SHOW ME THE MONEY: Profit-Centric → Player-Centric Game Economies

A crash course on game economies + Axie Infinity, the Phoenix Rising From The Ashes

Dec 25, 2023

Hi MINDS AT PLAY community. Class is in session! This post is dedicated to those who want to learn about designing game economies. This is not at all a comprehensive breakdown. There are plenty of books that offer that in much greater detail. This is just a compilation of what I have learned so far and what I am currently researching. As my understanding increases, this information will evolve with me, becoming more refined over time.

INTRODUCTION

Establishing a robust in-game economy is one of the first steps in designing a game. Thinking about its core mechanics and flow, I would argue, is the main component that distinguishes game design (at least to me) from game development. Game design is to game development, what UX is to back-end programming. Is it necessary to specialize and separate the two? Maybe it wasn't necessary in the past when game economies were in their pre-asset ownership days, but I would argue that in a post-asset ownership and creator economy world, hiring and training individuals who are highly specialized in game design is essential.

WHAT IS A GAME ECONOMY:

Lets start by defining what a game economy even is: An In-game economy can be thought of as the flow of resources around a system. According to Unity, a game economy is the silent force behind player engagement that defines how players progress through your game.

Bad economies = Imbalanced flow of resources and is more prone to exploits

Good economies = Balanced flow of resources, which positively influences player behavior, contributes to long term gamer retention and the sustainability of the game.

This video does a great job of explaining Game Economies:

WATCH: How Video Game Economies are Designed

The above video introduces you to a key idea. The functionality of faucets/taps = how resources enter a game. And drains/sinks = how resources exit a game.

For a virtual in-game economy to maintain economic equilibrium — the relative stability of its core currency and items — it must balance the rate of asset issuance with the rate of asset consumption/demand.
Stuff in ~= Stuff out
- Terry Chung in Sinks & Faucets: Lessons on Designing Effective Virtual Game Economies

VALUES & INCENTIVES

PROFIT CENTRIC VS PLAYER CENTRIC VALUES

Now we get into the heart of designing the flow of resources in your game. Good design is about understanding values and priorities. When you’ve crafted a well-balanced incentives system, your game will retain users, maintain a stable economy, and ensure the long-term success of your game.

A profit-centric economic model puts financial gains at the forefront of design decisions. Profitability is an essential part of any businesses survival, but a myopic focus on profit can lead to an un-loyal user-base, the players you do retain will be mostly mercenary in nature, which is the current case in the web3 gaming ecosystem. “[...] it seems that many of the “players” in the current crypto gaming space are mercenary in nature. Just like yield farming, users appear to be attracted to where the incentives are strongest instead of a genuine passion for the games on offer." - Delphi Digital's Gaming Report

In contrast, a player-centric approach is committed to delivering value to players and building strong, lasting relationships. A player-centric approach acknowledges that long-term profitability is often a byproduct of satisfied, loyal players. Not just giving value to those investors providing mercenary value, but also giving value to the people playing the actual game.

MY PHILOSOPHY : PLAYER FIRST, PROFIT NEXT

My philosophy is counter to much of what you will find in Web3 gaming today – that is to prioritize the player above profit. I know, shocking. I am not arguing that we shift away from thinking of profit entirely, that would be nonsensical, the goal of business is to make money, and though game making is an art, a joy and a medium for enriching human potential, it is also a business. Plain and simple. I am not arguing that we do away with the business model entirely as it relates to web3 games, but rather, that we transform our priorities and design game economies and business models that account for and fairly incentivize all game actors, from game economists, to the (needed) mercenary capital providers, and to the very gamers themselves, and the influencers who help drive market interest, and every one involved directly and indirectly into making the making of games happen.

From Sinks & Faucets: Lessons on Designing Effective Virtual Game Economies

MY HOT TAKE 🔥

Take this with a grain of salt. But I think Web3 has over-prioritized the oftentimes extractive demands of VC’s and the publishers behind games, while under-compensating or even acknowledging the gamers, the hobbyist designers, the fans and the hardcore loyalists. Game users have a sort of unspoken allowance to be extractive in a sense, but game developers should not be primarily focused on making the big bucks, at least not all at once and right away. There is no doubt ALOT of money in gaming, but I have seen games come and go trying to chase the bag.

