Play to Earn or Play to Ponzi?

Editor’s note: “As the two-year bull market has come to an end in an unusually tragic manner recently, many concepts and projects that were created and touted in this cycle have also begun to cool down. So, these once star products really Are they useless? What valuable experiences will their success or failure experience leave the industry?

In the near future, I plan to use 3 to 4 articles to review and focus on reflecting on several key tracks or business models in this cycle. “

Since the birth of Axie Infinity’s Play to earn and its derived X to earn model, its ideal of benefiting the public and the outside world’s doubts about its Ponzi scheme have gone hand in hand. In the past bull market, we have also witnessed the rapid explosion and demise of chain game projects adopting the X to earn model.

So, is the X to earn model really as unsustainable as the token prices of these projects? Is X to earn a great innovation in Web3, or just another unsustainable Ponzi scheme? If the X to earn model is finally falsified in this cycle, where is the future of blockchain games?

In this article, we hope to examine in detail the successes and failures of blockchain game development from a lower-level logic.

How to easily distinguish Ponzi projects?

Before we start to formally discuss the Play to earn model, it is actually necessary to revisit the basic definition of Ponzi.

According to the broadest consensus formed in the industry, the key to distinguishing whether a project is a Ponzi is to judge whether it has created new value for the external society, that is, whether it has produced a “positive externality”. If a system does not create positive externalities, then all value is actually just a zero-sum game and redistribution within the system, and will inevitably collapse after a period of time.

But in the field of Web3, many projects often combine other complex concepts such as currency, consensus mechanism, economic model, etc., which makes the identification of Ponzi schemes more difficult.

So, is there a simpler way for ordinary users to quickly identify Ponzi projects?

1. Observe whether the system has external revenue

One of the easiest ways to judge a Ponzi is to observe whether it can generate external income.

Because in a normal economic system, most economic organizations that can generate positive externalities will not provide products and services to society for free. Just as you have to be paid for working for a company and you have to be paid for selling goods to you, a sound market can always price these positive externalities reasonably and facilitate transactions.

Therefore, identifying whether it has external income becomes the easiest way to identify whether an economy has positive externalities.

So for a chain game, to judge whether it is a Ponzi or not, we don’t need to study the complex game mechanism inside the chain game. Instead, you only need to regard ChainGame as a whole and observe whether it can obtain income from the outside.

However, what needs to be emphasized here is that if we want to answer whether a certain chain game has externality, then the object of observation must only be the whole chain game, not a part of the chain game system. internal components.

We can see that the so-called “income” obtained by many chain games currently comes from the fee income of the NFT trading market within the chain game. However, since all these internal markets serve game players, which are typical internal benefits, they do not generate external value for the entire chain game.

It’s like the bookmakers can still make money even though the gaming industry is a classic zero-sum game. The income they make is entirely from within the gaming industry, so these incomes do not prove that the entire gaming industry has generated value for society.

Of course, we can also see that some chain game teams such as StepN have actually recognized this problem very early, and even set up the position of “chief revenue officer”, hoping to obtain real external income through brand co-branding, advertising, etc. These are clearly attempts in the right direction, and behaviors that should be encouraged.

2. Determine the attributes of the funds spent by participants: investment or consumption

In addition to observing whether the system has external income as a whole, ChainGame participants can also distinguish the Ponzi level of a system by judging the attributes of their own capital expenditures.

If most of the participants of a chain game put funds into the system with a consumption mentality, then these expenditures constitute the main income of the chain game system. This also proves from the side that chain games provide some kind of externality (fun) to encourage people to consume and pay for this externality.

However, if most of the participants of a chain game participate in the game with a speculative mentality, and the main goal is to make profits rather than entertainment, and attach great importance to indicators such as the return cycle, then this system is closer to a huge s scam.

After all, the ultimate goal of investing in funds is to get out of the market at a profit. Therefore, when the system does not have enough real income to fill their income gap, the system will inevitably move towards the Ponzi model of borrowing new and old.

