How to build a sustainable X to Earn economy

One of the biggest advantages of the crypto-economy is that it can flexibly design the incentive structure, so that any form of economic system can be built almost without restriction. In the encrypted economic system, Token is the core of production relations and an important resource coordination tool. We have noticed that a new token incentive model, a new cryptoeconomic system, has recently emerged, called X to Earn. Among them, “X” represents a certain user behavior encouraged by the system, and To Earn means that the system will provide economic incentives for this behavior.

From the popularity of Axie Inifity, Play to Earn (earning while playing) has entered people’s field of vision, and even a huge Web3 game gold guild has been formed around Play To Earn. Later, the Move to Earn application StepN and the Learn to Earn application LetMeSpeak came out one after another. People realized that the economic model of Play to Earn can have many variants and can be applied in more diverse scenarios, so a broader The concept of , is refined, namely: X to Earn.

The broad and narrow sense of X to Earn

X to Earn In a broad context, it can refer to all the behaviors of earning income in Web3, including:

  • Use specific hardware devices (generally referred to as mining machines) to access the decentralized network and provide services to obtain revenue (such as the mining behavior of Filecoin, Menson, Phala, Helium), which is classified as MachineFi by industry analysts;
  • Run nodes for the public chain network to obtain block rewards, including in the PoS public chain network, entrust Tokens to nodes to obtain income;
  • Invest funds in interest-bearing DeFi applications for yield farming.

However, in this article, the X to Earn we mentioned refers more to its narrow sense. In the narrow sense, X refers to a certain user behavior, and more emphasis is placed on the user’s time investment rather than capital investment.

Typical ones include:

  • Play to earn (representative project: Axie Infinity)
  • Move to earn (representative project: StepN)
  • Learn to earn (representative project: LetMeSpeak)
  • Drive to earn (representative projects: HiveMapper, CPLE)
  • Write to earn (representative projects: Bihu, CyberNote)

In addition, there are more novel and diverse forms, such as Sing to Earn, Sleep to Earn, Eat to Earn, Meditate to Earn, etc.

Commonalities and Personalities of the X to Earn Project

As mentioned earlier, in various forms of X to Earn projects, X is a variable, which is the behavior encouraged in the economic system, and Earn is a commonality, and the behavior of users will generate income in the form of Token. Players can exchange Token income for stable coins inside or outside the APP and sell them, or they can consume them in the system. In addition, most projects have another commonality, that is, if players want to enter the game to make money, they must first buy an “admission ticket”.

Most of the tickets are in the form of NFT virtual equipment. For example, if you want to gain income through StepN sports, you need to buy NFT sneakers, and if you want to learn English through LetMeSpeak to gain income, you must first buy NFT virtual characters. In some projects, the form of admission ticket may also be Token pledge (such as Bihu) or the purchase of smart hardware (such as HiveMapper).

Is X to Earn a Ponzi scheme?

People flock to X to Earn projects for speculation and profit-seeking purposes, which makes such projects have a great out-of-the-circle effect. However, entrants generally have concerns about its sustainability, and when they are actively entering the market, they are always ready to leave. Such concerns are understandable. Entrepreneurs in the track should think about: Can a sustainable X to Earn model be created? What should be done?

Just as life requires energy intake to maintain low entropy, an X to Earn economic system requires a constant infusion of funds to allow players to earn money.

The most natural way is to “come first and then arrive”, to support the old users through the joining of new users. Injecting this money into the prize pool, or using it to protect the game token), this model is unsustainable, we can make a simple mathematical argument:

Suppose the user’s expected monthly rate of return is , the price of the admission ticket is in , the number of existing users in the current month is , the number of incremental users is So to maintain balance, you need to meet:

i*v ≥ s*p*v

That is:i ≥ s*p,

Minimum need to meet:i = s*p

Assuming that the user expects to repay the cost in one month, that is to say, the expected monthly rate of return   is 100%, and the initial stock user is 10. To maintain the balance of the equation, the growth trend of users needs to satisfy the following curve:

How to build a sustainable X to Earn economy

It is not difficult to find that this is a typical exponential growth curve.

We can also understand it this way, with the stock on the left side of the equation increase in , the increment on the right side of the equation It must also increase proportionally to maintain the balance of the equation, which means that the increment must also maintain a certain growth rate. In other words, the growth of users must have sufficient acceleration, and uniform growth is unacceptable.