DYNAMIC + FLUID ECONOMIES

Ultimately, incentives and values is about balance and designing for all stakeholders. For instance, adding layers of in-game speculation targeted towards investors or people who do not want to devote alot of time to gameplay can be a great way to design and accommodate for the large amount of investors that are idle gamers in web3. And, if you wish, you can use that capital to incentivize actual players in small amounts and frequently, across a long-term time horizon. “If video games teach us one thing: If you want to motivate humans, frequent rewards are more addicting than one-off rewards.”

Additionally, crafting a dynamic value for in-game currencies that fluctuates over time, similar to real-life economies such as the stock market, enables more dynamic gameplay. The inclusion of deflationary assets is particularly clever, and Axie Infinity excels in implementing this strategy, which we will delve into later. The video below makes a compelling point about leveraging user behavior for optimization and creating a currency/asset that is abundant alongside one that is more limited (rare)

WATCH: Why Is It So Easy To Break Videogame Economies?

WEB3 GAME DESIGNERS: CRAFTING ROBUST SYSTEMS

MY (2nd) HOT TAKE🔥:

I am afraid we are attempting to onboard the next 1 billion users with too much emphasis on influencer shilling and too little emphasis on actually designing good games. Web3 games often lack playability. Projects shouldn’t spend most of their money on getting influencers to market their game. A good game markets itself.

Web3 gaming is overly saturated with influencers, commentators, critics and spectators, very few of whom are eager to come down into the arena and engage in the (metaphorical and oftentimes literal) battle of creating a game. And for good reason. Making a game is hard. Making a web3 game is much harder. There are very few upsides for many — the potential is enormous but the risks are large and plenty. Many have good reasons to avoid game design whether as a developer, publisher or designer.

But still we need gallant soldiers who ride into battle and will go into the lion's den of game creation. We need Web3 native game designers. It’s not enough to port a web2 game into web3 there are many nuances and complexities in designing blockchain games. That’s why I want to make an effort to celebrate and highlight the few that are native web3 game designers, starting with the OG’s of P2E, AXIE INFINITY:

AXIE INFINITY

Diving into Axie Infinity's landscape reveals a crucial lesson in the complex world of Play-to-Earn (P2E) gaming. The potential pitfalls of token overproduction and an overly extractive game system which hinders sustainability.

It's no secret that many P2E gamers are keen on extracting value. This sparks a consideration of the risks associated with hyperinflation, urging us to glean insights from economic history. As we navigate the upcoming bull market, a reflective pause is not just wise; it's essential—history doesn't always repeat itself, but it certainly rhymes.

Axie's newest update, Part Evolution, adds deflationary mechanics into the game, reshaping the gaming experience. This move encourages players to deepen their Axie investments, fostering a more profound connection and positively influencing market dynamics. The resulting deflationary pressure on the total Axie supply, triggered by heightened material demand, marks a significant shift.

Despite suffering from a devastating hack just over a year ago, the Axie Infinity team persists in delivering updates and prioritizing user experience. Their resilience speaks volumes about their dedication to the gaming community. This is a class act in my opinion. I am not sponsored by Axie Infinity, by the way, and to be frank, the battle gameplay thing is not really my cup of tea, although the Axies themselves are pretty cute. I was always a bit cautious of the old economic model that was inflationary in nature, and far too vulnerable to market manipulation, exploits and the malicious/extractive intent of bad actors. Sadly, my sense was right and the Axies team learned a very expensive lesson but the beautiful thing is that they learned the lesson and have grown and evolved from their past mistakes. I do love a good underdog story and afterall, It’s hard not to believe in someone and something that so clearly believes in themselves. So, I think it’s safe to say that Axie’s story isn’t quite finished yet.

WATCH: The Forgotten Temple | Axie Infinity (Part Evolution)

That’s all for todays post, class is over! Well done for getting to the end. Let me know what you think in the comments. Until next time,

— Cynthia ౨ৎ ⊹ ‧₊˚