P2E Economy: The Basic Layer Protocol of Web3 Games

The player retention rate in the game is the most important thing.

Nevertheless, game publishers are still optimizing company profits at the expense of player value and welfare. They are able to do this because they have end-to-end ownership and control the development, distribution and management of the game . A typical example is Electronic Arts ( EA). This game publisher plays a villainous role in the gaming community because they put their microtransaction profit model above the player experience :

  • In 2017, EA released ” Star Wars BattleFront 2″ (Star Wars BattleFront 2) , players either have to play for 40 hours to unlock a character (such as Dark Vader), or they have to pay. The company’s response to this is arguably the mostunwelcome comment in Reddit history , highlighting the hostility between game publishers and players, as shown in the image below.
  • Approximately 30% of the company ‘s overall revenue comes from the sale of its football game FIFA Ultimate Team(FUT) loot boxes . Leaked company documents show that the company’s primary task is to capture microtransaction activities: EA claims that ” all roads are accessible To FUT “, because ” FUT is the cornerstone, we will do everything we can to attract players there .”

P2E Economy: The Basic Layer Protocol of Web3 Games

EA’s response on Reddit is the most disliked comment in Reddit history

Play while you earn ‘(Play-to-Earn, P2E ) core vision behind this is to solve these problems on the inside game and real ownership of assets around the world by providing the players, and, ultimately, create greater community stickiness and retention . Compared with the current 30-day retention rate of 3% for global mobile games , we have seen some initial success in the first well-known P2E ecosystem, Axie Infinity -its 90-day retention rate has reached 40% :

P2E Economy: The Basic Layer Protocol of Web3 Games

Above: The Jiho, co-founder of Axie Infinity, said that the 30-day and 90-day retention rates of the game are basically the same.

Note: Not everyone who downloads Axie Infinity can play this game (because there are certain thresholds for playing the game), so the actual D1-D90 retention rate may be much higher than 40%.

Problems with Web2.5 games

Due to the success of Axie Infinity , we have seen many new P2E ecosystems trying to replicate similar successes.Nevertheless, many of which target the project is still at the center of control and coordination of the way the game is end to end production – and therefore may replicate the same structural imbalance in the traditional game.

These Web2.5 games hope to use “cryptocurrency as a feature ” to realize digital asset ownership through NFT, or to realize financial ownership of a specific economy through ERC-20 tokens, but at the same time , they also aim to limit other more encrypted natives. The environment and participation of ownership attributes (such as governance) .

Normally, the team behind Web2.5 games hopes to build a highly optimized but closed ecosystem in which the entire player experience is centrally controlled by an organization . These projects consider themselves “game first” and most of them are still optimizing Web 2 growth indicators. It can be said that they have the same value-squeezing mentality as traditional game publishers. As a game studio declared:

“We are implementing NFTs because we think it will generate more revenue. We believe that if players believe that these assets will appreciate, then they are willing to spend more money.”

Similar to CeDeFi, these games hope to build a closed-loop, centralized control ecosystem on an open and permissionless encrypted network (public chain) .

Although we don’t expect all P2E ecosystems to be decentralized from the beginning, but expect a more gradual process of decentralization ( just like Axie Infinity), we believe that this kind of Web 2.5 game development The trend stems from a fundamental failure to fully understand the power of composability, interoperability, and decentralized coordination technologies .

Our argument

We believe that Web3 games will beat Web2 and Web2.5 games because Web3 games take advantage ofcommunity ownership, actual economic value, and native composability to drive greater player adoption and retention .

We believe that the Web 2.5 method of constructing a P2E ecosystem is not enough to prevent the capture of value from the community, because players still need to rely on a single coordinator that controls the end-to-end development of the game and manages the game economy and the end player experience. On the contrary, we believe that we should treat the P2E ecosystem as an open source public product , that is, the game economy and all aspects of the surrounding game experience are built in an open environment .

Verifiability (block chain) to establish a system of trust that the system undeniably did what it promised,participants reached consensus on the information in the database is indeed established a not the fact that doubt.

——Token Maximalist Thesis from 1kxnetwork

With the help of token incentives and community ownership, we are able to spin off the role of game publishersthrough a set of bottom-up contributors, players, and guilds to promote world construction, product development, and governance . By making these responsibilities public, we no longer rely on a single company to achieve the goals of the entire ecosystem, but can take advantage of the open source contributions of anyone on the Internet.

We don’t think of P2E as an independent game or “application”, but think that the P2E ecosystem is about building a self-sustaining virtual national economy that community members can trust, operate collectively, own, and build on it .

