# Web3 Gaming - Tokenomics

By [Nylz](https://paragraph.com/@nylz) · 2023-11-30

---

[**_Token Economies Decoded: Shaping the Future of Web3 Gaming_**](https://twitter.com/i/spaces/1kvKpvDwbwaJE?s=20)

Step into the intricate world of token economies in Web3 gaming.

This discussion offers a deep dive into the strategic use of digital tokens, examining how they influence game dynamics, player behavior, and overall market trends.

Uncover the complexities and ingenuity behind token-based economies, revealing their critical role in the burgeoning Web3 gaming landscape.

**_TRANSCRIPT_**

Legendary 00:04:17 Gm happy Halloween, and welcome back, everyone. Sorry for being a couple minutes late, we had a bit of issues with X, starting the spaces, but we are all good now. And I'm very excited for today's discussion. Just last week, we held a spaces that was very centered on web 3 gaming and the future of web 3 gaming.

Legendary 00:04:44 And there, we only skim the surface of toeconomics And today, we're actually diving deep into the nitty gritty of token design, and we will discuss, if we're actually need tokens in gaming, do all games need their own token. We will go beyond the discussion that we had last time that was mostly centered around tokens and user acquisition to talk more about token design and how that can help with user retention. We'll have a look at CTX's own token launch and the TGE that happened. I think it was 2 weeks ago, but time passes so fast in this space.

Legendary 00:05:22 And ultimately also speak a bit to the challenges of creating a sustainable token design, and keeping in mind that web 3 is very volatile. Not only when it comes to prices, but also when it comes to the audience size, which can be very, very cyclical we will talk a lot about token design today. So just a quick reminder that nothing that we say here on stage is financial advice, and I'm very, very happy that we have a fantastic panel of speakers, to discuss things around token designs. We have my cost karma. We have meta alchemist.

Legendary 00:05:58 We have the G Way, and we have VTF video game week with us. Before we get started, Karma, welcome to the stage. Happy Halloween. Do you celebrate?

Karma 00:06:11 Hello, everybody. What a joy to be on Stasis again? Do I celebrate? Quite frankly, when I was a bit younger, especially when I was a student, Halloween used to be like the largest joint celebration for me and my group of friends. Simply because, you know, regardless of your religion, you tend to spend Christmas, you tend to spend Easter, you know, like, traveling around, visiting your family. And Halloween is a bit more an ambivalent holiday where people can actually get together. So we kind of made it, you know, just a joint celebration, even despite our families never celebrated it. And I think that was lovely.

Karma 00:06:47 But to be honest, if I had a chance, something on my bucket bucket list is certainly celebrating Halloween in US, at least once in my lifetime. That must be amazing.

Legendary 00:06:59 Oh, definitely there is a different Halloween culture in the States. I remember the times when I was studying at UT Austin at Metcoms and celebrating Halloween, there was way, way different from what we call Halloween back in in Europe, especially in Austria. VGF worked through the stage. I know you're a gaming Maxie, but are you a Halloween Maxie too?

vgf.eth 00:07:22 GM? A little bit. Yeah. I I I enjoy Halloween. I I go back and forth from spending time with, family and using it as a time to celebrate with friends. So, unfortunately, this here, spent it, you know, at home. I the last couple of years, I've had the privilege of being, like, traveling while, enjoying Halloween. So, this year spending some some time with family and it's been a good time so far. So spending some more time with family tonight looking forward to it.

Legendary 00:08:02 Love to hear that. The gray welcome back to the stage. Thank you for being with us last week. Thank you for coming back this week to continue the conversation. On Economics. How are you doing? Is Halloween a big thing for you?

THE GWEI | ʌı 00:08:14 Hey, guys. Hey, legend. Thanks. Thanks for having me back and looking forward to this conversation. Halloween is is it's a fun holiday. I think, you know, when I was younger, you know, obviously, you go out trick or treating. So those are those are some really memorable evenings. I I live in Canada. So Halloween is also a little bit bittersweet in the sense that, it it also signals that the winter is coming. So sometimes you get, like, a mixed bag of weather, know, 7 years, you actually get a little bit of snow on how Halloween night when you go out and trickled treat. So, just just definitely a sense of nostalgia, to my childhood.

THE GWEI | ʌı 00:08:53 But this year is a little bit different. I have a newborn. He's, like, three months old, so I think we're gonna keep it a bit low key. We're gonna have some fun dressing up a little bit today, but, other than that, no big plans.

Legendary 00:09:05 I love to hear that, and definitely, the smart choice is to keep it low key with a newborn Meta Alkomist. Welcome to the stage. How are you doing? Are you planning anything exciting for Halloween today?

Meta Alchemist 00:09:16 Nothing much, brother. You know, just working as usual and but, you know, old Halloween used to be, fun, like in college or when I was a kid, but, right now, I'm not really doing much, to be honest.

