To blockchain game designers: Single currency or dual currency model?

Katie 辜

Odaily资深作者

2022-06-03 11:04

This article is about 4539 words, reading the full article takes about 7 minutes

Play seriously and speculate appropriately.

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Play seriously and speculate appropriately.

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Using a single-coin or dual-coin model is one of the most common questions I get when designing crypto game economies. Games are an excellent token design test scenario because it involves more token utility than other projects. This article will focus primarily on blockchain games, but you can apply similar ideas to other crypto projects as well.

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Token use

In chain games, the main use of tokens should be to improve the game economy in some way, which is impossible without tokens. Tokens are used for many other things such as speculation. These uses may end up detrimental to the quality or future of the game.So, how can tokens improve game economies in new ways? I think this is mostly achieved by closing the "microtransaction" loop. Crypto tokens are two-way, players can extract the value of their work out of the game.

Chain games allow those who invest a lot of time in the game to exchange time for capital, and allow those who have capital to exchange part of the capital for time.

Transactions include the following two forms:
App transactions: Players pay in-game to obtain battle passes, decorations, loot box keys or unlock game progress, etc.;

P2P transactions: Players pay each other for resources in the game. Could be NFT, currency or anything else.This trading model has existed in the game for a long time. For example, we are all familiar with in-game transactions and auction houses.The most critical utility of the token in the game is to allow the token to create a liquid market between the game and "real money", allowing players to exchange game gold coins for US dollars.

Any other utility is secondary in my opinion. The transactional utility of tokens should always be the primary value for introducing crypto tokens into games.

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Dual Currency Model

The dual currency model was pioneered by Axie Infinity, including the governance token AXS and the in-game token SLP.

In this model, AXS is essentially a security. This is similar to holding stocks in the Axie Infinity game. Of course, the team can't be that explicit, but that's what it's currently practicing. Governance is often just a pseudo-utility approach to bypass security concerns. SLP is the true game token, as it is the foundation upon which most game economies operate.

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Advantages of the Dual Currency ModelThe advantage of the dual currency model is that you can separate the speculation and the game economy.

When you launch any crypto product, people are going to speculate on it, trying to make a quick return. Having one token that allows people to speculate and another token that allows people to play games keeps the two uses separate so that a surge in speculation doesn't lead to a spike in in-game prices. That surge of speculation won't suddenly drive up the price of everything in the game.

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Disadvantages of the dual currency model

Questioning the soul about the meaning of existence of fixed supply tokens is a question that the dual currency model needs to answer.

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What is FST (Fixed Supply Token)?Owning a fixed supply token (FST) that is purely speculative will eventually lead to a day when we start to question the point of holding it.

Speculation cannot keep prices going up forever, so tokens must have an existential role.

Some teams will take methods to increase cash flow, usually through staking. Can be done in two ways:
Dilution Protection: Hold your tokens to get more of the same tokens. It's not real cash flow, it's just dilution protection as more tokens are unlocked;

Bonuses: Stakers are rewarded with some tokens representing other tokens that can be spent in the game. But that's hard to do because if you redistribute the money raised through Application Transactions, then it becomes a Ponzi scheme, it becomes a redistribution of fees for P2P transactions.

The dividends of P2P trading can also be considerable. For most of the past month, STEPN's transaction fees have hit $2 million to $3 million a day. There were 600 million GMT in circulation at the time, so we assumed that 1/2 of those tokens would be staked if they staked tokens. If they split transaction fees equally with GMT holders, then $1 million per day would be spent on GMT holdings, or about 0.3 cents per token per day. Considering GMT's average price of $1.50 over the past month, this equates to a daily dividend of 0.2%, or a non-diluted APR rate of 73%. STEPN did not do this, but did show that the dividends of P2P trading can be huge.

If the team doesn't want to increase cash flow, or they want to add something other than cash flow, they add in-game utility to the fixed supply token.

However, the utility of FSTs can get complicated.

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Fixed Supply Tokens)

Whether as a market token or as an application transaction token, the token needs to exist for a good reason.