P2E Economy: The Basic Layer Protocol of Web3 Games

  • P2E economy as a virtual governance country

Based on its current economic mechanism, the P2E dynamics surrounding games have a completely new importance. These P2E economies are not only a place for community members to play games, but also a virtual world where they have financial advantages, ownership of income-generating businesses & valuable digital assets, and clear jobs and responsibilities .

We can think of P2E economies as virtual countries . Its citizens will want to live in the most democratic and well-governed country and provide them with the best opportunities (entertainment, work, society, culture). These virtual economy to retain its community members, must be fair and transparent manner to have a significant economic impact on its citizensdecision-making , such as:

Economic policy : such as the supply of in-game assets and the trade-off mechanism.

Monetary policy : such as value accumulation mechanism, transaction fees.

Treasury policy : For example, which community activities should be funded?

Intellectual property : For example, how should the intellectual property of the ecosystem be authorized?

We believe that the P2E economy operated by the community will optimize functional governance, the “quality of life”, “GDP” and economic stability of community members, rather than simply user growth . In turn, by making decisions that better suit the interests of community members, not only can we retain but also attract better community members, because this provides an economy that can be relied on for safe management ( public goods & agreements sinking theory). As we spend more and more time in virtual space, and as we move from one world to another, we are able to carry our identities, friends and assets, the analogy of this virtual country becomes more and more real.

P2E Economy: The Basic Layer Protocol of Web3 Games

P2E Economy: The Basic Layer Protocol of Web3 Games

  • P2E economy as a community distribution platform to promote the open source ecosystem of builders and creators

Unlike Web 2 games where data is stored in a centralized database, the P2E economy can be used as an open, interoperable SDK-like platform on which contributors can build it without permission. This allows us to treat the economy as a basic layer agreement on which other community-generated games and experiences will rise -they are all channels for the ecosystem to acquire new users, and they are also another aspect of this existing community. A user stickiness driver.

By doing this, we can provide developers with opportunities to create and publish games to an active community from day one.

In the Axie Infinity ecosystem, this may seem like funding new mini-games that will advance certain goals of the Axie Infinity ecosystem, such as: a better entry experience for players, where the creators of these mini-games will Get real-time token rewards related to the success rate of (users) on the machine of their game. By avoiding dependence on a single team and developing in an open environment, games can expand the breadth of product insights and develop products in a more scientific and engineering-based way.

This ecosystem approach can be applied to all other operational areas of the P2E ecosystem, from community development to world construction and transformation. Funds can be allocated to the grassroots through large-scale community funding mechanisms , such as second-party financing, or even through player-owned guilds that manage specific responsibilities and tasks , such as the Axie P2E scholarship guild that helps promote the distribution of Axie Infinity .

P2E Economy: The Basic Layer Protocol of Web3 Games

As players have greater control and mobility in the Metaverse, we believe that interoperability will become the core driving force for cross-world distribution . The more open and integrated these economies, games, and the world are, the more likely they are to generate more creativity through experimentation and permissionless integration, thereby expanding the top of the funnel of the P2E ecosystem. We believe that interoperability is not just “bring your sword from one game to another”, but can exist in many forms:

Appearance and vision (such as VRM virtual characters, cross-world visual features, etc.).

Player world interaction (the physics engine on the chain is the common standard of FPS games, and assets maintain cross-world integrity, such as plants that need to be watered in the same way in multiple worlds)

Economic aspects (allow players to use other game tokens to buy and sell assets, or use other game/world tokens to get discounts).

Reputation (certificate that can be verified across the world)

Achievements (complete the X and Y bounties in the game to unlock the badge)

Economic sinks and faucets (destroy game assets X and Y at the same time to create a unique skin/appearance props)

Intellectual property ( see legends and characters in a P2E world in another virtual world )

Access ( Game props that allow players to virtually visit virtual spaces in multiple worlds)

We believe that the opportunity cost of not building interoperability will be much greater than the net cost of building interoperability.

P2E Economy: The Basic Layer Protocol of Web3 Games

  • P2E economies as sinks and taps

When the value flowing into the system is greater than the value leaving the system, economic sustainability and growth occur. In game design, the mechanisms that affect the flow of value in an economy are sinks and faucets :

Sink (Sinks) will supply an asset detached from the economy, such as by SLP token fee Axie pet breeders of being destroyed; usually players will be motivated to breed Axie, so as to establish a more powerful fighting team and Get higher rewards.

Taps (Faucets) the supply of assets injected into the economy, such as by completing a task or win the battle and earn rewards SLP tokens.