Legendary 00:09:33 Definitely definitely share the sentiment as well of the good old days in college. One more thing before we get started, just make sure to click the comment button in the, bottom right corner, share your thoughts in the comments. We will definitely read through them, repost the spaces so more people can join. And let's get straight into the discussion. I would quickly to start with you, the gray as you were with us last week. And we spoke about the the 0 sum game that tokens can be in web 3 gaming in particular. If everyone has a token, then is it really a strategic advantage anymore?

Legendary 00:10:11 But you also pointed out that you know, many gaming projects might not generally require their own token. So starting a bit with a with a spicy question there, in your view, what does it take for a game to truly merit its own token?

THE GWEI | ʌı 00:10:28 That is a very spicy, spicy question to start off. With. Maybe where I'll start is, just a general comment. When when when people kind of analyze tokens or projects and thinking about, you know, from an econ design perspective, you have to keep in mind that there's no one size fits all answer to any of this, right, So, you you really have to understand the underlying project itself, the game economy itself, and also what it's, kind of business objectives are.

THE GWEI | ʌı 00:11:01 All of those things factor into, if and how a token is necessary and or appropriate, for for a particular project. So, to be honest, I don't have strong view, when it comes to many other gaming projects because, frankly, I just haven't haven't had the time to really dig into them too much. I can only speak from the perspective of how we think about, AI arena, for example.

THE GWEI | ʌı 00:11:30 And one of the things that I want to highlight for people is a very simple question to ask, when you're looking at whether or not a project requires a token is to ask yourself a question like, what is the main objective of this economy? It's a very simple question, but, you know, I, I would, I would bet a lot of times people can't even come up with an answer. If you cannot come up with an answer, there's probably a reason why that that that you're probably struggling with that.

THE GWEI | ʌı 00:12:06 And and and that may be the starting point to an exploration of asking whether or not a project really needs a token. Just one quick, kind of point on AI Arena as a case study of this in AI arena, especially the web 3 version of the game. We intend for it to be the competitive league, if you will. Right? You can think about it as our desire for it to become like the Esports version of AI Arena, thereby, the main objective of that particular competition is for the best most exciting and powerful AI to be developed and trained by a human player.

THE GWEI | ʌı 00:12:46 That's the objective. So from there, we we thought about whether or not a token has some type of utility or usefulness, in supporting that objective. And the answer is yes. And I wanna spend the entire time talking about the intricacies how we design the arena, but I just wanna allude to that a little bit just to frame this conversation and answer your question of, you know, how how do you even, you know, very simply try to diagnose whether or not, a project or a game, requires a token?

Legendary 00:13:23 That's a, it's a very, very good perspective to share. And I quite would like to get you into the discussion meta alchemist you know, talking about do we even need a token? Let's say we get to the point that a game says a producer says, yes. Might make sense to have a token for our game for our system, and you raised a very, very good point, namely how can token designers work together with game designers token designers are not familiar with game design on the one hand, and then you have game designers. On the other hand, we're not really familiar with token design.

Legendary 00:13:55 How can we bridge that gap and basically make sure that when game designers meet token and ecosystem designers that the expectations and the goals are aligned and that we don't have this mismatch.

Meta Alchemist 00:14:14 I mean, in terms of that legendary. Like, they need to, definitely delve deep into, you know, what the token is for. But, you know, if you just look at most games, actually, those, are simple aspects like, the token, needs to be, done in such a way that, it actually creates an incentive mechanism for players. Also, it needs to be done in such a way that the token can be used in a way that, you can purchase certain things from the game and, progress through the game.

Meta Alchemist 00:14:46 Or, the token can be used in such a way that you can actually create, you know, just, extra, you know, value for the whole economy, through, just, creating a high market cap token because if you have a high market cap token, you will likely have a big investors and big money coming in, and you can even do but, like, in a nutshell, like, there is actually, multiple, like scenarios for a token to be effective in the great free gaming, scene.

Meta Alchemist 00:15:20 But, like, just like you mentioned, the only problem that, we need to solve in the beginning is, how can actually, game designers and token designers actually work together in a, you know, balanced way because, let's say you're creating a system in which you're giving so many rewards, but then that will kill the economy.

Meta Alchemist 00:15:42 Or, you're creating, you know, game, with no, connection, to token economy, and you're just trying to, sorry, you're just trying to implement, talking in such a way that, you know, it has a function, then that's not gonna work either. So like, in the beginning of the game, while you're designing the game, you gotta really think, of it as like a, you know, one of the most core aspects of the game. And I think, to be honest, every single web tree game, needs a token.