The constant growth of users cannot be achieved continuously, not to mention the accelerated growth of users? Soon after such an economic system operates, it will be It gradually decreases until the players leave the game because they cannot meet expectations, enter a death spiral, and become a Ponzi scheme. To create a sustainable X to Earn economic model, other, sustainable sources of funding must be found. Let’s analyze several possible avenues:

Five Possibilities for X to Earn Sustainability

The first: use “krypton” to support “play”

If there is no external capital injection, the X to Earn economic system cannot allow every player to make money. If someone makes money, someone needs to spend money, and if someone makes money, someone has to pay for money (Krypton gold here refers to payment in general, not just to large payment). If some players are willing to pay for gold, it means that such an economic system provides players with other values ​​than profit-seeking: it may be the physical and mental pleasure brought by the game, or it may form a good habit, or it may help players make a group of like-minded partners .

Take the game project of Play to Earn mode as an example, if the attraction of the game is more than making money, and the playability of the game itself can attract players to pay, or allow players to accept the situation that the income from playing gold is less than the cost of krypton gold, then the game It is possible to achieve a balance between the economic system of the kryptonite and the goldsmith. In this case, krypton gold players are the real consumers of the game, and gold players are, to some extent, using their own time to serve krypton gold players.

From the perspective of time dynamics, it is very likely to be an evolutionary process. In the early stage of the promotion of game projects, high revenue will attract many users to play gold. Over time, the slowdown of user growth will lead to gold revenue. The decrease (often reflected in the way of lowering the price of the token), some gold users gradually withdraw, and the big waves wash away the sand, leaving krypton gold users and some gold users who accept lower yields, forming a balance.

In this evolutionary process, the game publisher saved the funds that should have been spent on publicity and channel distribution, and used the power of everyone to complete the publicity. From this perspective, Play to Earn does not change the game, it changes the way the game is distributed , and the decisive factor for the success of the game is its playability.

The second: use “lazy” to support “diligence”

The feature of being lazy is concentrated in items like Move to Earn and Learn to Earn. These two types of projects have a common feature, which is to use monetary benefits to help users fight inertia and become a better version of themselves. As we all know, whether it is learning or sports, self-discipline is required. Self-discipline is a pain, but it might be different if self-discipline could bring immediate feedback in the form of monetary benefits. When learning or sports become a kind of gold-making behavior, then people suddenly come to the spirit!

Of course, if there is no external financial subsidy, the problem still cannot be avoided: if someone makes money, someone has to pay for it. On the surface, all participants have earned Token rewards, but assuming that the total market value of Token remains unchanged, and excluding the fluctuation factors of the secondary market, we can think that only those who beat inflation are really earning money, not running Those who win inflation become passive users of krypton gold.

Such a situation is like: everyone starts a gold-playing competition in the form of sports or learning, and in the end, relatively lazy players pay for relatively hard-working players to form a balance.

Then under this balance, the krypton gold users in the system are passively paying, not actively consuming, although they also benefit from self-discipline to a certain extent, and in principle must be willing to admit defeat because of their relative laziness, but they There must be a limit to the acceptance of losses. Therefore, the entire economic system must maintain a relatively mild stimulus, which means that users who lose money cannot lose too much, and correspondingly, in order to maintain a balance, users who make money cannot make too much money.

In order to achieve this, StepN’s choice is to moderately limit the influx of new users, and to allow users to consume the earned Token income in the system as much as possible to reduce inflation (but currently we see all Tokens in the StepN system The consumption scenarios almost all point to earning more Token income, and the pressure to eliminate inflation will be greater); while LetMeSpeak chooses to let the role of NFT as an admission ticket have a certain lifespan (visa period), which makes the economic model It’s closer to the “punch mode” mentioned below.

The third: punch card mode

I don’t know if you have seen such a gym business model: an annual gym card is 2,000 yuan, and you can return 20 yuan each time you come to the gym. After 100 days, the annual card will be earned back, and there will be no cash back for more than 100 days. This is a counter-incentive method, and compared with the business model of most gyms, it has a greater incentive for customers to stick to fitness. Such a model has been successfully practiced in physical business.

We call this model the punch-in model. The money everyone can earn is the money they have paid, and there is no possibility of becoming a Ponzi scheme. Although the gambling excitement of the gold competition is less, it also eliminates the risk of being cut. Of course, the “lazy clientele” must also have a certain scale, or no one will pay for the gym’s operating expenses. Therefore, the punch-in mode can also be understood as another form of “lazy to support diligence”.

