Original Author: Peter 'pet3rpan'

Original source: 1kxnetwork

Player retention in a game is the most important thing.

Still, game publishers optimize corporate profits at the expense of player value and welfare. They can do this because they have end-to-end ownership and control over the development, distribution and management of the game.A prime example is Electronic Arts (EA), a game publisher that has played a villainous role in the gaming community as they prioritize their microtransaction monetization model over the player experience:

• In 2017, EA released Odaily's Star Wars BattleFront 2, in which players either had to play for 40 hours to unlock a character (such as Dark Vader) or had to pay. The company responded with arguably the most unpopular comment in Reddit history, highlighting the animosity between game publishers and players, as seen in the graphic below.

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EA's Reddit response is the most downvoted comment in Reddit history

The core vision behind Play-to-Earn (P2E) is to address these issues by providing players with true ownership of assets within the game and the world around them, and ultimately create greater community stickiness and retention .image description40%：

Above: Axie Infinity co-founder The Jiho says the game's 30-day and 90-day retention rates are roughly the same.

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01. Problems in Web2.5 games

Thanks to the success of Axie Infinity, we see manyNew P2E EcosystemBoth attempted to replicate similar success. Still, the goal of many of these projects is to control and coordinate the end-to-end production of games in a centralized fashion - thus potentially replicating the same structural dysfunction found in traditional games.

These Web2.5 games hope to take advantage of“Cryptocurrencies as a feature”, realize the ownership of digital assets through NFT, or realize the financial ownership of specific economies through ERC-20 tokens,But it also aims to limit the context and participation in other, more crypto-native attributes of ownership, such as governance.

usually,The teams behind Web2.5 games want to build highly optimized but closed ecosystems where the entire player experience is centrally controlled by one organization.These projects see themselves as "gaming first" and most are still optimizing for Web 2 growth metrics, arguably sharing the same value extraction mentality as traditional game publishers. As one game studio declared:

“We’re implementing NFTs because we think it will generate more revenue. We think players are willing to spend more money if they believe the assets will appreciate.”

Similar to CeDeFi, these games hopeBuild a closed-loop, centralized control ecosystem on top of an open and permissionless encrypted network (public chain).

While we don't expect all P2E ecosystems to be decentralized from the start, but instead expect a more gradual process of decentralization (like Axie Infinity), we believe that this kind of Web 2.5 game development Trends stem from fundamentally not fully understandingfirst level title

02. Our argument

we believeWeb3 games will win over Web2 and Web2.5 games because Web3 games leverage community ownership, real economic value, and native composability to drive greater player adoption and retention.

We believe that Web 2.5's approach to building a P2E ecosystem is not enough to prevent value capture from the community, as players still need to rely on a single coordinator that controls the end-to-end development of the game and manages the game economy and end-player experience. On the contrary, we thinkWe should think of the P2E ecosystem as an open source public product, that is, all aspects of the game economy and surrounding game experience are built in an open environment.

The verifiability of a (blockchain) system establishes trust that the system undeniably does what it promises, and the consensus of the participants on the information in the database establishes an indisputable fact.

——Token Maximalist Thesis from 1kxnetwork

With token incentives and community ownership, we are able to spin off the game publisher role through a bottom-up set of contributors, players, and guilds that drive worldbuilding, product development, and governance.By making these responsibilities public, we are no longer dependent on one company to achieve the goals of the entire ecosystem, but can leverage the open source contributions of anyone on the Internet.

We don't consider P2E to be a standalone game or "application", but rathersecondary title

1) P2E economy as a virtual governance country

The P2E dynamics around games take on a whole new importance based on their current economic mechanics.These P2E economies are not only a place for community members to play games, but virtual worlds where they have financial advantages, ownership of revenue generating businesses & valuable digital assets, and defined jobs and responsibilities.

We can regard P2E economies as virtual countries. Its citizens will want to live in the most democratic, well-governed country that offers them the best opportunities (entertainment, work, society, culture). For these virtual economies to retain members of their communities, they must make fair and transparent decisions that have a significant economic impact on their citizens.,For example:,For example:

• economic policy:For example, the supply and trade-off mechanism of assets in the game.

• Monetary Policy:Such as value accumulation mechanism, transaction fee.

• Treasury policy:intellectual property:

• intellectual property:For example, how should the intellectual property rights of the ecosystem be authorized?

we believe,A P2E economy run by the community will optimize functional governance, "quality of life" of community members, "GDP" and economic stability, rather than pure user growth.secondary title

2) P2E economy as a community distribution platform that drives an open source ecosystem of builders and creators

Unlike Web 2 games where data is stored in centralized databases, P2E economies can serve as open, interoperable SDK-like platforms on which contributors can build in a permissionless manner. This enables us toTreat the economy as a base layer protocol upon which other community-generated games and experiences will spring up- They are both a channel for the ecosystem to acquire new users, as well as another driver of user stickiness for this existing community.

