Token Economics Alone Won’t Sustain Web3 Games
Play-to-earn games must be underpinned by sustainable models to ensure players continue to play the games. And the heart of this sustainability lies in a game’s token and that token’s external incentives.
Play-to-earn games are shifting focus in the gaming industry from strict entertainment, as has always been the case, to entertainment with built-in economic incentives. At the same time, however, this makes a game more susceptible to market conditions.
That’s because when earning tokens in a specific game environment becomes less profitable, the user base decreases, meaning game developers must create not only fun games, but also games with sound token economics.
When players believe they cannot earn desired economic returns, they often quit playing the specific game. This leads to a negative effect on a play-to-earn game’s social interactions and community enthusiasm. Gamers must also become well-versed in the token economy to better understand price fluctuations and opportunity costs of not playing a different game.
These issues compound challenges already faced by play-to-earn game developers. Even in strong market conditions, many players struggled to realize a profit on average. Developers have used promotional events to boost activity on their platforms, but these prove unsustainable over longer periods of time. Token disbursement in game settings also typically results in but a few players controlling an unproportional share of the tokens.
In Web3, tokens are used to incentivize certain behavior and actors in a game. They can also be used to disincentive certain behaviors. Good actors are rewarded, while bad actors lose tokens. The goal is to create a flywheel incentivizing and rewarding the right people for a community, and then attracting more of those types into the ecosystem. At the heart of that should be a really good game.
Traditional games are like closed communities. They are free to play, and that’s how they bring in users. When players determine a game’s earning potential isn’t there, they stop playing it. There are many other games they can play with no earning potential, and in many cases Web3 games simply do not live up to the playing experience of their Web2 competitors.
Play-to-earn games must strike a balance between how much money a player can earn and the gameplay itself being enjoyable, especially compared to Web2 counterparts. A University of Washington study showed that 81 percent of surveyed game investors prioritize the fun factor over earnings.
Play-to-earn games often leave players disappointed, but that does not mean developers can overly focus on gameplay while sacrificing the economic promise of Web3 games.
Developers must strike a balance between play and earn. On the earn side, a game can have in some cases too few tokens to go around. In others, there may be an oversupply. Therefore, developers must have a complete understanding of the incentive structures they create, including risks to the games market conditions.
Some critics have derided play-to-earn games as Ponzi schemes, suggesting that traditional games can also achieve what Web3 promises. Making the problem worse, many play-to-earn games have been discontinued, leaving the games unplayable and the tokens without value.
Play-to-earn games depend on sustainable token frameworks and external incentives combined with exciting gameplay. This is how a game sustains itself in the face of market volatility and decreased profits for players.
A focus on profit has produced tedious, rigid games that undermine player enjoyment. Without striking a delicate balance between token economics and gameplay, games often disappear. This has harmed player trust in Web3 games. Developers often design crude economics, leading to speculative bubbles, pyramid-esque token distribution, and perceptions that these games are little more than Ponzi schemes. This harms perceptions of Web3.
A well-designed play-to-earn game amounts to a flywheel that rewards immersed engagement. This is how entertainment and economics are fused.
