12 Takeaways from "Economics of P2E Gaming Economy"
Lemniscap recently released a fantastic 70-page primer report entitled "Economics of Play to Earn Gaming Economy". The point was to examine the P2E economy from an economics perspective to identify some best practices for P2E game developers. It's a great read but being a little bit academic and on the longer side for many, I thought it would be worthwhile to throw 12 takeaways I got from it out there. These are the items that were more advice than detailed economic discussion (which is well worth reading).
Disclaimer: All takeaways here are purely my interpretation and don’t represent the authors of the document. I recommend everyone read the document for themselves as well! I also welcome any comments from the paper authors.
1. Consider 5 possible economic agents in your design
Games generally focus entirely on 2 agents, the developers, and the players. In the P2E economy, you have to consider Builders who may contribute in and out of the game, Investors who may just purchase speculatively, and Collectors who may or may not play the game.
2. Protect the value of user-generated content NFTs
If your game includes the ability for builders/players to create NFTs then you’ll have to find ways to protect them from knockoffs. For an example of this, see the drama around the CopyBot in Second Life. As a side note, you may also have to worry about players creating content based on 3rd party IP as you are participating in monetizing that. The paper recommends a mix of ML to detect imperfect copies and a governance gateway to approving new NFTs that uses the ML to identify potential issues.
3. Governance later
Conserve your resources by not focusing on Governance until a design is nailed down. Adding governance too early makes for politicians running an empty city. Get players first.
4. Passive revenue detracts from value add
Having passive revenue generation that doesn’t require any active participation reduces the involvement in economic activity. Better models are renting assets, assets that require active use to generate revenue such as Axie’s, or assets that investors want to actively use. Guilds can help support a more active investment model.
5. Game quality should stand alone
The game should be able to stand on its own in terms of engagement without the earnings part. A good comparison is IAP vs Ad-supported. Your game should be on the IAP-supported side. If earnings become more important than engagement you will end up with investors not players and it will eventually die out. Demand for cosmetic assets can be a good indicator of active engagement for social status.
6. Skill, strategy, or knowledge should be a factor
Requiring some element of skill, strategy or knowledge to efficiently extract earnings from the game greatly benefits the long term. This prevents investors/guilds from just hiring grinders, increases player engagement, reduces excess inflation, and helps fight bots ruining free 2 play economies.
7. Better pay to play through recurring expenses
It’s better to have recurring expenses during play than upfront expenses. You’ll have a larger player base with less friction to joining and possibly higher overall revenue. High upfront costs generally end up requiring guild involvement to increase the player base. Make sure players can see clear value in the recurring expenses relative to engagement and earnings so it doesn’t feel like a tax.
8. Set EXPECTATIONS WITH correct earning STRATEGIES
If the game is free 2 play but requires paying in to be able to earn, you need to be very clear about it. For example, Splinterlands is fairly clear on the requirement to purchase the $10 spellbook to earn, but Gods Unchained can be a little more confusing on the card fusing to earn. Confusion will generate negative feedback due to mismatched expectations. It’s also important to not market the game as an investment vehicle as overdependence on investors makes for swinging market cycles.
9. Diversify activities
Even if you use skill-dependent earning to reduce botting, you should still consider diversifying the activities required to earn. It has a positive effect on players by reducing the feeling of grind and may further reduce botting. This can be reinforced in the economic model by reducing or capping earnings per activity. Gods Unchained for example forces you to win 3 times with a variety of “Gods” to maximize earnings and reinforce diverse collecting. Splinterlands uses Daily quests to encourage broader collections and strategies as well for maximizing earnings.
10. Don’t let players buy rewards
If your reward loop involves rewarding utility NFTs they should be non-tradeable to avoid undermining the reward loop by purchasing in the market. For example, Diablo 3’s Real Money Auction House undermined the game's loot-driven reward loop and was removed. World of Warcraft made important item drops “soul bound” or non-tradeable in the Auction House and has been much more successful.
11. Pay 2 Win in PvE
Avoid perceptions of pay 2 win in PvE games by making sure free players can also grind through everything somewhat reasonably. This is a normal consideration in F2P game design and not necessarily P2E specific, but is exacerbated by secondary markets.
12. Pay 2 Win in PvP
Some games may be ok with a perception of paying players having an unfair advantage, especially in pay 2 play vs free 2 play games. When this isn’t ok there are two ideas presented to deal with this: Only allow cosmetic purchases or segregate PvP play between paid asset matches and balanced no-advantage matches. The more you incorporate skill, strategy, or knowledge into the game, the more you help mitigate the perception of pay 2 win. If not handled properly, paying players can end up driving off free and lower spend players out of frustration.
While there are some choices to be made, especially between F2P and P2P, there are a few strong recommendations that are universal. The primary one is really about making sure you are making a quality game and not just some investment vehicle or Mechanical Turk. The Second is the importance of skill and active participation. The game should involve your brain and not just be a click to earn or passive investment. Lastly, make sure tradeable NFTs don’t undermine the game through weakening reward loops or generating negative pay 2 win environments.