Proof of Meditation takes the punch card model, which is a Meditate to Earn app. The way to use the app is very simple, pay $100, and then do 21 days of meditation training. Every time you complete a meditation task, you can get back $5 and get a Meditation Medal NFT. At the end of the training, the principal will be fully taken. Return, if the meditation training is not completed within the limited time, the unreturned principal will be forfeited. At present, the project is still an experimental product, and the number of people concerned is not large.

The fourth type: Raising “points” with “nets”

We found that some X to Earn projects have clear logical end points and profit models. After they have formed the entire network in the form of X to Earn, they can provide social services and earn profits through the network. As long as there is enough profit, funds can be continuously injected into the bonus pool, or the price can be raised by repurchasing and destroying game tokens. In this case, the profit equivalent to the entire network supports the income of each single point. At the same time, the participants of the network will not only be value seekers, but also value contributors .

HiveMapper is a Drive to Earn project whose vision is to build a Web3 map product in a decentralized manner. Most of the map products in our mobile phones are centralized products such as Google Maps, AutoNavi Maps, and Apple Maps. In fact, the companies that operate these products are spending huge amounts of money every day hiring dedicated people to collect and update geographic information, something that only giant companies with deep pockets can do.

HiveMapper uses blockchain + data crowdsourcing to build a global map. You only need to buy and install Hivemapper’s driving recorder, you can complete data collection while driving, and earn Token rewards called HONEY. After such a global map is drawn, the user needs to consume the HONEY token to obtain the permission to use the API. As a result, a business closed loop is formed.

Another Drive to Earn project CPLE (CarpoolsLifeEconomy) is committed to building a Web3 Uber and ride-hailing platform. The project also requires contributors to install a driving recorder. On this basis, the token reward can be obtained by publishing the itinerary on the platform and completing the itinerary. The public information of the project is still relatively small, and the more detailed operation plan has yet to be disclosed.

Fifth: traffic realization

The development of Web2 has repeatedly told us that a continuous subsidized business is not necessarily worthless. As long as the traffic can be gathered, there are many opportunities for realization. Advertising and cross-industry cooperation are the most basic of them, and the more typical way is to personally end up and develop cash cow business. Taking Tencent as an example, as we all know, WeChat and QQ are not profitable, but with the huge traffic of WeChat and QQ, there are many profitable businesses for Tencent: including QQ Music, Tencent Video, Official Account, Qzone, King of Glory, etc. .

The same is true for Web3, if the X to Earn project is operated properly, it can have a strong ability to attract traffic and user stickiness, and have the opportunity to become the traffic portal for more Web3 applications. For example, the Move to Earn project can end up as an NFT trading market, use the Move to Earn module to drain the NFT trading market, and subsidize the Move to Earn bonus pool through the profits of the NFT trading market. In fact, the process of purchasing virtual shoes for new users of Move to Earn happens to be the process of learning NFT transactions. Such a business layout can be said to be a matter of course.

When we look at the Move to Earn application, we should not think that it is just a Web3 version of Keep. From another perspective, it is likely to be a Web3 version of Tencent or Meituan.


We believe that 2022 will be a brilliant year for the X to Earn track, where PAKA labs will also actively seek opportunities to support high-quality projects. At the same time, we are also soberly aware that the entry threshold for the X to Earn track is not high, and there must be a large number of projects with bad intentions. They wear various gorgeous gimmicks and use the banner of X to Earn. It is the capital disk thinking, and it is a Ponzi scheme. Here, we remind Web3 users to keep their eyes open and be alert to risks.

When there are various scams and chaos on the X to Earn track, it will bring disappointment in the market, and even lead to severe supervision and sanctions in some jurisdictions, resulting in the overall downturn. But we believe that the X to Earn program, which has successfully created sustainability, will survive and thrive in this new wave of growth. Among them, especially the X to Earn project, which is a traffic import business, will have strong vitality and huge imagination space.

Derivative reading:

[1] “X to Earn: The Official Challenge to the Death Spiral” / IOSG

[2] “10 Suggestions on the P2E Economy” /Folius Ventures

About PAKA

PAKA is a DAO Venture co-founded by many Polkadot parachain promoters, aiming to discover and help innovative teams in Polkadot and the web3 ecosystem. We hope to accumulate the entrepreneurial experience and technology of each generation of entrepreneurs, help the next generation of entrepreneurs through DAO, and promote the realization of the vision of Web3.0.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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