Meta Alchemist 00:16:18 And, the reason is because there's so many advantages that you can actually bring towards it, through, like, one is user adoption. The other, the other one is, being able to have that treasury. The other one is having a much more, deeper economy. So for all these things, I completely, believe that, you need to have a token if you're creating a victory game, but if that token basically has no function and you're just trying to create that just to incentivize players and stuff like that, that game is gonna suffer a So, that's why the game designers and token designers needs to work together.

Meta Alchemist 00:16:57 So the things actually connect and players actually field like their part of the experience a lot more.

Legendary 00:17:04 I think that makes a lot of sense and that there is also something where I would love to hear from your perspective VGF because I think the case of Pixel Vault is a very, very one for those not familiar in the audience, Pixel Vault had a tremendously complex NFT Ecosystem that that was built in the last bull market in the last bull cycle with, 2 tokens, with planetary NFTs, with many, many more aspects to it.

Legendary 00:17:34 And ultimately, you made the decision, to revamp that, to streamline that into and to reboot reboot g g to only have, the g g token. And you have that particularly challenge that on the one hand, you had an established community, that came in from the NFT collecting side of things that came in from from from the old ecosystem, but now you are streamlining that into reboot. You love to make that analogy of comparing reboot Gigi to the arcade where people can go in.

Legendary 00:18:12 They pay with Gigi tokens to be able to as the games, and play them and potentially depending on the skill level being able to earn more, tokens back than they earned. So how how did that thought process go for you to balance the token design on the one hand to balance the game design, but also to keep in mind that you had this massive community built back in the bull market.

vgf.eth 00:18:40 GM. Yeah. That was that was quite a lot. It did I I think to approach that I I did wanna highlight something that Gway had had emphasized there, and that's that the reality is that most tokens don't have a purpose to exist. Like, uh-uh, like, call it like it is. Most of these tokens are or or let's say many are just vehicles for speculation.

vgf.eth 00:19:14 Their primary utility is that their the number may go up. A lot of times, the actual tokenomics and token design are not intrinsically designed with the game game experience in mind. And so I I think that is an issue that a lot of, games, game economies, token designs, are either have seen in the last couple of years or will see into the future.

vgf.eth 00:19:49 And I believe that we may even get in get into it a little bit in this conversation, but, in in relation to our fraud, project. 1 of the primary challenges was, okay. We have this complex ecosystem involving multiple tokens.

vgf.eth 00:20:06 And stakeholders, you know, whether it be collectors that have kind of been along with us along the way, you know, some of our, like, whale holders of varying degrees, whether they were, you know, collecting pow token, for example, or, via staking their comics had had accumulated a lot of the punk's tokens or via our planet sale had, you know, got involved in the Dow ecosystem.

vgf.eth 00:20:38 And so we had this interesting balancing act of trying to equitably and and reward those holders for being early act act active participants. But then also you know, reboot is not Pixel Vault. Pixel Vault is not reboot.

vgf.eth 00:21:04 So how do we have this this token design that accurately and and, you know, fairly incentivized and rewards these these players for helping seed reboot, but that those that are coming in after the fact are not, you know, gate kept in such a way. And, I do have to give a a shout out, the, Pixel Vault Corps Committee.

vgf.eth 00:21:31 They are a good selection of just a a very broad subset of of our holders and they were instrumental in the feedback of helping to to craft and formulate this. We we got it to a place where we thought that we had a a fairly good, you know, kind of landing of how how it would be received by the community.

vgf.eth 00:22:02 And, it was really working back and forth and iterating with core committee that we got it to a place that no matter what the token holdings you may have, that it was a a really good accurate and fair compensation and and incentive and reward, no matter what part of the ecosystem you were involved in, And so that was that was instrumental in that kind of feedback loop and coming to market with reboot.

vgf.eth 00:22:32 So, yeah, I'm really just particularly excited for games that, like, are not just leveraging parts of web 3 technology, but are only enabled via leveraging web web screen technology.

Legendary 00:22:48 Yeah. I think that is a is a very, very fair distinction. I think it's also interesting to hear those different perspectives coming into the, Gigi token creation because you said, you had people collecting. You had people from the planet daos, with all different interests in the ecosystems, in the system, you are reflecting that in the DG token as well by tackling gameplay, tackling rewards, governance, validation, ISES, etcetera. But I also would love to hear from you, Karma. I think we had quite some spicy takes so far.

Legendary 00:23:19 Do you think going in line with what Meta Alchemist also said before that it is almost inevitable that most of the games in web 3 will have their own token?

Karma 00:23:32 Yes. And no. I think the majority of games will always have a token simply because in terms of marketing, economy and even funding funding. It's just such a lucrative and attractive item to, you know, dangle in front of everybody. I do sympathize a lot with what has just been said. I think, you know, for the majority of games we have seen maybe in the last bull run, which, you know, really color our perception of wet free gaming.

