GameFi — Economic Models & Money-Making Strategies
As the Crypto market as a whole has entered a downward phase, the price of NFTs have also been suppressed, and discussions on the true value of NFTs are being debated by more and more people in the industry.
What new application scenarios can NFTs add? Which NFT applications are really needed? These issues are becoming a topic of concern to more and more people. At present, in addition to the development of some emerging arts and public depository NFTs, GameFi has become the largest application direction of NFTs. From the entry of many traditional game companies and chain game companies into GameFi, to the combination of the token economy and the concept of the Metaverse, the combination of GameFi and NFTs has the potential to generate infinite possibilities.
One of the topics we want to cover this week are the Economic Models within GameFi projects, and understand how these projects make money. It is essential to understand the general routines of GameFi projects from the perspective of the token model and NFT mechanism.
How is GameFi different from traditional Gaming?
The main difference lies in the development motivation. In traditional gaming, all revenue made will be distributed to shareholders and the creators. The creator can then focus on building a game that their fans will love. For GameFi, the creator must also think about driving up the value of assets — in this case, its NFTs and tokens). As creators need to find a way to balance the interest of parties and create asset value growth, GameFi has become a difficult project to master.
The GameFi Economic Model
First, the economic model is the core of chain games, and is simply the change between the price and quantity of all NFTs and tokens in the game. By understanding this, users can know what cycle the entire system relies on, to which party the selling pressure is given, under what circumstances can a positive spiral occur, and under what circumstances a risk point will occur.
The economic model of chain games can be divided into two types: Single Token Model and Dual Token Model.
Single Token Model — One accepted token within the game that supports all economic roles.
Dual Token Model — Multiple tokens & currencies accepted within the game.
Within the Single Token Model, there are 4 sub-models：
(Model A) Input Money — Output Game Token
(Model B) Input Money — Output Money
(Model C) Input Game Token — Output Game Token
(‘Input’ refers to the cost paid by players to participate in the GameFi; while ‘Output’ refers to the income method of players who earn rewards.
Developing Money-making Strategies
Relatively speaking, the Single Token Model is the general standard in the early stage of chain game development. When Axie Infinity launched SLP, the Dual Token Model became the mainstream setup for the market.
The Dual Token Model injects new funds for old players to play to earn & have the currency price, entry threshold and other parameters increase in a positive spiral. If the speed of new players entering the market cannot keep up with the speed of old players leaving the game, there will be an inflection point, and even eventually lead to a death spiral. Therefore, it is vital that chain games need to always pay attention to three parameters: the number of new players, the number of active players, and the comparison of output and consumption.
As GameFi continues to evolve, each project is looking for its own expansion key. Some strive to support the price through certain funds and game mechanisms during the period of eliminating bubbles, maintaining a positive rise in users, constantly creating new FOMO experiences, stable operations and more. Some use mechanisms such as massive consumption + lock-up + disk control to delay the time of bubbles and death spirals, in order to seek a longer life cycle, to gradually achieve the transition from outer circulation to inner circulation.
At present, NFTs have basically become a prerequisite for all current chain games. For many projects, in addition to tokens that can be exchanged for funds, selling NFTs have also become an important source of funds. This makes NFTs have multiple values within GameFi:
1. NFTs are Tickets. NFTs become the threshold to enter the game. They have ERC721 or ERC1155 codes. If the game is done well, the value of NFTs will be high; if the game is not done well, the value of this NFT will be low. For example, the rising prices of land in Mavia, a play-to-earn MMO game.
2. NFTs have their own value. BAYC, for example, has a very high value in itself. The recent cooperation with the game that nWayPlay is doing is equivalent to diverting GameFi and completing the value upgrade.
NFTs with their own value are the focus of the future development of chain games. The entire scene and economic model are built around NFTs, giving them different appearances and attributes, and developing a set of gameplay around it. For games with a Metaverse scenario, it is highly recommended to work in this direction from the beginning.
3. NFTs as a soft token. These are some of the soft tokens in the game that require NFTs to set up. For example, setting some badge-like NFTs in the game can increase the speed of gold in the game’s economic model.
If this is a topic that interests you, we recommend that you dive deeper into understanding the GameFi economic model. Stay tuned as we cover more interesting topics in the Crypto world!