Thread by @0x_fren

How to create economic incentives in the next generation of games:

For game designers: Important to understand and implement

For investors: Important to identify and tick checkmarks on the scorecard

🧵 👇

Context:
I game, quite a bit. And IMO, gamers should know the most about designing products because, well, they are the end users.

Don't be like League, game designers say they have 200 years of exp before pushing out overloaded kits without consulting the people that play.

2/ Context 2:

I believe that there's 3 diff subtypes of games:

1. Metaverse - VR games
2. P2E - Your DeFi primitives encapsulated as games
3. Play and Earn (P&E) - Fun-first games that allow earning on the side

This thread focuses on designing economics for P&E games.

Now, let's first dissect how current game mechanics work. It's not very complicated,

Users put in their time and money (input), and in return they get emotional repayment.

Notice how the output is purely qualitative, not quantitative at all.

Example:
Any single player game (SP), in this case Assassin's Creed

You pay like $50 bucks, invest your time in playing the game, and realise that you get nothing physical in return.

You receive, well, good vibes for playing it.

The industry has evolved though, to use other blocks (platforms) that enable streaming.

This changed everything, as it allows gamers to now make an income. How would a gamer pre-Twitch make any $$ besides going pro? (and back then that wasn't even very common)

And then, you have multiplayer (MP) games which implement in game items - I argue that this would otherwise be useless in SP games.

Why?

Because people really only spend money on these in game items to flex on others, which you can't in SP games.

Your CSGO knives, your TF2 australiums, your LoL skins, your Maplestory pets and cosmetics - none of them have any sort of utility in the game itself (mostly).

It's all for prestige and leaderboard, which is another qualitative factor.

BUT it is VERY IMPORTANT TO NOTE: There are people that make money - the traders who flip these pieces. However, they're in a unique position because:

These in game items aren't redeemable for real world currency (in most cases)

So I've established the very foundational thesis of games:

A function that takes in your money and time, and spits out mostly qualitative factors (good vibes)

MP games have people spending money either for

1. Prestige / Leaderboard / Pay 2 win sometimes

2. Flipping

So here's how I believe the next generation of economic incentives for games will be designed, and it's really simple.

Just make the in game items now redeemable for real world $.

It's not rocket science, it's not groundbreaking.

But I had to break down how exactly games work for me to ship this to you, for it to make sense.

As a game dev, you lose ABSOLUTELY NOTHING. Your items aren't even real.

Literally it's lines of code in a virtual machine, the only difference is now people can trade it with real money instead of say, steam credits.

Example: My TF2 australium is a NFT, can now be listed on the Steam NFT marketplace built on Layer 2, and someone can choose to buy it for ETH / USDC / whatever

As a game dev, your job is not to figure out how to price these items. The market does that for you.

Your job is to figure out how to make people WANT to buy these items, to create some sort of "intrinsic abstract value" to the item in game.

In my head the process goes something like

1. First build a fun game, attract loads of people
2. Now design items to separate those tiers by adding rarity and scarcity

Two step process, but the hardest part is step 1 (sorry for simplifying it, i know it's hard af).

But that's my point!

Don't change how they work - figure out first, how to build a good MP game that people will love.

Economic incentives can always come later.

Even for games that use some sort of in game currency - it isn't your job to figure out how to turn that into IRL money.

It is your job to figure out how to balance the in game faucets and sinks of the in game currency, yes.

But beyond that, it's not.

Literally all games can be Play and Earn if there was just the development of a marketplace that allowed transactional in real currency.

End of story.

Ok, but now I want to explore new game ideas that could be implemented, beside the ol' brick and mortar type of games.

With this whole P&E paradigm, it's safe to say that perhaps gamers now have more capital to spend.

And so, another way to create economic incentives is to

Make the game Pay2Enter.

The best example I can give is Battlefly. Gamers pay an entrance fee, and the last man standing gets a cut of the entrance fee while the rest goes to the devs.

Imo, not a scam. Similar to gambling, the alignment of economic incentives

But it doesn't have to be paid with real money, it can be paid for by in game money

and that ingame money just has a way of exiting the system via other means.

It's doesn't have to be a direct implementation.
Gacha systems do this, but make it pvp.

Or build an entire game around this.

But the core idea is still there. Making a fair winner takes all kind of game will definitely create some core feedback loops that help build the game.

In the end, what I want anyone building a game to take away is this picture of mine.

It's a first principles understanding of how games work, and realise that as a dev

All you have to do is pull / push those levers in a certain manner to achieve certain outcomes.

P&E is characterized not by the game designers themselves, but by just allowing players to cash out their in game items to some sort of currency by trading amongst themselves.

Game devs don't lose money, money into game is still same.

Alter the state of the machine in the picture above for different outcomes

Money in = money out - game takes a spread? Then you have a more roulette style game

Money in >>> money out? Game keeps most of the $

Lastly, I would like to point out the idea of decentralization of games.

While not impossible, imo games are best made by studios - centralized entities that still have mouths to feed.

okenomics emphasize on sharing profit because there's no centralized entity anymore right;

but imo that's not realistic. But I see the future of this is:

similar to Frontier, issue a NFT

holders of the NFT get the $airdrop

Governance token, decides what to do with warchest

Anyways, hope yall enjoyed this thread.

Think some core ideas are distilled here, and to game devs thank u for the work that u do, i love all games
(as a gamer)

Am currently deciding what to write on next, if you have ideas do lmk. Or dm me or smth.

Cheers

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