What is the GameFi economic model? How is it designed?

From chess to 4X strategy, from traditional RPG board games to AAA open world, games have never been pure entertainment, but a platform for players to compete on limited resources.

Therefore, game tokens with circulation value and use value play a vital role in user retention and business cycles.

Economic elements of the GameFi ecosystem

DeFi

Decentralized finance is a system where financial products are available on a public decentralized blockchain network, which makes them open to anyone, rather than through intermediaries such as banks or brokers.

In the GameFi project, DeFi aims to improve the profitability of investors and seek to maximize the capital efficiency of participating in blockchain games.

Players can easily sell or rent their game assets or put their tokens into the pool as a liquidity provider (LP).

Even if the game lacks playability, the use of DeFi also attracts players related to cryptocurrency and derives various casual games.

Nevertheless, decentralization is the biggest difference between GameFi and traditional games.

In traditional games, game producers/designers often play the role of God.

They not only design the storyline for players, but also act as a central bank that releases and recycles game resources.

Traditional games can control game resources in time through powerful centralized means to prevent economic collapse and extend the game operation cycle.

On the other hand, it is not uncommon for game companies to deprive players of ownership of their own assets. Traditional game companies also occasionally close accounts or shut down servers at will.

NFT

NFT digital assets represent real-world objects, such as art, music, and video.

They are usually bought and sold online via cryptocurrency and are usually encoded using the same underlying protocol as many crypto assets.

Most in-game NFTs include interactive NFTs and favorites NFTs:

Interactive NFT can be applied to battle upgrades, training, merging, casting spells, inheritance, such as incubators, wizards, cards, avatars, advancements, training and inheritance, to improve the player’s performance in the game.

Collecting NFT is out of gameplay. They involve entertainment scenarios and limited combat attributes, enhancing the fun that players have, such as land, skins, cosmetics, and badges.

Compared with ordinary NFTs, NFTs in games have the potential for interoperability .

Some game platforms have realized the interoperability of virtual avatars, and some game cooperation will mutually transform irreplaceable attributes.

Although some game pioneers envisioned cross-game and cross-chain NFT interoperability, there are still some unresolved problems between blockchain technology and the smooth experience of games.

Game currency

The game currency in the GameFi project is used to define the value of potential resources in the game and make the internal economy of the game possible.

Currency, participants, resources, and commodities together constitute an economic system, each of which is interconnected.

The player maximizes his own interests in the game, so the value of the currency controls the player’s behavior and determines what the player does and for whom.

In-game currency plays a leverage role in regulating the economic behavior of the entire game, linking different elements together, and coordinating player profits.

Token Economics in GameFi

There are two types of token omics commonly used in GameFi projects : single token and multiple tokens.

Single token

The single-token system uses one currency for the in-game economy and the secondary market. Players who obtain game tokens through purchases can enter the game and earn revenue by playing the game.

The advantage of the single currency system is that it reduces the difficulty of resource integration, facilitates player transactions, promotes the flow of funds in the game, and directly stimulates players to participate in the game and obtain economic benefits.

However, the direct transaction of a single game currency and legal tender has increased the impact of the secondary market on the game economic system.

When players buy a large amount of game tokens and lock their accounts, the currency value and player income will increase, making the game very positive.

However, this is not conducive to attracting new players to keep up with the upgrade speed of old players, causing huge inequality and affecting the participation of new players.

Conversely, when the currency is sold in large quantities and depreciated, players will lose the motivation to continue playing due to low income, thereby accelerating the sale of game items and causing the game to fall into a death spiral.

In addition, the single currency system is prone to inflation, especially when the game guild continues to produce, it will cause the token to depreciate, which will cause the fear of investors in the later stage, which is not conducive to the survival of the game itself.

In addition, the overall cycle design cost and maintenance cost brought about by currency unification are relatively large, and there is no central bank to artificially regulate currency circulation.

Therefore, when a problem occurs in a certain link in the entire cycle, the entire BUG cycle will directly collapse.

Many tokens

Multi-token systems usually divide game currencies into in-game tokens and governance tokens.

The in-game token is the main reward for basic player behaviors such as daily tasks and PvE battles.

It plays a role in the economic cycle of the game and has unlimited distribution.

The governance token is used to incentivize players to govern the community in difficult tasks such as PvP battles.

Long-term commitment with higher token value.

As far as the game publishing platform is concerned, tokens can be divided into in-game tokens and platform tokens.

Platform tokens occasionally replace governance tokens, but the correlation and liquidity between tokens are diverse.

The multi-currency system reduces the impact of the secondary market on the game, increases the stability of the economic system in the game, and realizes self-adjustment through resource integration.

Although multi-token has a higher threshold for players’ awareness, compared with single-token, it has the following advantages:

First, the economic mechanism is easy to adjust during game operation .

In a multi-token game, the value of a single token can only affect specific resources, which may affect the player’s single-line revenue in the task, and will not cause the system to crash.

The second is that the token exchange rate is adjustable .

If a token encounters an economic downturn, designers can promote it through in-game operating activities to increase user stickiness or increase consumption, thereby increasing the value of other tokens and increasing players’ confidence, thereby continuing to play and place bets.

How does the GameFi project balance the in-game economy?

The game resources and tokens mentioned above are the foundation of the in-game economy, but it still needs an adjustment system to balance supply and demand, because the game itself involves complex digital relationships.

In the real world, the demand for a certain commodity may be saturated in the short term, but in the long run, the demand for the commodity is unlimited, because the commodities in the material world will be consumed over time.

On the contrary, when there is no demand, game items become worthless, because the value of game resources comes from player interaction and in-game consumption.

Tokens and resources are scarce, and resources are unlimited, so if there is no good relationship between consumption and output in the game world, it will lead to economic collapse.

If the relationship between consumption and output is not established in the game world, the game economy will inevitably collapse.

GameFi is still in the stage of vigorous development, and the utility of game resources will gradually evolve from two directions.

That playability and financial attributes , both great exploration of space and possibilities.

So far, the countless categories derived from game development are enough to take care of multiple players and ultimately achieve a balance of fun and revenue.

Because of this, the GameFi field has more possibilities and opportunities to break the circle than ordinary projects.

Expect GameFi to collide with more sparks in the Metaverse world.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-is-the-gamefi-economic-model-how-is-it-designed/
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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