In order to achieve sustainable development P2E economies, sink take away from economies need more than token supply faucet injected into the system tokens more , or over time, with the increase in the supply of tokens, the There will be natural downward pressure on prices.

An example of the future token sink is that Axie Infinity will introduce vertical integration upgrades (whether it is an upgrade in appearance or an upgrade in scarcity) that need to be purchased through SLP. Currently, the only SLP tank in the game relies too much on Axie to combine and reproduce (because reproduction will destroy SLP), but the quality and overall appearance of each Axie remain unchanged.

P2E Economy: The Basic Layer Protocol of Web3 Games

Vertically integrated token sink

We can also expect to see similar adjustments in other emerging P2E games because they are all committed to economic sustainability. We can expect that the community will crowdsource games and other player experiences and embed them in the player economy as sinks or taps to achieve stability.

We may even see other allied virtual countries integrate the sink or faucet of another economy into their own local experience to help this other P2E ecosystem facing economic instability.

P2E Economy: The Basic Layer Protocol of Web3 Games

The rise of minimal viable games

We believe that the largest P2E ecosystem in the future may seem small and inconspicuous at first.

By treating the P2E economy as the economic and social foundation of the entire game ecosystem , we believe thatbuilding a P2E ecosystem is more about the world construction, cultural construction and incentive mechanism design of the underlying economy .

Although we believe that well-designed games will attract and retain the largest player base in the long run, we don’t think you need to launch a highly optimized game from the beginning to be successful, but you can launch one. TheMinimum Viable Game (MVG) that is sufficient to complete the economic value accumulation cycle .

One advantage of cryptocurrency is that it can immediately start a token economy from day 0 , and start to build the lowest feasible economic value accumulation mechanism long before a complete end player experience is realized. This isin sharp contrast to the waterfall development approach adopted by traditional game studios from the beginning .

One way to launch a minimal viable game is as follows:

  1. Create a world that everyone else wants to join (including designing game concepts, designing legends, aesthetics/visual effects, creating stories, designing game internal assets);
  2. Allocate the ownership of the game world to the community (to tokenize future in-game assets in the form of NFTs and distribute them to early potential community members and players);
  3. The community launches tokens to guide a vibrant economy;
  4. Community funds are raised in a shared treasury;
  5. The community releases a minimal viable game with a token sink ;
  6. This minimal viable game will remove tokens from the token supply ( this needs to be driven by the interaction of the player world in the game. Players should believe that it is worthwhile to destroy their tokens );
  7. As the tokens are removed from the circulating supply, the economy will accumulate more value;
  8. Value is reinvested in the game;
  9. Create better games and token sinks;
  10. Repeat steps 7 to 9.

As shown below:

P2E Economy: The Basic Layer Protocol of Web3 Games

We believe that by building a complete economic value accumulation cycle as early as possible, the P2E ecosystem can build games in a more streamlined and iterative manner, and with lower initial startup costs .

Axie Infinity perfectly embodies the concept of a minimum viable game, because the first major capital raising of the game is before the release of the game’s breeding and combat components:

  • December 2017 : Concept and development started;
  • February 2018 : Raised 900 ETH (approximately US$720,000) through the sale of the initial Axie;
  • May 2018 : Reproduction game released (faucet introduced)
  • October 2018 : Idle combat game released (introduction of water tank)
  • January 2019 : Raise 3200 ETH (approximately US$400,000) through the sale of initial land;
  • December 2019 : The card battle game is released;
  • May 2020 : 4600+ ETH (approximately USD 1,000,000) obtained from land sale in the first quarter
  • November 2020: AXS Token Strategic Sale (860,000 USD)
  • November 2020 : AXS token strategic sale (860,000 USD);
  • April 2021 : Migrate from Ethereum to Ronin sidechain;
  • September 2021 : Launch of the pledge of AXS tokens

Although Axie Infinity already has more than 2.5 million daily active users, its development blueprint is far from complete.Axie Infinity focuses on community building and iterative development methods, which proves that MVG (Minimum Viable Game) can be used to guide a large-scale virtual economy.

P2E Economy: The Basic Layer Protocol of Web3 Games

Build a P2E ecosystem in a community-first approach

Based on our practical experience in building a token network, we believe that the most successful and vibrant P2E ecosystem will give priority to community and culture rather than gameplay.

We believe that correct world construction, cultural construction and incentive mechanism design are the key tasks for building a prosperous P2E economy .

  • World construction-“Let us build a world together.”

