# Cheat Code Game Tokenomics for Fun and Profit | Lisa JY Tan , Aron Beierschmitt, Benny Giang - Speakers: Lisa JY Tan - Channel: [Ethereum Denver](https://streameth.org/ethereum-denver) - Date: 2024-10-09 - Duration: 20:30 - Topics: blockchain, web3, ethereum, Entertainment - Watch: https://streameth.org/watch/yt-A8BVAdn7mV4 - YouTube: https://www.youtube.com/watch?v=A8BVAdn7mV4 ## Description APPLICATIONS FOR ETHDenver 2024: #YearOfTheSpork ARE OPEN APPLY NOW https://ethdenver.com/apply ## Transcript oh my God full house it's big audience woo you all right thank you for having us guys thanks for turning up uh we're going to have a great conversation about balancing oh thanks Benny balancing Fun and Profit in web 3 games probably my favorite topic to Riff on and we have an amazing panel here I I will introduce you guys very quickly just so that we don't spend too much time on intro cuz we've only got 20 minutes world-renowned Economist who has worked on designing the game economies of some of the best known Best Loved web 3 games out there we have a founder of a web 3 gaming company and one of my favorite web 3 games in the world crypto unicorns um but also with a long history working in web 2 Gaming so a lot of Legacy learnings we have to bring over to the industry there and then we and that's Aaron BMI Lisa jyan and we've got Benny gang he is the co-author of ERC 6551 which is one of the most exciting new trends in nfts coming up and he was there for the dawn of things like crypto kitties Dapper Labs so again we've got a lot of a lot of uh clout here so just to get us started I think there's a lot of learnings that we need to unpack in terms of what's happened over the past couple of years Aaron maybe you want to kick us off you've been there right on the front line building what I think is a brilliant game but it hasn't been you know a smooth path to success so what are some of the biggest things that you've learned in terms of building a game that can balance Fun and Profit over the last what is it two years three years yeah we need a much longer panel um tldr I focused a little too much early on in trying to embed as much economic depth within our system as possible um that was both a good thing in that you know for the first 9 months of shipping the game there were more tokens going in than coming out which which very few to almost none uh of our competitors can really make that claim The Challenge on top of that is I didn't think about completing the economic Loop and we launched without a fully complete economic Loop and what I mean by that is um for example the economic depth of the system incentivized players to breed a lot of unicorns cuz they needed a lot of unicorns it did not incentivize players to optimally breed high stat um good Gene unicorns right and ultimately that inflated the supply we now have hundreds of thousands of unicorns with relatively low demand you can imagine what happened to price on most of those unicorns obviously a super high tier legendary unicorn just went for tens of thousands of dollars right so there's a big range um there uh but again we we launched without a complete economic Loop we've just completed it with the glue factory which lets you you take your donkeys your low stat unicorns burn them for unicorn souls and use those unicorn souls to equip gems for your high stat you know High tier High Rarity unicorns and that embedded a deflationary mechanism into the system that is tied to the actual vertical progression of your remaining uh unicorns and in two weeks we've already seen one% of the supply burned and I look at that and go we should have launched with that um and so in the rush to kind of Hit the tell end of the last Bull and get a game live and out um we didn't take the time to again complete economic loops and that would be my advice to any developer launching a game today is making sure you really have the full system um because once you let an economy out of the bag it's impossible to put it back so I'm just going to tap on um I hoped you would yeah so I'm going to tap on Erin's point where we talk about the the game system and people usually think about the supply side right how do I introduce new supp apply to the system and how do I build that how do I use tokens to look at user acquisition nobody thinks about user retention but that is how games work you need to have high level of user retention and we talk about the the minimum almost like the minimum viable system or minimum viable economics in place it's about not getting the full model in place that you guys have done now but you need to get at least a minimum valuable system in place on syncs and forets for things to run minimum viable doesn't doesn't just mean what is the user or what's the to introduction into the system but how do you take tokens out how do you how do you balance between value created intrinsic value created in the game and the assets that will represent the intrinsic value so that we can find market value which are tokens that balance is something that projects don't see projects are just thinking very shortterm I'm looking at user acquisition and because that's what my investors are looking for and I just want to pump it but how do you sustain it the pump just doesn't say like that you need to find ways to close the loop and that is what minimum viable economics will look like yeah I couldn't agree more I mean that is the whole that that's my point right like you've got