Karma 00:24:01 For many of them releasing a token with a way of funding the actual game, you know, very often, realization of how difficult it actually is to launch a successful game, hit these teams a bit, you know, in a delayed manner and that I think very often influenced how the tokens were released and designed. And now, you know, we are now undergoing this very, important shift, I think, in this space where teams who have been building for a while, who have substantial experience, and the actual back to deliver on a high quality game experience are now going to market with products which have been in development for a while.

Karma 00:24:41 And these long developed products just have a completely different set of expectations set for themselves because they have the, you know, the just of the backing, they've had the time to think and build for the bear where the user acquisition is so difficult you are working on worst case scenario, which can only get better with time, you know, once the ball goes into swing. So I generally think that our perception is very colored, but these early and, you know, often unsuccessful attempts, and we will now see a much higher quality of delivery, quality of, you know, a tokenomics in game economy.

Karma 00:25:20 And, you know, from the from the thumbs up. I think that other panel speakers, agreed to with me to an extent. In terms of DTX, you know, for us, I think it's also important to delineate, you know, web free gaming is such a broad good. Currently, we throw everything in there. But if we look closer, we see very, very different products. We have games which are just shooters, you know, like one of experience. We have, you know, pixel experiences, which appeal to nostalgia and are more of an RPG immersive environment.

Karma 00:25:55 And then we have like ZTX, things like, you know, other metaverse products, which are much more of an entire ecosystem that is being built. And specifically for these ecosystems, I think the answer is not why a token, but why not. If you are building a wide ecosystem, you need common denomination, and you need a very, very well controlled, economy within that, which you can only do and really construct if you are in control the token syncs, token, you know, emissions, you can't do that unless the token is generally designed for you.

Legendary 00:26:33 Yeah. I think you mentioned quite a lot of very, very important points and actually want to connect on the last point speaking about token syncs because last week, we did speak a lot about user acquisition and how that can benefit, gaming projects. And, again, today, wanna speak a bit more about the other side, about the user retention.

Legendary 00:26:55 And I would absolutely love to go to you meta alchemists to here, bit your thoughts on, a, even if we now have, you know, more complex games that are being developed that people, projects use to bear mark it to think about the game design, the token ecosystem design, what are in your opinion, what what makes a good token sync, what makes a sustainable token sync, and also how do how can we deal with the risks of of token hyperinflation in games?

Meta Alchemist 00:27:28 Oh, it it needs to be connected to, the, progression of the game legendary. So, like, to put it to a very, very basic, stuff.

Meta Alchemist 00:27:37 Like, let's say you're progressing through the game and you want to go to, the next level in, in a character from, level 20 to level 25, you need to actually have, some certain skills in order to, you know, get more value from the dungeons you're entering or basically, something that will actually upgrade your character, then you may need a token or something that actually, like, that you need for upgrading your, buildings in a certain game or buying certain, packs, for example, in TCG games, trading card games.

Meta Alchemist 00:28:18 I mean, it needs to definitely be connected to, you know, the game progression itself. And, if you can actually arrange the game syncs and token syncs in that way, then it will work. But if you will actually try to, you know, just create, certain stuff, just to be able to create a a game sync and token sync, then it's not gonna work. People are gonna be like, okay. Why do we have this system? This is not connected to the game. And, why are we actually, needing to, use our tokens instead of just being able to sell those tokens. So then most people are not gonna be using the game syncs anyway.

Meta Alchemist 00:28:57 So it's it's definitely, needs to be connected to the gaming experience. But, like, in terms of, like, even tokens themselves. Like, I want to add a couple things to our karma set. Actually, you don't even need a token, for even the biggest ecosystems. Because, mutual currencies always existed. And, you don't need to really have a token in order to be able to, create a that is big. So, that's actually, not the purpose of a token.

Meta Alchemist 00:29:28 A token, basically does a much higher function in the economy of a game, which is actually, you know, making sure that the developer can have the funds to be able to develop better stuff because, most of the games in this ecosystem from what I've seen, from launching a lot of games at C Defy. They need a lot of actually resources. And, not every single, game is gonna have a ton of resources. And because of that, this ecosystem needs tokens in order to grow.

Meta Alchemist 00:30:02 And the tokens themselves also, put, reward mechanism into, gamers and players. And you can do that through, NFTs as well. You don't need a token really for that. But let's, put it into perspective this way. Let's, let's say you're actually building a great game and then your total market cap actually goes to 300, 400 dollar, a $1,000,000 market cap. And that means that, the project, while, it's growing with the game sync and the value that they're providing, they will be able to actually recreate some of the, tokens themselves too.

Meta Alchemist 00:30:39 And they will be able to generate income or they will be able to get tokens from game syncs and then they will be able to generate income to create a better game. So, the the purpose of the token is not actually, the economy, but it's actually, a way to reward users, but also a way to develop better products and someday, you know, certain games are gonna have a 1,000,000,000 of dollars of, token mark caps and, let's say, like, let's look at Gala games, for example. You know, they have, such a high market cap. They had such a high high market cap that they could actually develop, like, a ton of games, because they had a huge market cap.

