Article by Gavin Shi. This article is for research and communication purposes only and does not constitute investment advice.
“He who controls the spice controls the universe”——Frank Herbert《Dune》
The reasons that affect the sustainability of income for Web3 game players
In the world of “Dune,” according to author Frank Herbert, whoever controls the spice controls everything. In the pursuit of spices people are willing to wage war, intrigue, betrayal … the game is everywhere, and all the motive is to get spices.
So, in Web3 gaming, what drives people’s behavior? Please remember your answer, as it is crucial for the following discussion.
Before proceeding, if you are bearish on the Web3 gaming ecosystem, please stop reading, as it will be useless to you.
The current growth of the Web3 gaming market is slowing down, which allows us to think about how to restart the next round of growth. Do you remember what motivates people to enter the Web3 gaming world? Please think about your answer. If you answered similarly to “sustainable income,” our views agree. Therefore, players’ concerns about “sustainable income” hinder the new growth round in Web3 gaming. In this sense, using Frank Herbert’s words from “Dune,” in the world of Web3 gaming, whoever can achieve sustainable income for players will win the market.
Initially, the designers of Web3 games did not fully realize that it would no longer be just an industry but an economy. Web3 games fundamentally break the boundaries between gaming and finance. It is not just a simple leap beyond the existing gaming industry model but a complete overhaul. Web3 games are a fully decentralized financial ecosystem based on gaming, requiring the development and reconstruction of tokenomics from scratch.
From the perspective of tokenomics, Web3 games monetize players’ game time by rewarding players with in-game tokens (fungible and non-fungible) for their gaming behavior over a unit of time. What’s even more important is that this process needs to be sustainable.
Unfortunately, only a few Web3 game designers currently realize this point. That is why although many Web3 game white papers mention sustainability, they ultimately fail to deliver. Not to mention that some Web3 games’ main goal is only to achieve huge market returns while providing sustainable gaming delivery and gameplay for players is only a secondary objective.
Thus, we have found the reason why sustainable player income in Web3 games is affected. The conclusion derived based on the firstness principle is that the low utility tokenomics design.
Finally, under the tide of a downturn in the crypto currency market, the growth of Web3 games has slowed down, and its ugly side has been exposed, leading to the fall of the gods. This outcome has deviated from the expectations of investors/players/developers. At the darkest hour of the gods’ twilight, people will look forward to the dawn and the arrival of new heroes.
If we see the previous round of Web3 games as a battle of gods, its representation would be greed, arrogance, and brutality. Therefore, it could be recorded as the “Tokenomics 1.0” era of Web3 games. Next, Web3 games will usher in the battle of heroes, characterized by redemption, justice, and harmony, and could be recorded as the “Tokenomics 2.0” era of Web3 games.
Sustainable Tokenomics 2.0 for Tribal Island Game
As a younger species, you can draw experiences from history to enhance your survival and reproductive abilities. In designing the tokenomics in the Tribal Island game, we have learned from the success of previous Web3 games and captured economic models similar to the real world, striving to find the optimal balance between the game experience and economic incentives.
Below, we will elaborate on the tokenomics of the Tribal Island game (hereinafter referred to as “TI game”).
Balanced inflation and deflation.
We believe a sustainable Web3 game requires a balance of inflation and deflation in its in-game economy and native token (including non-fungible tokens) economy.
In Web3 game design, inflation is manifested by the mass minting in-game tokens through various actions such as planting/harvesting, PVE/PVP battles, career tasks, and challenging bosses. Conversely, deflation is manifested by the mass destruction of in-game tokens through various actions such as building units, upgrading attributes, hatching, and exchanging items.
In summary, the in-game and tokenomics are coupled to form a complete web3 game economy system. Game activities produce and destroy tokens, resulting in token inflation and deflation. The ideal state is a balance between the two, with the economy growing and meeting player expectations.
The bad scenario is when the two are out of balance. When the amount of tokens released through inflation far exceeds the amount of tokens destroyed through deflation, it can lead to a bubble in-game value. Eventually, the bubble bursts, causing a sharp drop in token prices.