to find a way to do that otherwise you're going to let an economic system out of the bag and it will go in One Direction which is towards collapse I mean we saw that with crypto kitties as well right I mean yeah there's like 2 million crypto kitties and like I think when we first began we never really thought about how deeply the economic systems can can get right of course of crypto kitties you never introduced in erc20 like kitty coins or anything like that but that would have created another dimension of like a double-edged sort of good and bad as well so 100% agree so I'm just going to add one more point because I have just a lot of points to add and 20 minutes is definitely not enough but when we think about token utility the tokens need to exist for a reason as well and the main the main goal of an economy it's is sustainability but sustainability from a fun perspective if the game is not fun if everything you're designing is financialization in mind the game will not skill as you mentioned people will have a lot of Supply there isn't a demand because there is no intrinsic value to hold these assets so you're just building for the sake of building and it just does not work that is not sustainable that doesn't work and I have no idea how people keep funding such activities it's almost like a hobby not a business and you don't fund Hobbies you fund businesses that actually is sustainable it's it's a sustainable growing economy that generates revenue and fund for the players and for the for the studios I mean I'll Echo that it's the only way to keep value in the system over time right if if it is purely a financial game people will optimize towards that and they will leave as the rewards falter right the the we have we're going on two years of uh 247 live operations of our game and we have users who' played every single day that we've been live right so the only way you really ret retain people over time is obviously to build an experience that that captures them um now one thing that I like to debate is obviously there's a lot of different flavors of fun some people don't like our land gameplay but really like rainbow rumble or really like unicorn party some of our ecosystem games right and so there's a wide spectrum of what people consider to be fun and ultimately you have to fall somewhere on that Spectrum to ultimately have a sustainable ecosystem and product yes I couldn't agree more like and we said we weren't going to do this we were going to debate I wasn't meant to say like I agree I agree no but it it is true like I think a big problem we've seen over the past couple of years with web 3 games is that they were overly financialized a lot of the people coming into those games were only looking for finance or profit my personal opinion is and I actually wrote a coindesk opinion column about this recently but I do think we could have a cohort of players that are incentivized by that but problems come in when everybody expects to earn from the game but I just wanted to like zoom out a little bit right because we were kind of talking about specific games Lisa are you seeing that a lot like in terms of learnings from the last cycle like what do you think will be the trends going forward in terms of game design and sustainable token economics what do you think we're going to see that's going to be quite markedly different to the last cycle yeah very good question there are a lot of trends that were were working and were not working and there there are few that I wanted to pick up the first one will be understanding what utility or what is the origin of value that is embedded Within These assets so we talk about talk about different kinds of fund and these funds is usually a reflection of what who are who is in your game who's in your system if you're marketing it as a as a you know hyper casual but you get to earn money kind of kind of thing then you're attracting the kind of people that are looking to extract value and whatever that is fun to them it's extracting value and you you can embid all forms of cool long-term value Creation in your in your token but nobody will care about that so something that it's quite talked about in like more serious game studios I don't know if it's for every game but you know things like the lvt the the um it's a kind of taxation model for nfts or for assets so in the physical world we call land value tax have you guys heard of that so it's taxing land and increasing the utility of these Assets in the space so we have all these you know metaverse kind of De Central land and these other great metaverse ecosystems that selling land but if people are just buying land for the sake of holding land hoping that it will exceed in prices what we need to do is we need to create incentives to to nudge people to be creating value that's the main important thing how do you create value and how do you embate these value creation within tokens the second thing is and then it's like nfts or or non-f fundable tokens doesn't matter you just need to embate that the second thing is probably more on the lesson simulations More on data analytics side of things you talk about life Ops as well and there was a huge junk chunk of people just focusing on running simulations how do you build games how do you turn them into simulations how do you get the data to to figure out what to edit it and change the thing is games are basically like economies like countries there's so so many diverse economic