So how can we better attract more consumer users into the system?

The answer is of course to create real value and improve the gameplay of chain game products, rather than deliberately guiding users’ mentality. Since the bottom layer of the chain game adopts blockchain technology, the entire game must also be an open economy. Therefore, a well-designed chain game must be able to accept and accommodate various types of users to participate in it. A game cannot be assumed, nor can it require users to use their products with a certain mentality, and there is no need to deliberately exclude certain types of users.

Just like Bitcoin never presupposes the goodness of human nature, but instead protects the system from malicious actors by designing a reasonable game mechanism. If the economic system of a chain game is too speculative and consumer demand is too low, then the first thing to reflect on is the design of the game itself, rather than directly passing the responsibility to the user, which is completely inversion of cause and effect.

Does the Ponzi Synthesis hold up?

Ponzi economies by themselves cannot generate value for society, so Ponzi has often been equated with scams in the past. But the birth of Bitcoin and its skyrocketing price have broken many people’s inherent cognition to some extent. What followed was the popularity of Ponzi combination theory and web3 Ponzi special case theory in the industry.

So, are the basic economic laws in the crypto industry really different from the traditional economy? Does the Ponzi structure really have a certain degree of value in the new economic system?

To answer this question, we first need to reanalyze several commonly used arguments for Ponzi combination theory.

Why are pensions not Ponzi?

Pensions are an integral part of almost every modern society and have obvious social value. However, because pensions also have obvious external characteristics of borrowing the new to repay the old, many people identify it as a Ponzi structure and cite it repeatedly to demonstrate the rationality of the Ponzi structure in some cases.

Play to Earn or Play to Ponzi?

So, is borrowing old pensions really a Ponzi scheme?

of course not. Because the greatest significance of pensions’ existence is not to increase investment, but to stabilize the financial risks brought about by the life cycle of individuals at the social level. Therefore, the essential attribute of pension is insurance, and all insurance products are consumer financial products designed to improve the certainty of the future.

Just as we do not buy aviation accident insurance to repay the capital and increase the value, the main purpose of pension insurance participants is not to make investment profits, but to ensure normal retirement living expenses without children to support.

Like the logic of other insurance products, old-age insurance also transfers risks from those who take risks to those who do not take risks, while capital flows from those who never take risks (young latecomers) to those who take risks (retired first-comers).

We can’t say that the pension is a Ponzi scheme of borrowing new money to pay back the old just because the old people who came out of the accident happened first, and the young people who did not happen to participate in the accident happened later. Pension and Ponzi are similar in form, but the underlying logic they follow is completely different.

How to understand Bitcoin’s externalities

The entire cryptocurrency market originated from Bitcoin, and the success of Bitcoin itself has subverted the inherent cognition of most people. Indeed, the first impression of Bitcoin to many people is that it is a pure Ponzi scheme. Even according to the simple method of judging Ponzi just enumerated, Bitcoin does not seem to meet any of the above definitions.

Therefore, Bitcoin has also become the best argument for the Ponzi theory. Many people believe that since Bitcoin can exist for a long time, it means that Ponzi schemes may, under certain conditions or a certain “narrative”, become a bubble that will never burst, allowing everyone to profit from it.

If one wants to counter such arguments, then one must answer: What are the externalities of Bitcoin?

Indeed, the externality of Bitcoin cannot be simply understood as external income, but is more reflected in the undisputed ownership of property and absolute trust in consensus within the system in an absolutely free and open environment. It’s just that these values ​​have always been extremely absent in Eastern culture.

This may be one of the reasons why Chinese public chain projects often fail. Because if a public chain project lacks things that can generate externalities such as freedom, openness, and trustlessness, the rest is indeed not much different from the capital disk.

As we saw after the BCH fork, the first thought of the BCH team was not how to improve transparency and openness to promote ecological development, but to find ways to attack Bitcoin. The underlying logic is still me without you, with you without me, “it is advisable to chase the poor pirates with the remaining bravery, not to be called a master of learning”. Although this underlying logic is indeed in line with China’s historical experience, in the world of blockchain, this kind of thinking makes the only externality of a public chain disappear, and eventually it is getting closer and closer to a pure Ponzi scheme.