I think that if the team intends to add utility to the FST, then that utility should have some impact on the supply of the token. The purpose of increasing utility is to bring value to FST, but if it is only used as a currency like VST, then holding it has no utility. Buy when you need it and sell it when you don't. But if FSTs are burned in-game when they are used for special upgrades, then as the game becomes more popular, the FSTs and assets with those upgrades should become more valuable as the game grows.

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Single currency model

There are following ways to do this.

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VST (Variable Supply Token) Single Coin Model

Create a token model with only one variable supply token. I haven't seen a good example so far. This goes back to the point I made at the beginning of this article. The purpose of in-game cryptoassets is to enable people to exchange in-game work for out-of-game currency.

If game studios want to do this without disrupting the token economy, here's a very simple way.
Make an excellent game with a built-in market (such as "Jianghu", "World of Warcraft", etc.);
Create a cross-chain bridge between the core currency and the blockchain;

Add liquidity to that currency via another token (ETH, USDC, etc.).

Simple but just needed. Imagine that "Jianghu" has a highly liquid USDC trading market.

You don't even need to create item NFTs, because let's be honest, game items are worthless without the game. As long as the normal auction platform is kept, players can exchange everything for USDC, add a cross-chain trading bridge, and a great crypto game is born.

Why haven't we seen this kind of chain game so far? Because making fun games is very difficult. There are some games that have taken this approach, but most of them are not yet out, and it is harder to get attention, because these blockchain games will not have an exciting Ponzi economic cycle. Honestly, the Ponzi cycle is an excellent go-to-market strategy to use for initial publicity.

Next let's consider a fixed-supply token model.

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FST (Fixed Supply Token) single currency model

Is it possible to create a blockchain game with only a fixed supply of tokens? This is the route taken by some early crypto gaming platforms such as Sandbox and Decentraland. I think these games could have a second life if improvements are made to the dual currency model.

NOTE: Here's a method I'm still working on, a bit speculative, so please don't just copy and paste. In this model, you have a fixed supply of tokens that are both investable assets and a bridge to all currencies in the game.

But in the game, you still need a more variable supply of currency so you can better balance the economy. So you still need VST (Variable Supply Token), it's just that VST is locked in the game without a cross-chain bridge.

Then create an in-game DEX between the VST and FST, and between any other in-game assets. It's actually a much better trading technique, like exchanging wood for gold, like a SushiSwap or Uniswap style liquid market, being able to trade anything instantly without needing a buyer on the other side.

Therefore, players can exchange gold for FST at any time, and build a cross-chain bridge between FST. Or they can build cross-chain bridges in FST to buy gold, wood, and other in-game items.

Since the supply of FST is fixed, and all items in the game are inflationary, the purchasing power of FST should increase over time without being withdrawn. Early players will receive more valuable rewards than FST, and later players can also "earn while playing".In addition to the resource market, you can also set up an item market.
These items can be extracted as NFTs or locked in the game. I don't think there is a difference. You can use FST to price everything in the market, then collect transaction fees, and either deposit it in the treasury or burn it. If burned, as the game develops, there will be some deflation, which will also help FST gain more value.The great benefit of this is that transaction fees are an asset that is not tied to game performance. If you charge transaction fees on your token, you still need to sell that token to the market for income. If you charge a transaction fee on ETH or SOL or USDC, then you get an immediate gain. This also requires players to connect another asset such as ETH, SOL or USDC into the game, which will be stored by the treasury. The treasury can earn income while hosting these assets, creating an additional revenue stream for the game.

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How does FST (Fixed Supply Token) gain value?

Here you can reintroduce the dividend model, but the dividends are paid out in assets used in the market. Therefore, by staking FST, you can earn some ETH or USDC in the game without having to bother with some complicated on-chain staking systems. That would be a really cool thing to do, no game has tried it yet, and it would be tricky legally.

You can also earn some dividends from transaction fees on other transactions. By locking your tokens in the game, you can get ETH, in-game VST and more FST through different transactions in the game. This will make the token an excellent investment asset that will increase in value as the game develops as it increases in purchasing power against inflationary assets.As I think about this model, I think it is much more powerful than the current popular two-token model. It adds a lot of flexibility and ensures that there is a core asset in the ecosystem that adds value.

If you just want to create a crypto-related game, then the VST single currency model is ideal. But this FST model allows you to retain some of the speculative nature of the cryptocurrency and the investability as the project grows.