The interoperability of blockchain technology could be the key to both the macroeconomics and the fun of metaverse gaming.
If you don’t want to join Mark Zuckerberg in the Metaverse, I’ve got some bad news for you: you’ve already there. To enter a virtual environment, you do not require a virtual reality headset. Since our distant forefathers first painted on cave walls, humans have been portraying reality. If you’ve ever had access to events that you couldn’t attend in person through television, radio, books, or newspapers, you’ve already been to a metaverse.
When we are not on the field, we often participate in sport and activities digitally – from the fans or behind a screen.
As a result, it’s no surprise that games have dominated what most people refer to as the Metaverse, or Web3. From soccer to chess to Roblox, our intrinsic enjoyment of play, knowledge that meaningful games require rules and frameworks, and readiness to assign value to events that occur within them are all part of our cultures. They play a significant role in the economy as well: Even after pandemic lockdowns and market predictions for video games reaching $178 billion annually, the global sports industry reached approximately $400 billion in 2020.
As a result, it’s only logical that games will guide players into more immersive and interconnected metaverses. In their meta-realities, games are also expected to continue to provide financial benefit to consumers, companies, and countries. Microsoft’s recent offer to buy Activision Blizzard in an all-cash deal exemplifies this concept.
It’s unclear how prominent online game franchises like Axie Infinity, Decentraland, and Alien Worlds will fit into a Web3 metaverse, but blockchain-based games like Axie Infinity, Decentraland, and Alien Worlds have already gained traction. These games pioneered the play-to-earn (P2E) paradigm, which provides a glimpse into the future.
Players can develop assets in these games, trade them in token form, and transfer their value into real-world currencies using nonfungible tokens (NFTs) and in-game digital currencies. Instead of brand owners (Facebook/Meta, Microsoft, and others) collecting all of the wealth from games, players might have a part in their success.
Last year, reports emerged of communities in the Philippines earning money by playing Axie, which drew so much attention that government authorities advised that play-to-earn revenue be taxed. This phenomenon exemplifies how a developing crypto-economy could facilitate financial inclusion. However, the rise and fall of one of Axie’s in-game currencies reveals the inherent difficulties in building long-term economic models for games, as well as the practical truth that metaverse games must be more about playing than earning to flourish.
It’s not the tokenomy
Axie Infinity, for example, is a game in which players control digital pets known as Axies. Tokens are earned when players contribute to the game’s environment. To get started, they’ll need to buy their first Axie, an NFT that will grow in value over time. Axie Infinity Shards (AXS) and Smooth Love Potions (SLP), both constructed on the Ethereum blockchain, are used in the game (SLP). SLP is a game currency that is necessary to “breed” new Axies (don’t ask how).
A variety of factors can influence the price performance of a digital asset like Axies’ SLP in the game environment. The way a token is distributed, the rules governing supply, price-stability mechanisms, governance, and, of course, the gaming audience’s power of anticipation all matter. However, for a token that powers a game, utility may be the most crucial criterion. Simply put, can the asset provide the holder with the experience they desire? This might cover everything from gaming to community status to revenue potential. If players believe they have value, they will cling on to them or even purchase more. Otherwise, they will sell and spend their time and money in something else, just like they would with any other asset.
The utility of the SLP construct in Axie Infinity is that it allows users to produce new Axie pets, which can earn more SLP and provide further value to the player. SLP prices soared during the summer of 2021 as a result of this positive feedback loop, but they have since fallen by 94%. That means people value what they can make from selling SLP more than what they can gain by holding it and “breeding” more Axies. To put it another way, they would rather cash out than continue playing the game.
It’s vital to keep in mind that the concept of “play to earn” is still in its infancy. Axie is an early example of a paradigm that combines gameplay with economics. After discovering that a single-token economy has its own liquidity issues, Axie launched SLP as a secondary in-game currency. Experimentation will continue, but a fundamental lesson for metaverse game producers is that the fun of playing a game, not the money, must always come first.
Prioritizing economics over gaming has the potential to alienate players. Sega, Konami, and Square Enix, for example, have faced blowback from users after attempting to incorporate NFTs into popular games. However, as metaverse games get more sophisticated and expansive, we may expect them to offer a tremendous spectrum of experiences. More users will find usefulness in keeping tokens as a result of more variety and richer play, resulting in more sustainable game-based economies.
The quality of the spectacle will become increasingly important as additional games and sports are formed in the Metaverse. Humans require competitions, heroes, stories, and wagers. We want to interact as part of a group of people sharing a common experience, as well as play games. There’s no reason why games in the Metaverse can’t feel as real and exciting to us as the English Premier League, NBA, or the Free Fire World Series, which is expected to be the most viewed esports event in 2021.
Better gameplay increases the stickiness of a game’s micro-economy, making it more sustainable. What blockchain can provide is a level of interoperability that will make the macroeconomics of metaverse games more liquid and fair than they are today. Interoperability allows players to transfer digital goods or status from one game to another, or even further out onto social media networks. In contrast to today’s economics and rights associated with game franchises and leagues, where owners and publishers get all the benefits, this allows players a larger portion of value creation, more influence, and therefore greater interest.
You may not want to join Mark Zuckerberg in his Metaverse, but on the blockchain, ordinary fans and gamers should be able to have fun while gaining more value for themselves.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.