Conversely, When there is a severe deflation in the supply of tokens, it can cause token prices to skyrocket, and speculators seize the value that should have belonged to players. As a result, players’ expectations for the game cannot be met, and they eventually sell their assets and give up the game.
A typical example of economic imbalance is the SLP token in Axie Infinity. SLP, which peaked at $0.39 per SLP last year, once fell to $0.0089, losing more than 95% of its value. The sharp decline is because Axie Infinity minted a huge amount of SLP tokens in-game, causing serious inflation of the SLP token. At the same time, player cultivation activities only destroyed a small amount of SLP tokens, meaning that the generation of SLP far exceeded its destruction.
As a result, the price of SLP tokens plummeted, hindering the entry of new players and dampening the expectations of existing players, thus disrupting the entire economy.
Design of balancing inflation and deflation in the TI game
From an economic perspective, the more singular an economic model is, the more fragile it is. Therefore, TI game has designed a variety of gameplay to avoid this issue. TI game has a complete world narrative, which can be divided into three chapters in the order of game iteration: Crystal Tribe, Crystal War, and Crystal Technology. From early to late stage, it provides unit building, farming, crystal collection, commodity trading, monster hatching and nurturing, PVE/PVP, player socializing, tribe creation, island management, item crafting, tribe wars, and technology upgrading.
These gameplay actions are inseparable from the in-game currency, crystals (TIC tokens). In this sense, the sustainability of the TI game economy depends on the balance of TIC token inflation and deflation, but how can this be achieved?
Firstly, the TI game learned from the lesson of the Axie Infinity game, and the production of TIC tokens in the game does not adopt a fixed output. Instead, we introduced the”expected production period” and “expected production value,” where the expected production period can be freely switched according to demand across weekly, monthly, and quarterly time spans.
Players obtain TIC tokens through collection outputs and box outputs (boxes are relatively scarce compared to production from collection). The collection power determines the amount of TIC tokens a player produces per second, while the box output is random.
Firstly, the A algorithm calculates the number of TIC tokens that need minted for the next expected production period, defined as the “expected production value.” This value is an iupper limit on the number of TIC tokens that can be produced by retained players in the next period;
Then, based on the expected production value and the player’s maximum collection power, the B algorithm calculates the upper limit of the player’s TIC token production per second;
After that, the C algorithm calculates the TIC token production per second for each player based on their collection power;
Finally, the C algorithm is used again to calculate the TIC token production per second for new players.
In summary, following the first principle, the TI game has found the optimal path to achieve its goal. Through the expected production value algorithm model, it achieves the balance of TIC token inflation and deflation.
Controllable Native Token of the Game
This design is easily misunderstood as centralized control, but it is not. The ideal “controllable” should ultimately be achieved through AI-like algorithms. Of course, this algorithm will not appear out of thin air. Initially, it is a simple decision-making model based on quantifiable data.
Through continuous practice and iteration, its applicability will become stronger and stronger. Don’t worry that it will get out of control. Another meaning of “controllable” is to intervene and optimize it in a DAO. The reason for controlling token production is that the market is constantly changing. If we don’t want the game to fall into an economic collapse, this is a necessary choice.
Although some players may be tired of centralized power, most people are still more concerned about the result because this means that their beloved game will continue to survive and thrive for a long time.
Also Axie Infinity, a serious inflation problem with its SLP token led to a loss of over 95% of its value, but a reversal occurred. As the creator of Axie Infinity retained complete control over the SLP token and their economic dynamics in the game, Axie Infinity quickly canceled rewards for activities such as “adventure mode” and “daily tasks” to restore economic balance.
These timely actions reduced SLP production by 56%, resulting in a short-term increase of more than double the SLP token price.
TI Games’ design for the controllability of its native tokens
In TI game, the total amount of in-game token TIC is constant, which is used to enhance the attributes of game units and exchange for in-game props. TIC tokens are produced through players’ game activities, and 90% of them are also destroyed through game activities.