Meta Alchemist 00:31:19 And oxie Infinity because they had actually a great, token of economy in the beginning. They could actually do a lot of marketing. They could do a lot of stuff. So it's not only affecting, the players in a good way when you create a good token economy, but also it's affecting the progress of the company, which then you know, resonates with the users because they will be getting more value out of it too. That's how I see tokens actually. Like, otherwise, you can just create a virtual currency and you're fine with it.

Legendary 00:31:48 You know? Interesting. I I like how you look at it from that funding perspective, but also from the scalability perspective, connecting those two saying if the market cap is higher, you obviously have the resources to generate more income to work on on broader things. For those that there was another point stood out from what you said. You said for the token things, they need to be progressing throughout the game.

Legendary 00:32:12 So once once, you know, a game matures a bit and the player base reaches the end game, whatever that might look like in the game, will there always be the need to create new content, staying in, you know, you mentioned dungeons staying maybe a bit in that MMO world create new higher level areas to just keep that progression system going to basically have new token syncs, or can you create a system that does not need the new fresh content to have new token things for end game and is in in some ways almost self contained.

Meta Alchemist 00:32:48 I would say you need fresh content, because if you don't have a fresh content, then why would, players, you know, pay expert tokens to use the same, things. So you need to actually produce a new innovations, new content, new exciting ideas. So, you know, players are gonna be like, holy, cow. Like, I need to actually have this. I need to you know, get this month or I need to have this, new, you know, skin or, anything like that. So you need to, side people with, things that you actually create, and then you can create tokens around that.

Legendary 00:33:27 Yeah. Very much agree with with that perspective. Vijay, if I see it with your hand up, what are your thoughts on this?

vgf.eth 00:33:35 So I I agree with what was just said, but I wanted to push back on something that was mentioned a few minutes ago where, it it was said that basically games should or or can always have tokens.

vgf.eth 00:33:53 And in my in my perspective, this this example of, like, game design involving sort of this evergreen content, the the desire in for, almost this live service model to be constantly iterating and providing, new value, new experiences, new updates is why not every game needs a their own token.

vgf.eth 00:34:23 This is why, sort of platform and, you know, ecosystem tokens can't exist is not every game design should be perpetual or evergreen or need to be this live serve model in order to exist, in my opinion. Like, I would being being constrained to a type of game sign that requires a game to live on forever, essentially, in order to to sustain a game game economy, is a constraint I I don't agree with.

vgf.eth 00:35:01 I believe that game designers should be able to to design game experiences and and that may not require its own token, though leveraging an existing token may be of benefit.

Legendary 00:35:14 Interesting meta alchemist. I definitely wanna hear your reply on that. And then the way you are reading my mind, absolutely wanted to get your perspective in as well.

Meta Alchemist 00:35:23 Yeah. So, in terms of, what I mentioned, actually, like, there is this, like, different between, needing a token, and, like, whether it will be actually helpful for you to have a token So, like, if you actually look from that perspective, me, Jeff, like, let's say you created actually a great game. And then, that's how, Xfinity actually, did. I mean, for his time, it was a great game. And then they started to build new games or, let's look at parallel right now. They have Prime, and they're building new games.

Meta Alchemist 00:36:02 So most of the, gaming companies who create actually a great game and they have a token, inside that, they can always, start to build, more games and then turn it into an ecosystem. So So, and that is actually, like, applied in such a good way in our ecosystem that most of the users love that. Like, they wanna see, okay, how can I actually play another game from the same, game studio, which we are seeing very often? So it doesn't need to be like, okay, we created this token and then we cannot make use of it.

Meta Alchemist 00:36:39 If you actually create another game, that the token can use or even, you can actually, provide, UGC systems, for community to create, even stuff with the NFTs and, tokens that you have, then you can actually utilize those tokens in even more interesting way. So What I'm saying is I don't think every game needs a token, but I think for every single game, if they utilize a token in a great way, not in a crappy way, but a great way, then they will provide more value to their community and to themselves. That's what believe in.

vgf.eth 00:37:16 I appreciate the clarity. And and just to to follow on that really quick, and then I definitely wanna hear Goya's thoughts here.

vgf.eth 00:37:25 One thing I would highlight there is I I do think that, you know, kind of building a game economy leveraging a single token and a studio being able to leverage that into building it into, you know, a grander ecosystem type token, is the viable avenue, but it doesn't you can't you can't overcome poor token design from the onset, which is where I think we're we're seeing a lot of, struggle from from some existing tokens right now yeah, legendary talking to, like, you know, the hyper inflationary question that you had earlier.

