The trend of play-to-earn NFT games has recently gained massive traction from both crypto and traditional gaming communities. Among many factors that made these games successful, the in-game tokenomic plays a crucial role.
In order to better our game’s tokenomic design, we have to do some research and address the current problems of existing tokenomics that players have been faced with recently. There are 2 prime examples as Axie and CryptoBlades I would like to dive into those following points:
- The entry price to enter the game
- In-game monetization mechanism
- Revenue streams of the game
- How the token’s value is captured
- Pros & Cons
There are 2 tokens in the Axie ecosystem:
- AXS which is the governance token to capture revenue with limited supply
- SLP which is the in-game rewards and has an unlimited supply
To enter the game, a user needs to buy at least 3 Axies. At the time of writing, the floor price for a single Axie is around ~$200. Thus, it costs $600 to start your Axie journey. This price is quite a big number for beginners.
- Battle and earn SLP tokens. Users can play daily PvP, PvE missions and earn 100~300 SLP. The current price of SLP is ~$0.17, which makes daily income around $17~$50 and monthly income $500~$1500.
- Compete in tournaments & earn AXS tokens. Axie Infinity will sometimes organize tournaments with the prize of up to 1000 AXS ~ $68,000 for the top players.
- The highest income sources for users are breeding and selling Axie.
- Breeding will cost AXS and SLP tokens. AXS will be collected to the Treasury as revenue, and SLP will be burnt. More than 85% revenue of the game is generated from breeding activities.
- Marketplace fee: Axie takes a 4.5% fee for every transaction in the marketplace.
- Other revenue streams are selling lands, stickers, entry prices for tournaments, marketing, etc.
- AXS stakers have certain rights in Axie’s Governance
- Receive 5% of the game’s revenue
- Staking incentive
- Breeding leads to high demand for AXS
- Axie Infinity uses 2 tokens to separate revenue and payout rewards. The primary AXS token obviously has higher demand and limited supply, so the price fluctuation is higher. SLP as the main payout for in-game missions makes the reward rate more stable even though the AXS price sky-rocketed. It still has a certain amount of impact but less than using the same AXS token as the payout.
- Even though the SLP token has an unlimited supply, Axie creates purchase demand for SLP through breeding and burning and reduces the supply to make it well-balanced.
- Axie built a good flywheel for the AXS token as it re-distributes 5% of the game’s revenue back to the holders. This makes a closed-loop among playing <> earning <> staking, which drives the value of AXS continuously higher.
- The entry price for new players is very high, which is a barrier to sustainable growth. Even though Axie has the scholarship program, it is just a work-around rather than solving the root of the problem.
- AXS price surges pushing Axie character’s price to new limits. AXS token should only capture the value of the ecosystem rather than driving the character’s price, making it even harder for newcomers to join the game.
- The inflation rate of the Axies characters is high. Each Axie can breed 7 times, and there is no way to reduce the number of available Axies in the game. If there are fewer new users in the future and the number of Axies keeps increasing, it will either reduce its valuation or collapse.
There is only 1 token SKILL in CryptoBlades.
It only costs around $20 in SKILL to buy the first character and enter the game at the moment. This entry price can be changed dynamically. But it sometimes can rise to $200 when the SKILL price is high.
- Participating in combat and earn SKILL after you win the battle
- Forging new weapons and randomly receive a rare one which is very valuable
- Upgrading their characters & weapons and selling them on the marketplace
- Selling characters & weapons, shields for users
- Upgrading weapons (reforge) fee
- Early withdrawal tax up to 15%
- 10% fee on every transaction in the marketplace
- Most of the game activities cost SKILL, which creates a huge purchase demand for the token and increases its value
- Staking incentive inside the game and to avoid the 15% early withdrawal tax as well
- The whole tokenomic only spins around the SKILL token, so SKILL captures all the value in the game. Thus, it had a very high buy demand initially, and the price skyrocketed.
- It can randomize the weapon like a lucky gacha draw. This feature is very entertaining and makes many players want to try their luck.
- The entry price is good enough for new users
- The price of characters, weapons, the payout can be dynamically changed to balance the price vs. payout.
- Using the same SKILL token to payout makes it hard to stabilize the income of the player. The price of the SKILL token fluctuates so quickly that what a player earns today can be worth 10x or 0.5x tomorrow. It only attracts pump & dump or short-term players rather than building a sustainable user base that actually spent the effort to get the money.
- The same thing with Axie, there is no way to reduce the number of characters in the game yet. It is possible to turn weapons into dust, but not the characters. The market will eventually be flooded with low-level characters with almost no value.
Based on what I found above, there are some points that I notice:
- The entry price should be competitive and stable to invite new players over time
- The reward payout should be stable and be independent of the governance token’s fluctuation. This approach nurtures a sustainable growth of a play-to-earn user base rather than pump & dump users who’re looking for short-term profit.
- There should be some kind of lucky/gacha drawing of rare items to encourage more people to enjoy the game while balancing the characters in the game with probabilities.
- There should be mechanisms to create purchase demand for the tokens and burning to reduce the inflation rate.
- There should be a way to burn the characters in the game to make it not hyperinflation and increase their value in general.
- Stakers should receive incentives from the game to make a flywheel for the governance tokens between playing, earning, and staking.
Stay tuned for Bunicorn Game Tokenomic that will be shared shortly. Let me know if you have any questions or thoughts, I would love to discuss further with you all.