Regarding the controllability of TIC tokens, it has been mentioned earlier that the TI game has the concept of “expected production value,” The control of TIC tokens is achieved by adjusting the expected production value and the actual production value of the game. This design draws on the concept of currency and GDP in macroeconomics.
It needs to be acknowledged that there are differences in the operating environment and methods between real-world economy and Web3 economy, but the basic principles are the same. In this sense, concepts such as “transmission mechanism” and “liquidity trap” also apply to TIC tokens. Taking the “liquidity trap” as an example, if we analogize the concept of the “interest rate” of sovereign currency to the “premium” of cryptocurrency, this model still holds.
Therefore, the liquidity of TIC tokens will affect players’ asset allocation and thus affect the in-game production value. Conversely, by adjusting the in-game production value, the liquidity of TIC tokens can also be affected (by adjusting the supply of TIC tokens).
In summary, the TI game achieves the controllability of its native token TIC through the design of “expected production value” and “Game production value.” The advantage of this design is that the TI game economy system is very sensitive and can hedge against market uncertainty to a certain extent, achieving sustainable growth of the game economy.
Governance tokens as a value storage
To combat the impact of token volatility on player expectations, currently, top web3 projects adopt a dual-token (or multi-token) model, usually consisting of an in-game token and a governance token. Of course, this is an effective strategy that can make the tokenomics of the game more elastic.
However, many web3 games have not been successful in practical applications, mainly because they have stayed at the level of the “dual-token” concept and have not done the deep design on the application and economic model of the dual-token structure.
Ideally, the in-game token should be controllable, but the consequence of doing so is that its price will show cyclical fluctuations (which you need to ensure are benign). In this sense, passive investors will find it difficult to invest in in-game tokens for the long term.
From their perspective, they are more willing to choose governance tokens that anchor the value of the game and bet on the game’s future. But, of course, to gain the favor of passive investors, your governance token must possess the most basic attribute of a currency – value storage.
TI game’s value storage design for governance token
In the TI game, the governance token TIT has a constant total supply and is used for game governance, NFT asset-related minting and exchange. TIT tokens are minted through Double and business multi-signature smart contracts, and will destroy 90% of the total through Gas.
TIT token is designed as value storage in the following ways:
- TIT token is used as a currency for NFT asset minting and trading in the TI game
- TIT token is used as a currency for airdrops and game revenue sharing based on game assets
- TIT token is used as a voucher for game governance rights
- TIT token is used for creating liquidity pools with the in-game token TIC
- TIT token is used as an anchoring currency for tokenizing game resources.
Tokenized Game Resources
In addition to circulating NFT assets, there are various game resources such as crystal mines, wilderness resource points, uninhabited islands, wild monster lairs, special prop instances, and large world exploration instances in the TI game.
Players can acquire the opportunity to compete for these game resources through bidding, purchasing instance challenge tokens, and adding resource pools. The benefit of this design is that it converts in-game resources into tradable tokens, and the TI game executes more flexible economic stimulus plans by owning all liquidity of these resource tokens. Furthermore, by maintaining complete control over the pricing dynamics of in-game tokens and tokenized resources, the TI game can create tokenization strategies for all in-game resources and have a liquidity pool for these resources.
In this sense, the TI game will have two token systems for player rewards: TIC in-game tokens and game resource tokens, making the TI game more profitable and sustainable.
Creating a sustainable Web3 game economy model and overall token economics is a process of constantly challenging the old order and nurturing new hope. Despite our years of experience and months of contemplation, games like Axie Infinity, valued at billions of dollars, continue to refine their tokenomics. So we don’t expect to get a perfect model in one try. This is not wise, so everything about the TI game is just beginning, and we have a long way to go.
The potential of Web3 games is so huge, and it’s so exciting that we have the opportunity to do this! We treat the TI game as a living organism, with respect for the market and goodwill towards the players, and then watch it evolve and grow. And the most meaningful thing is to see how it brings change to the world.
Gain of optimizing game launch methods
The current way of launching web3 games has a confusing phenomenon. For example, when you open the launch panel of some new games, you will find that their contents are almost the same. So what are the consequences of your participation?