Legendary 00:38:03 Yeah. So it was, like, it's also a bit of a chicken problem because you have some starting building the game first and trying to pivot into an ecosystem. Others try to build the infrastructure first and then actually find partner who build the games on their platform. It's not always that straightforward to know, you know, which way to go first, but the way I definitely wanna hear from you, and then we'll go to next Yeah.

THE GWEI | ʌı 00:38:24 Maybe I just I just wanna make a comment to kinda bridge what both Alchemist and BGF set. I think I think as an observation, and not, I'm not saying whether it's wrong or right. As an observation, there there's really, like, call it, 2 spheres of utility when it comes to tokens. One sphere is the macro utility of the token gives you the ability, to on one hand, like attract audiences. So customer acquisition marketing, on the other hand, build ecosystem wealth, which can become resources that you can leverage to improve your ecosystem over time. So I think that's what Alcon is just highlighting.

THE GWEI | ʌı 00:39:04 And, I think from his perspective, he's saying that, you know, especially in web 3 gaming, this could potentially become a source of like superpower. And you can, you can scale to staggering degrees of, gaming economies that haven't, we haven't seen them web Right? So on that basis, I think a lot of projects, and I think most projects in are intoxicated by the prospects of that, that they launch a token without giving too much slot about the other sphere, which is in game utility.

THE GWEI | ʌı 00:39:39 And this is what with DGF is saying, which is, well, yes, it's one thing to launch a token, but if you don't do it properly, you're likely gonna fail. And that likelihood is really, really high, because these economies systems are very, very complex. So in fact, it is a double edged sword. Right? Because there is this, incredible pull on the, financial economic, prospect side of things. And then there is the very daunting, practical realities of actually making it work for your economy, for your game.

THE GWEI | ʌı 00:40:18 But I think the observation is more likely than not, web 3 projects will launch a token and the reason that they do launch is they're overvaluing the former, which is the customer acquisition, the prospects of we can build something really big. But they haven't put too much or enough thought into the ladder, which is how do you actually make this work in your game?

Legendary 00:40:49 Yeah. I I think that's an excellent take, balancing and bridging what both meta alchemist and VJF said before. Next, I wanted to come to you next. Well, no pun intended.

N3XT 00:41:00 Welcome to the stage. Hello, hello. Thanks for having me. I was I wanna to jump on Gway, actually, because he briefed perfectly. I was going to play, like, bad side because if you look at the token itself and let's say you have a token, you get it in your ecosystem and everything else and what Meda said Alchemists about creating, you know, multiple games for one company. That's all great, but now if you're looking from gamers perspective, let's say I'm a gamer, and now you have a token, right? But that token is now, let's say, 5th bucks per token.

N3XT 00:41:39 And, like, say, early users will be rewarded. Right? You have a token. You have multiple tokens. You know, you are going through the game and everything working. But do you onboard the new people? Like, if your game is based on the token and it's requiring token to do something in the game, but token is, let's say, 50 bucks per token. That's a high entry point for, anyone new trying to get in game. So there, you're coming into a big problem there. Right? But if you hyperinflate the token as a example, and the token keeps going up for no reason, then you come to a problem again.

N3XT 00:42:15 But if if it's like deflationary and your game is say very successful and it runs for years years years and years and the token gets basically extinct, but then So, like, people really need to think before creating a dog. I was just trying to bring the points of before making a dog can think really about this because just imagine if you're because everyone in this space wants the docket to be like 100 bucks, right? But if it's 100 bucks, new place cannot afford to you know, if it if your, let's say, NFT requires 100 token to upgrade, that's, you know, 100 k. Like, no one is gonna pay 100 k to upgrade NFT.

N3XT 00:42:55 So, basically, your game is dead. So, yeah, I just wanted to throw some, you know, let's say negative side to to the tokens.

Legendary 00:43:02 So, yeah, Sure. And I think the token sustainability is is a very important aspect as well, and we'll definitely get into that a bit more. I think we initially plan to run the space for 1 hour, but I think we have a very, very good discussion going. So we quite like to go a bit beyond that if everyone on the on the panel is happy with that. Obviously, if you would have to leave at the hour mark, feel feel free to go and I do think that we have quite a few more points to touch on. Before I go to my next questions, VJF, I saw you with your hand up get get back in on us with that discussion, please?

vgf.eth 00:43:41 Just wanted to to bring it back around to something Karma had said earlier that there's there's no one size fits all to any of this. Right? We're we're painting with very broad brushes, based on, you know, our our personal opinions, the perspectives of the the companies we may represent, but when especially when looking at token and and game design.

vgf.eth 00:44:06 One thing that I think goes unnoticed or is maybe a little, more complicated and months than many many people, dig into is that for many of these games, ecosystems, they're they may leverage the token as an opportunity to monetize, or one avenue to monetization, whether that be from the perspective of funding of the team, VCs, leveraging it as a early, you know, early liquidity event. And oftentimes, that can be extremely difficult. To come back from.

vgf.eth 00:44:47 So I think token distribution and and getting that equitably and fairly attributed. And I'm not I'm not necessarily judging because for some for some developers that may be a viable means of monetizing.

vgf.eth 00:45:08 But it's I I think historically, we've seen it taken advantage of in a way that's almost, not not malicious, but, overly extractive in a in a way that is not advantageous to the user, to the gamer, and that the the people that are essentially having to buy in are buy at these inflated prices, and it's, it's not sustainable.

vgf.eth 00:45:39 So it's just, I think sustainability is such, again, a double edged sword because you want something to be reliable and sustainable while still being able to, you know, participate in that upside.

