You’ve seen it before. Incredibly talented game founders team up with top-notch studios that promise to deliver amazing gaming experiences built on the most powerful engines in the industry. But it does happen. Paired with a suspicious poop coin that launches long before any in-game content drops.
In the not-too-distant past, the mainstream media may have referred to an exaggerated crypto bull market, but the Bored Ape lower bound is still in the clouds, so we’ll respectfully call it a monkey run. Aside from market volatility, metaverse evangelists still claim that Web3 finance will revolutionize the way games are monetized. I call BS.
The focus right now is not on new monetization models. The only thing these token fundraising is challenging is the idea of capital formation, not revenue generation. But as tempting as it may be, Monkey Run quickly tricked our cleverest founders into believing that they should raise pointlessly large amounts of capital from tokens printed in the air as a false alternative to real-world monetization strategies.
We are ready for a mindset shift. The important questions are: How do you get the overcapitalized and overhyped Web3 Metaverse project to work for gamers, founders and investors?
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Path #1: Ceiling is a thrill
Financially speaking, everyone does well in monkey running. From major smart contract platforms to the experimental DeFi protocol to the next Axie Infinity imitation, the monkey market is a beautiful proof of the notion that there are really no shit coins, only shit prices.
For a clearer picture, travel through the trading pipeline to the heart of crypto venture capital, where inboxes are constantly flooding with new metaverses and game projects that shine through. A wealth of links to cinematic trailers, Unreal Engine mockups, and complex “token economy diagrams” will make it possible to properly prepare token launches and initial decentralized exchange proposals by raising millions of dollars in simple contracts for future tokens.
The game’s release date, you ask? It’s probably a “mini-game” planned for Q3 or a massive Triple-A launch in mid-2023. What utility will the token have on day one? Well, you can stake them for more tokens, and even give you access to the game’s first NFT sale. Sometimes they advertise utility tokens with no utility and governance tokens with no governance. It justified its existence because the big Daddy exchanges agreed to go public in just a few months.
This can be read as an exaggeration, and I hope so. However, this is the most troubling reality facing the current landscape of token launches in the midst of bulls. Excuse me. Monkey market. They capture short-term enthusiasm without a sustainable plan for building the future. These presentations capture the moment, but not the right perspective and business model for the future of gaming.
Relevant: Metaverse-as-a-service will be the basis for the next Internet era of Web3.
Path #2: Sustainable Building
The GameFi token environment is incredibly fragmented. Although initial liquidity is tempting, an early token launch carries serious risks. The balancing act that creates a sticky toquenomics and successful game design actually provides a narrower focus for the project token. That is, user engagement and retention, not pure monetization.
The final optimization problem? Maximizes additional user retention and engagement per project token emitted, subject to some level of existing Web3 revenue and user community.
You don’t need your own project tokens right away to monetize your application. Tokens are a simple form of exchanging assets that the virtual world creates and sells. If your Web3 game doesn’t work on tokens that are already liquid or volatile, or worse, it can’t work on fixed stables, there’s a problem with your game. Please try again!
Instead, make sure you have enough private capital to comfortably pass the beta launch. In beta, work with your chosen smart contract platform to incorporate native tokens and selected stablecoins into your game. We begin to observe core game loops and major revenue streams.
Think of yourself as a data scientist! Are there user behaviors that are fun defensively but still underperform? Are the subsidies worthwhile to get you started? Is currency volatility something users avoid? Where do the most engaged users come from? How many low-wage workers are there in developing countries? How many prosumers are looking for the next trending social hangout? How many whales are driving the auction through the roof?
Ultimately, tokens should be designed to incentivize users to stay in their own world. For example, you can offer consumption discounts when paying with your own project tokens, just like in foreign currencies, but digital goods are priced in USD. You can also utilize a tiered risk finance strategy that accepts USD (and its equivalent), L1 or L2 of your choice, and project tokens. This will allow you to have a large existing audience who can immediately join your world. It also helps protect you during crypto and macro economic downturns, and the excess can be used to reward investors and users without putting pressure on the tokens to sell, among other huge benefits.
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As the game creator of Web3, the most important thing you can do is to keep focusing on improving the game. Tokens cannot make games, but they can break games.
The right priorities for a sustainable GameFi future
The intrinsic value of games and metaverse applications is not tokens in circulation. Project value is generated by revenue generated from unique in-game digital assets in the long run. Owning, experiencing and understanding these NFT-based assets in the community builds and builds value. Otherwise, the community’s willingness to sell increases.
Looking forward to the day when this model remains the same. Because that means we can get even closer to the best Web3 game we’ve seen so far. Instead of grabbing a short-term bag of rewards from the market, we will see superior gameplay and token economics packed into one long-term built game ecosystem.
Engage, retain, and monetize. Optimize in that order. Please choose the correct path.
This article does not contain investment advice or recommendations. All investments and trading involve risks and readers should do their own research when making decisions.
The views, thoughts and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent those of Cointelegraph.
Alex Yes Leading Republic Crypto’s early-stage research, investment, and token economy strategies, helping secure and advance cutting-edge projects for Republic Crypto’s advisory portfolio. Prior to Republic Crypto, Alex led fintech and blockchain investments at ZZ Capital, crypto fund research at Top Tier Capital Partners, a $7 billion venture fund, and funds from his alma mater, the University of Chicago.