agents think that they could do and that's where AI could come in to to expose what the variety of economic agents are so how do you how do we even simulate these things there's so many points that we just don't understand and simulation is just probably it's not going to scale it's not going to be that I'm not that bullish on simulations on on you know game validation however data analytics is going to be very very important how do you look how do you measure your user retention I would like investors to start talking a lot more about what's your seven days 14 days no 90 days retention how do they gen how how is that related to arpu how is that related to to the DA how does that relate to you know value Creation in the space there is not enough analytics on that and one of the problems is that a lot of 90% of data is off chain and so there are not a lot of there there's probably like one or two game Studio or analytics films that's trying to aggregate all the data together and there quite a few people trying to figure that out but we're not there yet and I hope this will change and the third one will be investors which is a very key big player in in this entire ecosystem you're talking about because we can talk about building the best model we can talk about going in depth into the economic stack we can build everything out but investors have an incentive to say I need my returns I'm going to give you money I'm going to give you funding but if you don't give me some returns why am I funding you I'm not funding your hobby I'm not funding you as a I'm not funding it as a subsidy to get users I need to get returns and that's where we go back to the whole point of we need to talk about financialization in this game and and that's to me that's a big struggle and I would like to know how you guys deal with that because you've got one one part of the economic agent which are investors I'm putting money in because I'm expecting money out you need to give me that model and the other parts will be players that's interested in playing the game and fun is the fun is what they want to maximize not exactly the financialization part these are opposing factors and we need to embate both in the token and in the model I find it quite a bit of a challenge I I have a question do do all players have to be humans can it be can is fun only because we as humans want to have fun while playing games but if we're imagining games in the future where there are agents or NPCs or whatever and they're playing the games and we're kind of managing them like uh you know is that a job or is that fun uh and do we need to optimize for fun and how do we kind of assess metrics at that point where D7 D14 is based on a human coming back and clicking a button but uh bot or MPC uh will click the button no matter what cuz it's programmed too um I wonder what we think about uh this topic so just before you dive into that I feel like that was a very loaded question Benny um do you want to just give us a quick elevator pitch on ERC 6551 and particularly what it could potentially do in terms of when it's coupled with AI is bringing NPCs to life yeah so I was part of the team that worked on the ERC 721 standard the nft standard and then uh 7 years into the future which is last year at e Denver we released the new standard called ERC 6551 token bound accounts the tldr is we linked every single nft with their own wallet or smart account and so now an nft has three new properties one is asset ownership second is social identity and the third is programmability which brings us back the games of like what happens if you program an nft to play a game that's on chain on your behalf uh earning these tokens and you know driving up the metrics uh is it still a game is it optimized for fun uh or is it not I mean that just comes back to my point there's a whole there's many flavors of fun right inside of our game particularly corand gameplay a lot of the fun is in the Forex strategy side of that it's how you're optimizing your setup for players running teams of Scholars it's actually managing those players and you can say well that's kind of a weird game it's almost a job and you know anyone who's played Eve online better understands like people can obsess over these kind of games and these systems um because they're deep and there's opportunities for specialization there's opportunities to Corner the market on certain items like again there's a spectrum of players who are going to find that very enjoyable and you know again our retention speaks to it we're our day 365 is 24% right I mean that's an insane number that most web 2 games cannot compete with you can't say in the Market that all of our players were making so much money that they just sat there for 365 days pulling cash out of the machine um especially with what I said earlier we we were net token uh net tokens into the game over the first year um so again every uh there's a whole spectrum of fun whether it's AI Bots whether it's Scholars Etc there's an aspect of fun to being the authority being the manager and not necessarily being um a grunt or a grinder so I'm going to go the other direction and let's debate for a little bit so f f so I I think I think there's a lot of opportunities in that at the same time I'm just going down the dystopian way right there's a theory called the date internet Theory where 99% of everything online are bots so we're just using Bots Behavior to train more bosss and it's