Legendary 00:45:53 Yeah. That's that's a very interesting challenge that, games certainly do have to balance. And you also mentioned, you know, there is no one approach fits all we are painting with a broad brush and kinda staying a bit on on that analogy, you can make the argument that, the GTG token is painting with a very broad brush because it has so many things that it wants to cover. I'm currently on the on the website looking at the g g token overview And I see, its utility being in gameplay by binding DG to game credits. I see it for, rewards for price collaterals.

Legendary 00:46:32 I see it as a governance tool. I see it as a game validating and matchmaking tool. I see the aspect mention of content creators, but as well as prices, where players can earn g g wrapped as proof of skill tokens. And if you have such a complex, ecosystem. And we just spoke about token utility, and we just spoke about tokens and how games could already struggle to basically create only in game token utility. And you have those 6 different criteria, not criteria aspects listed of what the DG token wants to do. How do you approach that strategically?

Legendary 00:47:12 Because you add even more to something that's already complex, but by that, you also make the token very interesting.

vgf.eth 00:47:19 Well, we were we were talking earlier about how you know, for many of, for many tokens, they struggle to find a reason to exist. Gigi definitely does not have that problem. I I think fundamentally, the the g g token is it it the concept of reboot comes down to the the collateral of everything in the ecosystem with the the underlying token.

vgf.eth 00:47:47 So whether you're talking, you know, the the liquidity in AMM providers, the words providers staking for for validation, the the in game assets being collateralized with Gigi. So that, the assets can be portable, within games in in reboot. I think that that is really what provides, a lot of that ease of friction. So there is a of this, quote, unquote, utility provided to the token in the the avenues of choice for the gamer for the user.

vgf.eth 00:48:28 But it should be simple to approach. Right? Like, fundamentally, we use we use the the metaphor of the arcade. You go into the arcade either load up your game card with credits, or you put your quarter into the machine. Right? And in reboot, that kicks off this on chain transfer value.

vgf.eth 00:48:49 It's what jump starts the machine of you collateralizing the the game session paying out the AMM and liquidity providers, doing the on chain transfer of value dependent on the skill of, presented, you know, by the gamer presenting the opportunity to potentially pay out even more than was collateralized for the game session based on their skill rating and the amount of challenge that they take on.

vgf.eth 00:49:23 So it is it is complex, when you get into the nitty gritty of it, but at its at its face value is the gamer putting a token into the machine and how many tickets come out.

Legendary 00:49:37 Thank you. Thank you very much for breaking down that complexity. I wanna shift gears a bit and get you either way back into the discussion. On the thread that we kind of dissected last dissected last week that you shared, which was very, very interesting. There's one more final point where it didn't have the chance to touch upon. And I wanna do that now, you shared that regulators will begin to focus on gaming tokens this will take some time as they're always behind the curve. And you also said, I hope your favorite gaming projects have lawyered up right now.

Legendary 00:50:11 Definitely wanna hear more on your thoughts about how regulation will affect, like, the ability to create a good token design and how you at, a I Arena approach that future challenge.

THE GWEI | ʌı 00:50:28 Yeah. I think, I mean, regulation is one of the largest variables in all of this. When it comes to token design and econ design, to be honest, my observation of the space right now is, Most projects probably are aware of, regulatory, call it what's the right word, like, regulatory considerations that they need to, embed into their planning.

THE GWEI | ʌı 00:50:57 And yet, they act in a way where they clearly violate, regulatory guidance that's, existing out there, maybe not specifically to the gaming ecosystem per se, but certainly you've seen, enforcement actions taken by, you know, the SEC and other regulators against, you know, broader crypto fraud mix, and all of those things do apply to, wet free gaming as well. And, it it is it is quite a challenge.

THE GWEI | ʌı 00:51:24 I mean, just to highlight on a couple of things, you know, the, this, this conversation around using tokens as a way to raise capital, I mean, that clearly becomes in the crosshairs of a, potential securities question, when when projects pursue that path.

