analogy for this is a bottomless well. You can buy water from the well or sell water back into the well at any time. The cost is dependent on the amount of rope needed. If you are first to buy the water, you use very little rope and it’s cheap. The more people that buy, the lower the water falls, the more rope is needed and the more expensive it becomes. At anytime you can sell your water back into the well. As the well fills, it gets cheaper to buy again.
For this specific example, one could start to determine the price of the water for both buying and selling with a formula. In the same way, the price of Continuous Token Issuance is governed by a set formula (e.g. linear, quadratic, logarithmic).
Let’s take our ERC-721 (e.g. Babe Ruth card) and have it be owned by a Bonding Curve. Anyone can now buy ERC-20s that in some way represent ownership of that ERC-721. Anyone can also sell their ERC-20s or ownership back to the contract. The price of those ERC-20s are determined by the formula.
The use of Re-fungible Tokens in Mythereum
Mythereum is played by making a deck of ERC-721 cards and battling an opponent with it.
Cards have four main attributes
- Attack — The amount of damage the card can do.
- Defense — The amount of damage a card can take.
- Magicks Cost — The amount of Magicks needed to trigger the cards special ability. Magicks are generated randomly throughout the game.
- Special Abilities — Currently a boost to the cards attack or defense.
There are two extrinsic incentives to play. First, players can earn Mythex (an ERC-20) that they can spend to upgrade some of their cards attributes. Second, players can compete in tournaments and win prizes (e.g. DAI, ETH, Mythereum Cards). Because of the extremely limited number of cards per an edition and the ability to upgrade cards, scarcity for rare cards is very high and accessibility is close to zero. This greatly affects the outcomes of tournaments unless limits are placed on what cards players can use. This also makes joining the game as a new players unappealing because the best cards are owned by veterans and the cost of acquiring them is prohibitive.
To fix this let’s take the following steps with Re-Fungible Tokens:
- Create a mechanism so that players can “stake” Mythereum cards so that they are owned by a Bonded Curve.
- Anyone can buy or sell an ERC-20 that is associated with the staked card.
- Each card will need its own ERC-20.
- The price should be extremely affordable. The formula for the curve will need to be tested.
- This ERC-20 does not give you ownership of the ERC-721 but gives you a proxy card. Essentially this is a copy of the original that you can use to play in tournaments. The creators of Mythereum would need to always honor these proxy cards as real cards.
- The ERC-20 would need to have the decimals set to 0 so that cards are always sold as integers. This will make the ERC-20 proxy similar to an ERC-721 in that it will not be divisible.
- A percentage of each purchase and sale of an ERC-20 from the curve is split between the owner of the ERC-721 and the game designers. Eventually this pool could be split differently to encourage interoperability. The pool can essentially incentivize other developers to somehow incorporate Mythereum cards.
Re-Fungible tokens should increase speculation for the following reasons:
- The value of ERC-721s should go up because now they have two ways to earn the owner ETH.
- They can be used to win tournaments.
- The owner can stake the card and earn from people buying and selling the ERC-20.
2. The value of the best ERC-20 proxies should go up. Many players will want a proxy of the best cards in the game. Therefore, each card staked may create its own speculation.
Re-Fungible tokens should increase accessibility for the following reason:
- While the ERC-721s in the game may become less accessible any player will be able to afford the ERC-20 proxy. This will allow any player to play with every card.
New Areas for Designers to Play
This solution also affords some really interesting areas for us to play with as designers. I imagine we could do some or all of the following:
- Clans or guilds can be formed around ERC-721 cards. These guilds will need to determine governance to ensure that cards change in the way they want. This can happen in two ways:
- The ERC-721 is affected by playing with the ERC-20s. For example, upgrading a ERC-20 proxy with Mythex will have some similar effect on the ERC-721. Or if you win a tournament and use the ERC-20 it will in someway affect the ERC-721. Clans or guilds will need to work together to upgrade the cards in the way they want.
- The ERC-20s are affected by the ERC-721. For example, if I upgrade my ERC-721 with Mythex it affects all ERC-20 proxies. Clans or guilds will need to petition the owner of the ERC-721 for the changes they want to the card. The ERC-721 owner is incentivized to listen or else less players will buy the card.
2. Put the artwork for cards on IFPS.
- The ERC-20 proxy also acts like a copyright for the art. Imagine being able to make and sell merchandise for your favorite cards.
- A percentage of all buying and selling of the ERC-20 goes to the artist.
3. Allow players to determine the type of formula for their staked ERC-721.
- This allows everyday users to play with bonded curves and better understand them. Game designers will also get robust data on what type of formula is best for accessibility and speculation.