Written by: MIDDLE.X

Reviewer: Owen; Shawn Lin@1PAR

Edit: Eunice

This article is from the WeChat public account PAKA.

One of the biggest advantages of the encrypted economy is that the incentive structure can be designed flexibly, so that any form of economic system can be built almost without restriction. In the encrypted economic system, Token is the core of production relations and an important resource coordination tool. We have noticed that a new token incentive model, a new encrypted economic system, has recently begun to emerge, called X to Earn. in"X"Indicates a certain user behavior encouraged by the system, and To Earn means that the system will provide economic incentives for this behavior.

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The broad and narrow sense of X to Earn

In a broad context, X to Earn can generally refer to all behaviors that gain benefits in Web3, including:

• Use specific hardware devices (generally called mining machines) to access the decentralized network and provide services to obtain income (such as Filecoin, Menson, Phala, Helium mining behavior), and some analysts in the industry classify it as MachineFi;

• Run nodes for the public chain network to obtain block rewards, including in the PoS public chain network, entrust the Token to the node to obtain income;

• Invest funds in interest-bearing DeFi applications for Yield Farming.

But in this article, the X to Earn we mentioned refers more to its narrow meaning. In the narrow sense,X refers to a certain user behavior, which emphasizes the user's time investment rather than capital investment.

Typical ones include:

• Play to earn (representative project: Axie Infinity)

• Move to earn (representative project: StepN)

• Learn to earn (representative project: LetMeSpeak)

• Drive to earn (representative projects: HiveMapper, CPLE)

• Write to earn (representative projects: Bihu, CyberNote)

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Commonality and Individuality of X to Earn Project

As mentioned earlier, in various forms of X to Earn projects, X is a variable, which is a behavior encouraged in the economic system, and Earn is a commonality, and the behavior of users will generate Token form of income. Players can convert Token earnings into stable coins to sell inside or outside the APP, or consume them within the system. In addition, most projects have another commonality, that isTo enter the game and make money, players must first buy an "admission ticket".

Most of the tickets are in the form of NFT virtual equipment. For example, if you want to earn money through the StepN movement, you need to buy NFT sneakers, but if you want to learn English through LetMeSpeak, you need to buy NFT virtual characters first. In some projects, admission tickets may also be in the form of Token pledge (such as Bihu) or the purchase of smart hardware (such as HiveMapper).

Is X to Earn a Ponzi scheme?

People flock to the X to Earn project for the purpose of speculation and profit, which makes such projects have a great out-of-the-circle effect. However, the entrants generally have concerns about its sustainability, and they are always ready to leave when actively entering the market. Such concerns are understandable. Entrepreneurs in the track should think about:Can a sustainable X to Earn model be created? What should be done?

Just as life needs energy intake to maintain low entropy, an X to Earn economic system needs continuous capital injection to allow players to make money.

The most natural way is to "come first, eat later", to support users through the addition of new users. Inject the money into the bonus pool, or use it to protect the game pass), this model is unsustainable, we can make a simple mathematical argument:

Assuming that the user's expected monthly rate of return is p, the price of the admission ticket is v, the number of existing users in the current month is s, and the number of incremental users is i, then to maintain balance, it needs to satisfy:

i*v≥s*p*v

That is to say: i≥s*p,

Minimum needs to be met: i = s*p

Assuming that the user expects to pay back the cost in one month, that is to say, the expected monthly rate of return p is 100%, and the initial stock of users is 10. To maintain the balance of the equation, the growth trend of users needs to meet the following curve:

It is not difficult to find that this is a typical exponential growth curve.

We can also understand that as the stock s on the left side of the equation increases, the increment i on the right side of the equation must also increase proportionally to maintain the balance of the equation, which means that the increment must also maintain a certain growth rate , in other words, the growth of users must have sufficient acceleration, and even growth at a constant rate is unacceptable.

The uniform growth of users cannot be realized continuously, let alone the accelerated growth of users?first level title

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The first method: Raising "fighting" with "krypton"

If there is no external capital injection, the X to Earn economic system cannot allow every player to make money. If someone makes money, someone needs to spend money, and if someone earns gold, someone has to krypton gold (krypton gold here refers to payment, not just large payment). If some players are willing to krypton gold, it means that such an economic system provides players with other values ​​besides profit-seeking: it may be the physical and mental pleasure brought by the game, or it may develop a good habit, or it may help players make a group of like-minded partners. .

Take the game project of Play to Earn mode as an example, if the attraction of the game is not limited to making money, the playability of the game itself can attract players to pay, or allow players to accept the situation that the income from playing gold is less than the cost of krypton gold, then the game It is possible to achieve a balance in the economic system of the economy - the balance between the kryptonites and the gold diggers. In this case, the krypton gold players are the real consumers of the game, and to some extent, the krypton gold players are using their own time to serve the krypton gold players.

From the perspective of time dynamics, it is likely to be such an evolutionary process. In the early stage of the promotion of the game project, high returns will attract many users to make gold. As the price decreases (often reflected in the way of lowering the price of tokens), some gold-making users will gradually withdraw, and the big waves will wash away the sand, leaving krypton gold users and some gold-making users who accept lower yields to form a balance.