The above two examples are actually intended to illustrate that there is not much essential difference between the encrypted economy and the traditional economy. For Ponzi projects that cannot generate externalities, the final result will still be collapse and zero.

However, is there another possibility that a project uses the Ponzi model to increase the number of users in the early stage, and when the number of users reaches a certain scale, it will be realized by the number of users, and then it will become a normal economy that relies on revenue to maintain operations?

Is there still a possibility of transformation in the chain game of Play to earn mode?

First of all, we have to admit that many so-called “chain games” projects in the industry have been produced by the capital team from the very beginning. Therefore, after they fall into a death spiral, the project party may have already run away, and naturally there is no mention of transformation. question.

But we can also see that some projects with a certain long-term vision, such as Axie and StepN, were born in this cycle. So is it possible for these teams that rely on Ponzi growth to develop users in the early stage to complete the transformation in the future?

The essence of Ponzi returns is liability

We already know that in chain game projects that rely on the Ponzi model for user growth, the benefits of early users all come from the principal invested by users who enter later. Then, for a chain game team that wants to transform into a non-Ponzi project, the benefits of these users are essentially the marketing expenses of the system, and the payment of marketing expenses obviously cannot always be paid by the last user.

Therefore, when such a system begins to transform, if the early users do not want to lose money, then these marketing expenses become transformation liabilities that the system needs to make up for through follow-up revenue. The higher the income of early users, the heavier the debt burden during the transition period.

Exponential Growth and Medical Runs

We know that the main advantage of Ponzi growth is that it can make the number of users grow exponentially within a certain period of time. But the exponential growth of debt is obviously not a good thing for transformation.

We have all experienced the power of exponential growth during the pandemic. If you want to control the outbreak of the epidemic in a city, in fact, the time window for solving the problem may only be the first two weeks. Many chain games have actually encountered the same problem, that is, when their systems have experienced a “medical run” due to exponential growth, and their public relations and user service capabilities are on the verge of collapse, they have actually missed the time window for transformation.

Another serious problem caused by the growth of the debt index is that the income side cannot keep up with the growth rate of the debt side. In the current normal business model, there are actually very few products that can achieve exponential growth, and a few industries with network-related industries such as social networking and advertising cannot maintain the momentum of exponential growth for a long time.

Therefore, even if the chain game team successfully created revenue and began to transform, it still needs to slow down the growth of the debt side in order to achieve a balance with the income side.

Incremental Reduction and Debt Restructuring

So is there any other way to deal with the exponentially growing liabilities that have gotten out of hand? Theoretically there is.

On the one hand, it is to reduce the speed of debt increase as much as possible, that is, to reduce the yield, but at the same time, it will also lead to a reduction in the inflow rate of new users, further aggravating the transformation crisis.

On the other hand, it is to reduce the stock, that is, to carry out debt restructuring, so that some users will admit their losses and leave the market. However, this kind of clearing will also cause great damage to the brand reputation and the number of retained users, while continuing to reduce the attractiveness of the product to new users.

From this point of view, the transformation logic of Ponzi Chain Games seems feasible, but it is still more difficult to implement in practice, and it may not be a truly feasible business route. Of course, we still welcome entrepreneurs to continue exploring in this direction, but don’t use user money to try and make mistakes.

Where is the future development direction of Chain Games?

Although the current chain games all have strong Ponzi properties (except for a few such as Dark Forest, which have certain playability), I still think that chain games may be one of the earliest application directions in the crypto industry that can break the externality of the industry. .

So, what should be the focus of improvement in the development of chain games in the future?

1. The game must be fun first

The primary value of a game’s existence is fun. Therefore, when the product you develop is not fun, please stop calling yourself a game, and you are not qualified to talk about gamenfi.

