Complete Guide to Crypto Gaming Tokens


Written By: Simon, a Crypto Analyst at Footprint Analytics, focuses on blockchain data like DeFi, NFT, GameFi. The data source is footprint analysis.

Although “play” is the first part of GameFi, “finance” is the main reason for its rapid growth. GameFi is still in the early stages of growth and games within that space are much less developed than traditional ones.

The main source of earnings for players in the game is the non-fungible token (NFT) trading, as well as mining and trading game tokens. Therefore, it is important for players to understand the economic model of these tokens.

The economic model of tokens

GameFi tokens link the game, NFTs and financial attributes. A sustainable, fair and attractive token model will have a significant impact on the game.

The current model of tokens in the game is mainly divided into single-token and multi-token economies.

1. Single Token

The single token economy model uses one token for everything related to the platform, such as in-game activities, project management, and secondary market transactions.

The advantage is that the model is simple. Players only need to obtain a token to experience the game, which facilitates player transactions and reduces the difficulty of resource integration.

The disadvantage is also obvious, because the token used is also an asset that the player wants to keep in order to increase its value. The player’s willingness to hold it contradicts the game’s setting of having to consume tokens to advance.

Players can easily be affected by fluctuations in the price of the token. When its price is too low, players are likely to lose some of their interest in playing due to its lack of potential profitability; When the price is high, players will lose their assets by tapping into the high value token.

Furthermore, if a project adopts a model of constantly issuing additional tokens, the result will be inflation. Since the single token model can easily affect the token ecosystem, more gaming projects prefer to adopt a multi-token model.

2. Multi-token

Multi-token games are typically separated between platform governance tokens and tokens that circulate within the gaming ecosystem.

  • The Platform Governance Token is primarily used to encourage players to contribute to the governance of the community and thereby increase recognition of the value of the platform.
  • The tokens used in the game are mainly used for in-game tasks, trading, daily quests, level ups, etc. There is usually no set maximum issue amount, and some of them don’t even need to be virtual currencies. a blockchain and are often not traded on secondary markets.

The multiple tile model has various forms according to different games, and also has obvious advantages and disadvantages compared to the single tile model.

The main advantage is the stabilization of the economic system in the game. The model allows players to play without being affected by the fluctuating price of the main token. In-game token separation also allows developers to flexibly adjust the economic model of different tokens.

The downside is that it increases the difficulty of integration for the players and the difficulty of learning for the players.

GameFi Project Examples

Footprint analysis: the economic model of the best gaming tokens

The top-ranked games using the single token model are mostly focused on the metaverse concept of buying land.

For example, Decentraland’s MANA token can be used to purchase land and goods and services in the virtual world; in Sandbox, SAND is used as the base token of transactions and interactions, which players can use SAND to buy, rent, hire, vote, bet, etc; SIL can be used in addition to in-game activities, and can also be staked on rewards in the pool, as well as participating in governance.

Other projects mainly use multi-token models. For example, in DeFi Kingdoms, JEWEL is the main token used to purchase heroes and accessories, and xJWEWEL is used for post-staking governance. DFKTEARS is the token used to summon heroes in the game.

In Axie Infinity, AXS are government tokens that can also be staked for rewards, and SLPs can be earned through in-game battles, where players can burn them to create their own unique Axie.

GameFi Key Economics

It is also important to understand the economic system within a GameFi project. A token can be evaluated using the following points.

1. Mechanism of emission and burning




A reasonable and limited issue size can prevent token inflation, while an unlimited economic model can cause tokens to devalue and make players lose confidence in holding them for a long time.

Destruction mechanisms also play an important role in preventing inflation, and active burning mechanisms can help stabilize prices. For example, on February 4, 2022, Axie Infinity Announced that it would no longer issue SLP token rewards in daily quests and adventure mode, and added more SLP burning mechanisms (including special cosmetics and skins, upgraded Axie body parts, in-game emojis, Axie names, etc.)

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Source – Axie Infinity Twitter

The implementation of this mechanism has led to a rebound in SLP prices, which had been falling.

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Footprint Analysis – Axie Infinity Token Price

2. Distribution

The team’s token distribution scheme is also noteworthy, with more weight given to the community to earn more player preference.

For example, Axie Infinity’s AXS token is allocated 20% to Play to Earn, 29% to Staking Rewards, and nearly 50% to users. A proper allocation mechanism has far-reaching effects on the project. After all, community involvement is all that makes a game successful.

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Source: Axie Infinity white paper

3. Utility

The broader utility of a token is more attractive to players. Most games have tokens for daily quests, in-game level ups, purchases, PVP, etc., and some can be staked for additional NFTs or token rewards.

Extending the use cases outside of the game will add more capabilities to the token, such as secondary market trading, integration with other projects to earn revenue, etc.

4. Blocking period

Setting the unlock time helps prevent speculative users from influencing the token price and retain more users. At the same time, keeping the same lockout period for the project team and the players is also helpful in keeping the interests of both aligned.

Axie Infinity assignments to the community and teams basically have a gradual unlock over 4 years. The goal is to attract more players looking for token rewards while still providing an incentive for team building.

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Source: Axie Infinity white paper

A lock-up period is a time during which investors cannot sell their assets. These periods ensure that investors focus on the project for a longer period of time and at the same time prevent them from dumping large amounts on the market.

Gaming Token Data Performance

According to footprint analysisGameFi’s top 5 token projects by market cap as of March 2022 are Decentraland, Axie Infinity, The Sandbox, DeFi Kingdoms, and Illuvium, with a nearly 10x disconnect in the top 3 from 4th place.

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Footprint Analytics: Top 5 Gaming Market Cap

Good user experience and gameplay are also crucial, as reflected in Illuvium. Although not officially online, the game has released gameplay trailers with stunning visuals and game-rich characters.

Illuvium is still in the Top 5, despite December’s losses due to hacks and protocol errors, showing that gamers still have a higher demand for quality games.

DeFi Kingdoms differs from the other top 5 projects in that its main core is decentralized finance (DeFi), and the gaming properties are just icing on the cake. This fun, game-like investment experience has seen DeFi Kingdoms token JEWEL rise to #4 in market cap since launch.

Summary

With more capital pouring into the GameFi space, there is no shortage of GameFi projects, but rather a shortage of projects that are good at anything from game quality to token economic systems.

Compared to more developed traditional games, GameFi’s projects are still at an embryonic level. However, its financial attributes and high community participation mean that a new blue ocean opens up in the red sea of ​​the playing field.

Improving the game economy through game tokens is just as important as improving the gaming experience. Whether it is to play to win or for those who hold the token to increase, it is also a must to have enough understanding of gaming tokens before starting.

This piece is contributed by footprint analysis community.

Featured Image via pixabay.