By doing this, we are able to provide developers with the opportunity to create and distribute games to an active community from day one.

In the Axie Infinity ecosystem, this might look like funding new mini-games that will advance some of the goals of the Axie Infinity ecosystem, such as: a better onboarding experience for players, where the creators of these mini-games will Earn real-time token rewards related to (users') play success of their games.By avoiding dependence on a single team and developing in an open environment, games can expand the breadth of product insight and approach product development in a more scientific and engineering-based manner.

This ecosystem approach can be applied to all other areas of operation of P2E ecosystems, from community development to world building and transformation. Grassroots funding can be channeled through larger community funding mechanisms, such as through quadratic funding, or even through player-owned guilds that manage specific responsibilities and tasks, such as the ones that help drive the distribution of Axie InfinityAxie P2E Scholarship Guild。

As players have greater control and mobility within the Metaverse, we believe interoperability will be a core driver of cross-world distribution.InteroperabilityInteroperabilityNot just "carrying your sword from one game to another", but can exist in many forms:

• appearance and vision(such as VRM avatars, cross-world visual features, etc.).

• player world interaction(On-chain physics engine is a common standard for FPS games, and assets maintain cross-world integrity, such as plants that need to be watered in the same way in multiple worlds)

• economic aspect(Allow players to use other game tokens to buy and sell assets, or use tokens from other games/worlds to get discounts).

• reputation(credentials verifiable across worlds)

• achievement(Complete in-game X and Y bounties to unlock badges)

• Economical Sinks and Faucetsintellectual property

• intellectual propertyaccess

• access(a game item that allows the player to virtually visit the virtual space of multiple worlds)

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3) P2E economy as sink and faucet

Economic sustainability and growth occurs when the value flowing into the system is greater than the value leaving the system. In game design, the mechanism that affects the flow of value in an economy is the sink and the faucet:

• sinkFaucet

• Faucet(Faucets) inject asset supply into the economy, such as SLP token rewards earned by completing missions or winning battles.

For a P2E economy to be sustainable, the sink needs to siphon more token supply from the economy than the faucet injects into the system, otherwise over time, as the token supply increases, the There will be natural downward pressure on prices.

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Vertically Integrated Token Sink

We can also expect to see similar adjustments in other emerging P2E games as they all focus on economic sustainability. We can expect the community to crowdsource games and other player experiences, embedding them in the player economy as sinks or faucets for stability.

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03. The Rise of Minimal Viable Games

We believe that the largest P2E ecosystems of the future may seem small and inconspicuous at first.

By viewing the P2E economy as the economic and social base layer of the entire gaming ecosystem, we argue thatBuilding a P2E ecosystem is more about the world construction, culture construction and incentive mechanism design of the underlying economies.

While we believe that well-designed games will attract and retain the largest player base in the long run, we don't believe that you need to launch a highly optimized game from the start to be successful, ratherA minimum viable game (MVG) that is sufficient to complete the economic value accumulation cycle can be launched.

One of the strengths of cryptocurrencies is their ability to jump-start a token economy right from day 0, and start building a minimum viable economic value accrual mechanism long before a fully fledged end-player experience is achieved. This is in stark contrast to the waterfall development approach that traditional game studios have adopted from the beginning.

One way to launch a minimum viable game is as follows:

1. Create a world that everyone else will want to join (includes designing game concept, designing lore, aesthetics/visuals, creating story, designing in-game assets);

2. Assign ownership of the game world to the community (tokenize future in-game assets in the form of NFTs and distribute them to early-stage potential community members and players);

3. The community launches tokens to guide a vibrant economy;

4. Community funds raised into a shared treasury;

5. The community publishes a minimum viable game with a token sink;

6. The MVP removes tokens from the token supply (this needs to be driven by in-game player world interactions. Players should believe burning their tokens is worth it);

7. The economy will accumulate more value as tokens are removed from the circulating supply;

8. Value is reinvested into the game;

9. Create better games and token sinks;

10. As shown below:

As shown below:

we believe,By building a full cycle of economic value accumulation early on, the P2E ecosystem is able to build games in a more streamlined and iterative manner with lower upfront start-up costs.