just all bosss humans just become the manager but what's the fun in that a lot of people that I know and and work with nobody likes managing people like doing the work and people like doing the ground work because there's a level of satisfaction to a to see your your input result in an output management of people management of bots is very passive how do I know I'm doing well I don't know I I I think the a factor of how well your Bots are doing right if it's fully on chain you cannot avoid this problem unless you have a solution to it right because anyone can interface with our contracts and build a bot around it right and so at the end of the day you you foundationally have to accept the idea that AI agents are going to be in your system I guess it's my Counterpoint okay I think there will be some level of AI agents in the space but when most of the players those creating value are AI agents then this this changes the social economic structure of this game that we are talking about people become Capital owners and only the rich can become Capital owners that that outsources the work work to to these Bots and we're just adversely selecting for a greater inequality divide between the the agents in the space and that is a very strange society that we're living in then who is making who is having fun it's fun sitting on the owning Capital having AI Bots working for you and you just have a big fat paycheck at the end of the day that's like heroin on steroids for games oh this is great so I totally I'm on the flip side of you because there's one element that we cannot change which is time uh we all live x amount of years we all have you know 8 hours of work a day and you go home you spend you cook some dinner and then you go watch Netflix and you go to bed right so that element we cannot change so uh what this does is it kind of questions you know what is the important to the human right uh is it 8 hours a day working your normal job or how many hours do you spend in a day playing a game or mobile game maybe a few hours does that time kind of abstract into this AI agent this NPC that does it for you and now you actually your element of fun is actually going outside and enjoying the sunshine while the the agents outside what's that the fous Sun but so that's what I would say about like time is the element I I agree so I call that time Arbitrage and we see that in a lot of games right you see that a lot of people who a lot of game farmers are in a lower social economic kind of society or or countries because it's it's cheaper or you make you make more money spending 1 hour playing the game than 1 hour in minimum wage so you we see that time Arbitrage already with with real humans in the system and they're just they're just working because they're grinding they're making money but are they creating value that's the key thing and now we're just changing these humans in developing nations to AI Bots and are they just creating for the sake of creating to return it to the capital owners which are people who own these BS and what does that mean for for us like what does it mean for games are we just building managers like a game for managers and then we're going to train them to become managers of a of a company like what's the end goal what is fun fun see you're just talking to someone who played Sid Meers Alpha satari and Sim City and all this right so I've played games that you know where there's Minions that do your bidding right and again whether they're AI agents whether you're running teams of Scholars overseas Etc there is fun in that there can be a lot of fun in that and then it from a the perspective of sustaining the economy over time you have to ensure that how does It capture value inside of it and to your point it is that whole spectrum of I am a more whale oriented player I want to deploy these Bots I want to deploy these Scholars I'm putting money into the system I'm obviously looking over time to get some out I'm taking a bet that this economy scales you know beyond when I entered it and then the hope is on the other side you have players coming in that go you know what there's some fun here I mean shout out to pixels I think pixels is showing this has a very interesting model we'll see if it sustains I have questions pix on the r Network really killing it right now they are and it is a very interesting thing you have the 5,000 uh land nft holders and then you have the Grinders who come in and work on that land right many of them I would like to think are probably Bots yeah well actually yeah the uh CEO of pixels Luke has actually come out and admitted that he thinks probably only about 40% of their 180,000 da are actually real people um and the majority of them are coming from the Philippines so yep yeah yeah for sure guys we've only got 11 seconds left I just want to say quickly my favorite takeaway from this panel was many flavors of fun I think we all have different uh perspectives in terms terms of how to build these uh sustainable game economies that balance Fun and Profit but the most exciting thing about web 3 is this the first time in history that we've been able to actually successfully and legitimately integrate secondary markets and interoperability into these economies so I think that's when we'll really be able to explore what all those flavors of fun may be so I just want to say thanks guys that was a spicy panel um I just wish we had more time thank you Leo thank you everybody [Applause]