During this evolution process, the game publisher saved the funds that should have been spent on publicity and channel distribution, and used the power of everyone to complete the publicity. From this point of view,Play to Earn didn't change games, it changed how games were distributedsecondary title

The second type: Raising "diligence" with "lazy"

The characteristics of laziness and diligence are concentrated in projects such as Move to Earn and Learn to Earn. These two types of projects have a common feature, which is to use monetary benefits to help users fight inertia and become a better version of themselves. We all know that whether it is learning or sports, self-discipline is required. Self-discipline is a pain, but it might be different if self-discipline brought immediate feedback in the form of monetary gains. When studying or exercising becomes a kind of gold-making behavior, it will immediately make people feel energetic!

Of course, if there is no external financial subsidy, the problem still cannot be avoided: if someone makes money, someone has to krypton gold. On the surface, all participants have earned Token rewards, but assuming that the total market value of Token remains unchanged, and excluding the fluctuation factors of the secondary market, we can think that only those who outperformed inflation actually made money, and did not run Those who win inflation have become passive krypton gold users.

This situation is like: everyone starts a gold game in the form of sports or learning, and in the end the relatively lazy players pay for the relatively diligent players, forming a balance.

Then under this balance, krypton gold users in the system pay passively instead of actively consuming. Although they also benefit from self-discipline to a certain extent, and in principle must be willing to gamble and admit defeat for their relative laziness, but they There must be a limit to the degree of acceptance of loss. Therefore, the entire economic system must maintain a relatively moderate stimulus level, which means that users who lose money cannot lose too much. Correspondingly, in order to maintain a balance, users who make money cannot make too much money.

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The third type: check-in mode

I don’t know if you have seen such a gym business model: a gym annual card is 2,000 yuan, and you can get 20 yuan back every time you come to the gym. If you come to the gym for 100 days, the annual card will be earned back, and no cash will be returned after 100 days. It’s a counter-incentive approach that motivates clients to keep working out more than most gyms do. Such a model has been successfully practiced in real business.

We call this model the check-in model. The money everyone can earn is the money they have already paid, and there is no possibility of becoming a Ponzi scheme. Although the gambling excitement of the gold game is missing, the risk of being cut leeks is also ruled out. Of course, "lazy customers" must also exist on a certain scale, otherwise no one will pay the operating expenses of the gym. Therefore, the check-in mode can also be understood as another form of "lazy to support work".

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The fourth type: raising "points" with "network"

We found that some X to Earn projects have a clear logical end point and profit model. After they have established the entire network in the form of X to Earn, they can provide social services and earn profits through the network. As long as there is enough profit, you can continuously inject funds into the bonus pool, or increase the price by repurchasing and destroying game tokens. In this case, it is equivalent to the profit of the entire network supporting the income of each single point. At the same time,Participants in the network will not only be value claimers, but also value contributors.

HiveMapper is a Drive to Earn project whose vision is to build a Web3 map product in a decentralized manner. Now most of the map products in our mobile phones are centralized products such as Google Maps, Gaode Maps, and Apple Maps. In fact, the companies that operate these products are spending huge costs every day to hire special personnel to collect and update geographic information, which can only be done by giant companies with strong funds.

HiveMapper uses blockchain + data crowdsourcing to build a global map. You only need to purchase and install Hivemapper's driving recorder, and you can complete data collection while driving, and earn Token rewards called HONEY at the same time. After such a global map is drawn, users need to consume HONEY tokens to obtain API access. In this way, a closed business loop is formed.

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The fifth type: traffic realization

The development of Web2 has repeatedly told us one thing, a continuous subsidy business is not necessarily worthless, as long as traffic can be gathered, there are many opportunities for realization. Advertisement placement and cross-industry cooperation are the most basic of them, and the more typical way is to personally end the business and develop the cash cow business. Take Tencent as an example. As we all know, WeChat and QQ are not profitable, but with the help of the huge traffic of WeChat and QQ, Tencent has many profitable businesses: including QQ Music, Tencent Video, Official Account, Qzone, Glory of Kings, etc. .

The same is true for Web3,If the X toEarn project is properly operated, it can have a strong drainage ability and user stickiness, and has the opportunity to become the traffic entrance of more Web3 applications.For example, the Move to Earn project can end up as an NFT trading market, use the Move to Earn module to attract traffic to the NFT trading market, and use the profits from the NFT trading market to subsidize the Move to Earn bonus pool. In fact, the process of buying virtual shoes for new users of Move to Earn happens to be the process of learning NFT transactions. Such a business layout can be said to be a matter of course.

Conclusion:

Conclusion:

We believe that 2022 will be a year for the X to Earn track to shine, and PAKA labs will actively seek opportunities on this track to support high-quality projects. At the same time, we are also soberly aware that the entry threshold for the X to Earn track is not high, and there must be a large number of unscrupulous projects. What they are doing is thinking of funds, and what they are playing is a Ponzi scheme. Here, we remind Web3 users to keep their eyes open and be alert to risks.

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Derived reading:

[1]"X to Earn: Official Challenge to the Death Spiral"/ IOSG

[2]"10 Recommendations for the P2E Economy" / Folius Ventures