In this cycle, almost all of the chain games we see are pursuing financialization at the end of the day, relying on Ponzi growth to develop the number of users. Yet Ponzi growth is at best a marketing ploy, not the ultimate purpose of the game’s existence.

Pure Play to earn will only lead to Paly to Ponzi. The strategy of relying on Ponzi expansion in the early stage and transforming in the later stage is extremely difficult to execute, so that no project can really run through at present.

2. We should encourage innovation, but please don’t take users’ money for trial and error

Whether exploring new ways to play or trying out new economic models, you naturally have to take great risks, and failure is more commonplace. An emerging industry needs countless entrepreneurs to bravely try and make mistakes before it is possible to explore a new business model.

Naturally, we should not laugh at those failed explorers, but the cost of failure should be mainly borne by entrepreneurial teams and venture capital institutions. After all, they bear high risks and have the opportunity to obtain high returns.

But please don’t pass the cost of trial and error to your own users! ! Some chain game teams earn a lot of transaction fees during the Ponzi growth stage, and at the same time, when the Ponzi model is about to collapse, they blame the greed of users for the game crash. This is obviously a very irresponsible attitude.

3. The core logic of the chain game should be on the chain

For some projects that claim to be blockchain games, in addition to releasing game tokens and NFT equipment to the chain, the core logic of the rest of the game still needs to be run on a centralized server. Therefore, we can see that the project party can modify the rules of the game at will, increase or decrease the usage scenarios of some NFT equipment, and even stop the server and run away, but the user can do nothing about it.

For this kind of game that cannot put the core logic on the chain, it should not be called a blockchain game at all, but just a traditional Web2 game that uses blockchain technology to issue coins.

Of course, it is really helpless for many chain games to use centralized servers to run game logic. After all, the performance and cost of the public chain at this stage cannot meet the needs of the game. Therefore, the further development of chain games still needs to wait for the gradual improvement of the underlying infrastructure.

But in any case, the real blockchain game in the future can never be equivalent to a game where coins are issued on the blockchain . If the core logic of the game cannot be guaranteed by the trustless and tamper-resistant features of the blockchain, then users cannot truly own their game assets. The so-called user ownership is actually just empty talk.

4. Excessive financialization can disrupt user and team feedback patterns

If you want to develop a good game product, you must iterate quickly and keep trial and error in the early stage. In this process, the team needs to get clear feedback on the strength of the game from the market.

However, the inherent token incentives of ChainGame seriously interfere with this feedback loop, so that any adjustments made by the development team to the game will be directly translated by the market into changes in the rate of return. Under this incentive model, the development team will unconsciously change its development direction to the pursuit of profitability, and then evolve into a more pure Ponzi model.

Therefore, for a team that really wants to develop a game, excessive financialization and premature token incentives may actually affect the normal development of the project. Moderately delaying the process of financialization and conducting token incentives on the premise that the gameplay has been fully verified by the market may be a chain game development strategy worthy of rethinking.

5. Openness and composability are the core advantages of Chain Games

A truly fun blockchain game must not simply copy the successful experience of traditional games, but can make use of the underlying advantages of blockchain technology to make an attempt to surpass the playability of traditional games in some aspects.

The comparative advantage of blockchain games over traditional games, I think, is most likely to appear in the openness and composability of games. For example, users can deploy new game logic on the chain that is different from the official one without access, so that the game community can re-create on the same chain game assets. For example, the assets of Chain Games can be used across games, and show different properties in different games, etc.

We have seen some useful explorations and attempts in these aspects in this cycle, but obviously they have not become the focus of the development of the chain game industry.


In order to discuss the X2E mode as clearly as possible, the article is indeed a bit long. But the reason why I have said so much is that we hope that our industry can take less detours, and at the same time, let ordinary users suffer less losses.

Although I do not agree with the pure X2E model, I am still very optimistic about the future development potential of blockchain games, and even chain games is one of the tracks I am most concerned about. But the development of anything must conform to the most basic logic or common sense, and Chainyou is no exception.

Let’s drop our obsession with economic models and start exploring gameplay again.

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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