The idea of a completely player-driven economy has been popularized by games like EVE Online, but in reality, it’s not as simple to implement. This article will explore how the industry needs new ways to handle selling pressure and create value for players who are eager to trade their in-game assets.
The “p2e economics” is a term that refers to the idea that in P2E games, players can never have enough. This infinite selling pressure leads to game economies that are broken and unbalanced. To fix this issue, developers must take steps to end infinite selling pressure.
In many play-to-earn (P2E) games with rental economies, the revenue-sharing model has produced inexhaustible selling pressure– but that doesn’t have to be the case forever.
For the last year or two, the amount of money coming into the P2E gaming market has been staggering. In 2021, gaming-related NFTs earned $4.8 billion in revenue, accounting for almost 20% of total NFT sales. Furthermore, by the end of the year, the total market valuation of in-game fungible currencies had risen into the tens of billions — and was still rising.
However, if you’ve been following the long-term value trajectories of in-game fungible tokens, you may have noticed something odd: many of them are going down, with no prospects of reversing course anytime soon, due to heavy inflationary pressure.
Indeed, it seems that something in gaming economics, or gamenomics, is preventing long-term value development. Nobody can claim to have conclusive answers to this issue since the area is young and exploratory. In the long term, discovering innovative methods to approach and structure in-game economics might lead to improved results.
Smooth Love Potion ($SLP) by Axie Infinity has been rapidly losing value from the beginning of 2022. (Source)
Why are so many P2P gaming currencies losing value so quickly?
It’s no secret that P2E gaming has enraged established gaming communities. While there are a variety of reasons behind this, one of them is the high start-up expenses. Players must first collect pricey NFTs before they can begin playing — the absolute lowest cost of the three Axies required to begin playing Axie Infinity was $84 – but it may cost much more.
Even for players in the Global North, these expenditures are too high. However, these fees are simply exorbitant for P2E gamers in the Global South, who are much more likely to depend on gaming money to cover necessary necessities.
To solve these expensive start-up expenses, games and their communities devised renting programs, often known as scholarships. These allowed experienced players with a large number of gaming NFTs to lend them to new players who didn’t have any in return for a percentage of their in-game revenue. For gamers in impoverished countries who depend on in-game profits to make ends meet, this has been revolutionary.
This method worked for the most part. Renting NFTs to new players sounded like a win-win situation: players who had previously been priced out of the gaming environment now had a way in, and players who had NFTs to spare now had a new source of revenue.
However, the income balance between NFT owners and renters seems to have resulted in essentially endless selling pressure over time.
Fungible Gaming Tokens may face unsustainable economics as a result of NFT rental systems.
Before we get started, I believe it’s vital to emphasize how new everything is. The whole P2E gaming market is basically uncharted territory, and as a result, there are no established authority. Rather, the Pegaxy team and I are experimenting with how to get the optimal results while keeping in mind that the game dynamics are always changing. All P2E developers are breaking new ground, and they must be ready to iterate on a regular basis as the technology advances. But all I can share is the viewpoint we’ve built based on the information we have.
It’s also worth noting that the notion of NFT renting does not, in and of itself, induce inflation. Rather, the way these rental systems interact with other components of the in-game economy, as well as individuals’ personal lives, creates selling pressure.
Let’s take a look at how income is normally split between NFT lenders and renters, for example. Lenders often get 30% of the in-game revenue earned by renters when utilizing borrowed NFTs.
This revenue-sharing approach is not, in and of itself, a problem. However, since many NFTs tenants depend on their in-game profits to make ends meet in the real world, they quickly convert their in-game earnings to fiat cash. In practice, this implies that 70% of in-game cash created each day is immediately sold. Inflation is caused by this selling pressure. If left unaddressed, the situation will only become worse as more participants join in.
How to Restore Gamenomics to Its Former Glory
Fortunately, there are numerous options for dealing with this issue. And, looking forward, these forms of flawed gamenomics can be fixed in the future — if not retrospectively.
One technique of lowering inflation is to flip the revenue sharing models used by NFT rental systems, such that, for example, lenders earn 70% of profits while renters receive 30%. In practice, this would imply that a lesser amount of tokens would be traded for fiat cash each day.
Any transition to this technique must be carefully handled to prevent users who rely on P2E revenues seeing a sudden loss in income. The consequent decrease in inflation should be enough to restore the token’s value and keep users’ revenue intact.
Incorporating a token burning mechanism into a game’s economy is another anti-inflation option. Games may gradually boost the value of their tokens using these approaches without upsetting the system. And there are several proponents of this strategy: The token burner from Axie Infinity, which was just released, destroys both $SLP and Axies.
Another way to minimize the inflationary pressures that NFT rental systems cause is to eliminate the need for them in the first place. Pegaxy, for example, offers no initial charges for players — they may play the game with no money and utilize their profits to buy their own gaming NFTs over time.
Creating a Solution-Oriented Culture
The beauty of peer-to-peer gaming is its ability to innovate. Developers of blockchain games have devised systems that value people’s time and reward them for it. However, since the area is so young, there are very few examples. In this area, being a creative might seem like breaking new ground.
Problems in the economy of peer-to-peer gaming can’t always be predicted. However, in the future, new games may learn from the activities of previous and current P2E games — we are a community that learns from one another. And by working together, we can figure out how to create stronger game economies in the future.
The “play-to-earn analysis” is a paper that discusses how to end infinite selling pressure in P2E gaming economies. It includes the different ways that companies can implement play-to-earn mechanics, and it also covers some of the negative impacts.
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