For example, a bloody loss in an IDO/IGO. If you are still active in the web3 game community today, you will know that many people are already tired of this game launch model that relies on short-term speculation for profits.
You will realize you won’t make money with this model when you think about it. It is time to launch game startup methods that align with players’ interests.
TI Games’ original web3 game launch method – Double
The biggest difference is that TI Game’s original web3 game launch mode – Double – will filter out most pure speculators because it rejects speculation. “Double” originally meant “double” and is now used as a launch mode for TI games.
In addition to the meaning of “double,” Double brings participants multiple and more meanings. How is it achieved?
TI Game’s “Double” is essentially a recruitment method for founding players of the game. The gameplay of Double is that first, participating players pay a fixed 300 USDT to exchange for TI Game’s NFT blind box, and one-third of each payment of USDT will be used to add liquidity to the LP and buy back TIT tokens.
Secondly, based on the TIT price at the time of exchange, an equivalent of 300 USDT worth of TIT tokens will be given as a gift and then linearly released to players over 120 days.
- Participating players pay 300 USDT to exchange for the NFT blind box at the same cost (gold standard). The TIT token is a reward. This is the initial “Double,” As the game develops and the prices of NFTs and TIT tokens rise, it becomes a “compounding, more” benefit.
- Each payment will have 100 USDT split into two parts for LP and repurchase TIT tokens, which increases TIT liquidity and boosts the token price.
- The TIT tokens given as gifts are linearly released to players over 120 days, so there is no need to worry about selling pressure.
- Double is not a fundraising method, and TI games do not conduct public offerings in the early stages, ensuring that the initial circulation of TIT tokens is scarce. The TIT token circulation pool increases in value due to Double’s uninterrupted injection of LP and TIT token Appreciation.
- The NFTs exchanged through Double can be used to equip the game for continuous play-to-earn, and the TIT tokens are continuously earned through the linear release over 120 days.
More Double details: https://www.tribalisland.io/#/
TI Game’s Thinking and Layout on UGC, Play-to-Earn, and Ownership
Web3 games have a natural mission to enable players to own their game assets. However, this requires respecting a blurred fact: game players are not just consumers. Before players enter a game, it is just a bunch of lifeless code without warmth or vitality. The game world only starts to take on color and come to life when players spend time playing it.
In this sense, players are the creators of game content, which should belong to them. This is TI game’s attitude towards this issue, so TI game encourages UGC and supports players in owning game content.
Eventually, the TI game world will become a public resource, and players can make great game videos and original NFT artwork and even help expand the TI game world.
Few people may realize that from a sustainable perspective, UGC, play-to-earn, and ownership will be the most important part of the web3 game economy model. From a systematic perspective, everything tends towards disorder, which increases entropy. If the web3 game is an isolated system, it will also lean towards extinction. In this sense, UGC and the ownership and play-to-earn, it generates are economic behaviors that differ from the in-game economy and are like the sub-systems of the in-game economy.
Therefore, the economic system of Web3 games is no longer independen. However, UGC and other sub-systems will inject new vitality into the economic system of the web3 game, allowing it to decrease entropy and prolong its lifespan of the web3 game.
Expanding the Revenue Boundary of TI Game
From the perspective of tokenomics, expanding the revenue boundaries of TI games is an important measure for the sustainability of the TI game economy. This is a simple but effective strategy. On the one hand, the more income a game generates and the higher the profit, the more money it can allocate to reward players more sustainably.
On the other hand, an expandable economic structure can hedge against system vulnerability and make the TI game economy more dynamic.
Our research has found that the revenue model of web3 games has much room for improvement compared to traditional games. Therefore, in the economic model design of TI games, after the overall number of game players reaches a certain level, TI games will conduct deep market exploration in-game advertising, game competitions, and game brand peripherals.
Based on the blockchain and digital properties of web3, our view is that in the trend of the overall economy shifting from the real to the virtual, web3 games have a broad market in the areas mentioned above.