Axie Infinity embodies the concept of a minimum viable game perfectly, as the game's first major capital raise came before the game's breeding and combat components were released:

• December 2017:Concept and development begins;

• February 2018:Raise 900 ETH (~$720,000) by selling the initial Axie;

• May 2018:Breeding game release (introducing faucets)

• October 2018:Idle Battle Game Released (Introducing Sink)

• January 2019:Raise 3,200 ETH (~$400,000) through initial land sale;

• December 2019:Card battle game released;

• May 2020:4600+ ETH (approximately $1,000,000) from land sale in Q1

• November 2020:AXS Token Strategic Sale (860,000 USD)

• November 2020:Strategic sale of AXS tokens ($860,000);

• April 2021:Migrate from Ethereum to Ronin sidechain;

• September 2021:Launch of staking for AXS tokens

While Axie Infinity already has more than 2.5 million daily active users, its roadmap is far from complete.first level title

04. Build a P2E ecosystem with a community-first approach

Based on our practical experience in building token networks, we believeThe most successful and vibrant P2E ecosystems will prioritize community and culture over gameplay.

we believe,Proper world building, culture building, and incentive mechanism design are key tasks in building a thriving P2E economy.

1) Worldbuilding - "Let's build a world together."

In the minimum viable game model, common world building in the early P2E community is an important driver of user stickiness and engagement. As such, we expect to see more and more P2E ecosystems taking a content-first approach (such as Loot, Treasure, and CryptoManga).We can foresee that early user acquisition in the P2E ecosystem will be more like a tech-savvy dungeon master working with the community to create a D&D world, especially when no games are ready or even developed yet .

One such example is Loot;As the project adopts Yearn-like fair distribution and the creative potential of text-based NFTs, many developers see the potential that together they can build a new digital economy. Over the next few months, 86 community projects emerged to expand the possibilities of Loot, including new spinoffs, tools and peripherals, maps, lore, and visually rendered guilds.

While we currently lack player-driven world-building tools, we expect to be able to innovate in this area in the coming years. We believe that generative AI technologies will play a key role in the transformation of humans from the role of content creators to curators. We view world building as a collaborative process, one that fosters a community of potential players and other contributors before the game even exists.

2) Culture Construction - "Come for culture, stay for ownership."

People join a community because they resonate with the community's culture, and they stay because they become owners of the community.Culture is strengthened by demonstrating integrity around a set of values ​​and principles, encouraging others to emulate. This was co-created in a community, so it was an important part of the early community.

While traditional metrics emphasize "how many players are in your game", we believe the P2E ecosystem needs to focus"Who are the players and contributors to the game". Therefore, we highly encourageP2E Ecosystem carefully manages its early community members and players. This can be achieved through manual whitelisting and other measures, such as limiting participation through oaths of allegiance or contributions.

"In the early days, one thing was important - many of our community members were 'all in', they needed Axie to succeed. Now, NFT community members are also prone to the 'Venture Effect' where they put too many eggs in Too many baskets without focusing too much on one item."

—— Jiho (co-founder of Axie Infinity)

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Source: Axie Infinity's Discord chat channel

3) Incentive mechanism design - "reward valuable contributors"

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Above: The journey to becoming a community contributor

When designing the distribution of assets within a game and the sharing of economic benefits, game studios shouldEnsure that the most valuable community members and contributors are rewarded for their work and commitment. When this contributor feedback loop is repeated, trust, loyalty, and fanaticism emerge.

We believe token incentives are a scarce resource that should be distributed carefully and merit-based to the most valuable community members. We expect to see more experiments with token ownership and in-game asset distribution models. For example:

• Only guilds of a certain size or overall "experience points" can purchase exclusive assets (such as virtual land);

• Some props in the game can only be obtained by completing strict knowledge examinations and deeply understanding the legend of the game;

• We believe that,

We believe that,P2E games should carefully design incentive mechanisms based only on gameplay.So if incentives are based solely on gameplay, the game runs the risk of its members gravitating toward mercenaries, who are more likely to jump from game to game in search of higher rewards (this is similar to Yield farmers in DeFi protocols hop from farm to farm). We believe that,first level title

05. Summary

Rather than flashy graphics and big funding rounds, we think the most successful P2E games will start by creating a great culture, community, and vibrant economy first.

We're only just beginning to understand how to build in the open. At 1kx, our mission is to be the most helpful investor for builders looking to build the next big P2E ecosystem. If you want to do something in this field, we would love to chat with you~

"If you want to go fast, go alone. If you want to go far, go together."

Acknowledgments: This article was co-authored by the 1kx team: Dmitriy Berenzon, Justin M. (AcceleratedCap), Michael Hua, Nichanan Kesonpat, Peter (pet3rpan), Christopher Heymann. Thanks to everyone who helped us understand P2E (play while earning), including Jiho, Michael Arnold, James Young, Ryan Foo, and Metaversatile.