What makes Web3 Economies Different? Part #2— Evolution of Economic systems

Game economy design is a fundamental element of game design. It encompasses the building of core game loops, significantly impacts the game balance, and plays a vital role in creating a positive user experience.

Game economy designing and balancing has become a profession of its own, and due to its significance, it can be the determining factor of a successful game. The significance of game economy design has not diminished with the progress in the gaming industry; on the contrary, its importance has shot up in the most contemporary style of games, aka Web3 games. In part 1 of this 2-part series, we explored the distinctions between Web2 and Web3 game economies. In part 2, we explore the players that make up Web3 game economies.

The challenges

It’s no secret that developers turn to the real world to look for ideas to help create a sustainable game economy. The problem is the fundamental difference in resource supply between the real world and a game. Let’s expand on this.

The core economic problem in real life is scarcity, the gap between the limited supply and theoretically limitless demand. It is the basis of all economic theories and rules. So, what happens when the supply is no longer limited? Every mob spawn or loot drop in the game is equivalent to the game indirectly printing money. Any digital asset can be used or sold and has a set value, and the game will continue to generate the value as that’s what the gameplay demands. The players need continuous rewards and exciting content to enjoy the game.

Moreover, as NFTs do not naturally decay or self-destruct over a set period, with more and more assets being added to the game, hyperinflation will eventually wholly crash the market.

To combat this problem, developers make innovative use of sinks.

In real life, the central bank performs the function of controlling the money supply and, subsequently, inflation through open market operations. Developers would naturally need another solution. Used in virtually any game, sinks are a creative way to remove money from the in-game economy. Have you ever thought about why NPCs need payment to upgrade your gear or why there is a trade tax in the game? These are examples of sinks used by developers to stabilise in-game economies. Trainers, upgrades, cosmetics, and repair fees, all of these functions effectively act as stabilisers. This also needs to be implemented in an organic way not to deter or discourage users from playing the game.

Another challenge faced by Web3 developers is the volatility of the crypto market. With Web3 games being tied closely to the blockchain they’re hosted on and, therefore, the leading cryptocurrency on that blockchain, changes in the crypto market can have a significant impact on player confidence.

Players in Web3 Game Economies

Players are naturally the audience for any game. What changed with Web3 games is the importance of identifying player types, sometimes called personas, and their influence on the game economy.

Most of the personas we are about to highlight have been a part of Web2 games, although their impact and importance have risen significantly in Web3 due to true ownership.

To tackle this challenge, developers opted to design game economies that could accommodate the goals and wishes of new personas. While there is no universally accepted classification, players could generally be divided into the following categories.

New players

Players who are fresh to the Web3 sphere looking to try something new. These players will avoid games that have high entry thresholds. If interested or invested in the game, they will eventually gravitate to one of the other types. These players have a higher churn-over rate, so their introduction to the game must be handled carefully.

Casual & Midcore players

Casual players are closest to traditional Web2 players. Their primary focus is to have fun with the game. The game economy and the state of the market may be of little importance to them, and generally, an entertaining game will result in high player retention. They can help sustain a significant network value due to their high volume. These players may transition to becoming inactive players or fans that nevertheless provide value to the network (e.g., esports viewers/twitch subscribers)

Hardcore players

These players seek to dominate via skill and strategy, driving the meta forward. They spend a lot of time perfecting and iterating the game.

Workers

Workers are players that can invest a lot of their time into the game. Their activities may commonly include grinding for in-game tokens for profit. While they do not directly care about the in-game economy and the marketplace, they need to be certain that their efforts will net them the expected rewards.

Market speculators

Highly invested in the market, these players seek to trade their NFTs and aim to maximise their earnings in as short of a period as possible. They can take a very active role in the in-game marketplace and will seek out games with energetic and vibrant communities.

Crypto whales

Crypto whales possess sizable liquid funds and seek to invest heavily in new Web3 games. The spending of crypto whales can jump-start new projects. To sustain a high expenditure and retention rate, Web3 games must have a robust economy and show a clear path to growing value.

Entrepreneurs

Equipped with a deep understanding of the marketplace and the core game mechanics, entrepreneurs seek passive income through renting or staking. They can be a crucial part of the community, especially in older games, as they can act as a gateway for new players. Entrepreneurs are usually attracted to games that sport a healthy mixture of exciting gameplay and a robust economy.

To resolve the free-trading problem, game designers need to explicitly tie these different personas together by appealing to what motivates them and doing so in a way that grows the overall value for the entire ecosystem.

Web3 has been extremely effective at attracting the new ‘earning’ group of personas who are motivated by the financial returns from speculating and investing in digital assets. One of the main challenges is to balance the ratio of earners to players.

To sustain the former, you need to attract the latter; therefore, gameplay and fun need to take priority. The overall economy may be balanced by having the right mix between the ‘earners’ and ‘players’.

Final thoughts

Web3 games have caused a fundamental change in the in-game economy design. Game studios must invest much more thought and resources into crafting sustainable and exciting economies. We hope this article gave some insight into the distinctions between Web2 and Web3 game economies.

Written by Economy Designer Howie Zhang.