In the minimum viable game model, the common world construction in the early P2E community is an important driving factor to promote user stickiness and participation. Therefore, we expect to see more and more P2E ecosystems adopt a content-first approach (such as Loot, Treasure, and CryptoManga ). We can foresee that the early user acquisition of the P2E ecosystem will be more like a technology-savvy Dungeon Lord and the community to create a “Dungeon and Dragon” world, especially when there is no game ready or even game development. .

One example is Loot ; because the project uses a fair distribution similar to Yearn and the creative potential of text-based NFTs, many developers have seen the potential for them to jointly build a new digital economy. In the next few months, 86 community projects appeared to expand the possibilities of Loot, including new derivatives, tools and peripheral props, maps, legends, and visually rendered guilds.

Although we currently lack player-driven world-building tools , we expect to be able to innovate in this area in the next few years. We believe that generative AI technology will play a key role in the transition of human beings from the role of content creator to the role of curator. We view world building as a collaborative process, that is, a community of potential players and other contributors that can be cultivated before the game is born .

P2E Economy: The Basic Layer Protocol of Web3 Games

  • Cultural construction-“come for culture, stay for ownership.”

People join a community because they resonate with the culture of the community, and they stay because they become the owners of the community . Culture is strengthened by demonstrating integrity around a set of values ​​and principles and encouraging others to follow suit. This was co-created in a community, so it was an important part of the early community.

Although the traditional indicator emphasizes ” how many players does your game have “, we believe that the P2E ecosystem needs to pay attention to ” who are the game players and contributors “. Therefore, we highly encourage theP2E ecosystem to carefully manage its early community members and players . This can be achieved through manual whitelisting and other measures, such as restricting participation through an oath of allegiance or contribution.

“In the early days, one thing was important-many of our community members’all in’, they need Axie to succeed. Now, NFT community members also tend to “venture effect”, that is, they put too many eggs in Too many baskets without paying too much attention to a certain project.”

——Jiho (Co-founder of Axie Infinity)

The right culture will allow the team to take full advantage of the fact that P2E games as a community increase the surface area where participants with the same values ​​can create influence in the economies they belong to, and enable them to create in the world they have helped create Accumulate ownership.

P2E Economy: The Basic Layer Protocol of Web3 Games

Source: Discord chat channel of Axie Infinity

  • Incentive mechanism design-“reward valuable contributors”

Although culture may initially attract members and contributors to the community, they will only stay if their work is fairly rewarded and a sense of ownership has developed.

P2E Economy: The Basic Layer Protocol of Web3 Games

Above: The journey of becoming a community contributor

When designing game internal asset allocation and economic benefit sharing, game studios should ensure that the most valuable community members and contributors can be rewarded for their work and commitments . When this feedback loop of contributors is repeated, trust, loyalty, and fanaticism will arise .

We believe that the token incentive mechanism is a scarce resource and should be allocated to the most valuable community members carefully and based on merit . We expect to see more experiments on token ownership and in-game asset allocation models. For example:

  • Only a certain size of guild or overall “experience” can purchase exclusive assets (such as virtual land);
  • Certain props in the game can only be obtained by completing a rigorous knowledge test and a deep understanding of the legend of the game;
  • Players can obtain exclusive items by completing tasks (in-game or other community bounties), which can then be used as “badges” to show their reputation.

We believe that P2E games should carefully design an incentive mechanism based only on gameplay . Therefore, if the incentive mechanism is designed solely based on gameplay, then the game will face the risk that its members tend to be mercenaries , and mercenaries are more likely to jump from one game to another in order to seek higher returns (similar to this The profit farmer in the DeFi agreement jumps from farm to farm). We believe that the P2E economy should design the incentive mechanism more focused on retaining “missionaries” and loyal community members, rather than promoting pure user acquisition.


Compared with gorgeous graphics and large financing rounds, we believe that the most successful P2E games will begin with the creation of an excellent culture, community, and vibrant economy.

We are just beginning to understand how to build in an open environment. At 1kx, our mission is to be the most helpful investor for those who seek to build the next large-scale P2E ecosystem. If you want to do something in this field, we are happy to chat with you~

“If you want to go fast, go alone. If you want to go far, go with your company.”

Acknowledgement : This article was co-written by the 1kx team: Dmitriy Berenzon, Justin M. (AcceleratedCap), Michael Hua, Nichanan Kesonpat, Peter (pet3rpan), Christopher Heymann. Thanks to everyone who helped us understand P2E (play while earning), including Jiho, Michael Arnold, James Young, Ryan Foo and Metaversatile.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/p2e-economy-the-basic-layer-protocol-of-web3-games/
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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