THE GWEI | ʌı 00:51:45 Now it could be a differentiation depending on which projects are launching through which jurisdictions, and maybe there are different jurisdictions that may have a more favorable view on, such a question, but certainly in the North American region where we are the SEC, has been rather clear, that, you know, any type of capital raising mechanisms token, whether it's a token or an NFT, you're you're you're kind of playing a very, very risky game with them because, they have reinforced this, and they will likely continue to enforce this.

THE GWEI | ʌı 00:52:23 In addition to that, there is also, the considerations around, you know, how how, you know, if you if you were a project and you needed to retain control of certain economic levers, like emission, of, supply for key assets does that, all of a sudden make the entity, which is usually like a company, a, a, a, a, basically, a focus of centralization, right, because you you can't really make an argument the entire kind of system is fully decentralized because there are key actors here that have outsized influence on mechanics with the economy.

THE GWEI | ʌı 00:53:06 And then the other thing is just how actively you market the token itself, can be used against you, from a security regulation active. And then in, on top of all that, there's the other kind of sphere of regulation, which is gambling laws. And, and that perhaps is even more precarious for a lot of projects because a lot of game mechanics have spiritual similarities gambling mechanics. And there's a lot of nuance in here.

THE GWEI | ʌı 00:53:37 But I'm hoping that projects are taking the time, to speak with legal muscle to understand whether or not, certain mechanics that they're introducing the game whereby there is a token tethered to it becomes, in fact, gambling and just a word of caution on the gambling side. Like, gambling laws are much more unforgiving relative to securities laws. Right? Like, securities laws is more kind of punitive damages in terms of money, fines, and things like that. Gambling laws are strict liability in a sense that people go to jail for those.

THE GWEI | ʌı 00:54:13 So, there's a lot of things and potential considerations when you're designing a system. None of this is to discourage people to explore and experiment, but but I I think people just need to be very, very powerful and thoughtful in terms of how to manage those, regulatory risks when they're when they're kind of launching a gaming project going forward.

Legendary 00:54:34 Yes. It is an amazing objectives that you just shared on on the regulatory risks, and I absolutely love that you also went into the connection to gambling loss because I can only speak from a u a u perspective, but definitely the European Union loves to have a very strict eye on how his work when the EU deems them as is actually gambling and then likes to crack down on them. I, but I do wanna take a step back on the on the con session and reset the topic a bit a bit.

Legendary 00:55:03 We did speak quite a lot about the user retention side of things, the longevity, the sustainability of token design, But before that happens, obviously, we have the TGE, we have, often a token air drop, which it gets the user base excited because we said, right, from a user acquisition standpoint tokens are a great, great tool, and we've also now seen that change in the market sentiment that starts to look more positive, which definitely seems to accelerate some of the project's plans to launch the tokens.

Legendary 00:55:40 We even if we look at our own panel, we had CTX with the recent token launch, we have, reboot with the anticipated g g, token launch. We have, NRN from airena. We have s funded has been launched from CDFI as an ecosystem token quite a while ago. And also other games, Shrapnel, age of Diner, have the token upcoming, but I wanna get to you Karma with, ZTXs, TGI being a very, very recent memory Could you provide an insight look a bit into that process and mindset, of the the token address the initial token distribution, how you approach that strategically?

Karma 00:56:21 Yeah. Absolutely. That's actually a incredibly fascinating topic that I could But so, you know, we we tend to sometimes conflate these two terms, you know, TGE and air jobs. So TGE token generation event, just for those who may be tuning in, that's the first time a token is created on chain and becomes available and the air drop is just how more often than not that initial liquidity is distributed. A TGE does not need to evolve an air drop at all. Or, you know, it can involve different liquidity mining or liquidity distribution.

Karma 00:57:01 In in the case of ZTX, we decided for the initial liquidity of our token to go very largely to the community. So upon TGE, which happened on October 16th, we air dropped 4% of the entire token apply across our community. And these were the holders of our NFTs, but also active players of our earlier which were small play tests. And I wanted to talk very, very openly and very honestly about why we took this approach. Because, quite frankly, while users, we absolutely love air drops. That's, you know, the backbone of the backbone of of NFTs and web free.

Karma 00:57:41 In terms of user retention, Airdrops are actually notoriously horrible. Now let me expand on this with a few examples. For example, maybe one of the air drops that most of us were most aware of, where, you know, the optimism, the arbitrary air drops, like, the huge air of the layer 2 hours. And in terms of the increase in active addresses on these networks, you know, measuring before in the in the month before the air drop and after the air drop, for optimism, it led to 200 and 50% increase in activity.

Karma 00:58:18 For arbitrary, it led to over 100% increase in activity. However, if you act actually then continue to, you know, watch the retention of these users that receive the airdrop. And by retention, I mean, do the same users that got the airdrop come back to the network and actually keep participating, it's an absolute drop off over in like 4 to 5 months, and that percentage stabilizes well below 20%. So anywhere below 20% is how many people you will retain in your network after given them di job.

Karma 00:58:56 Anything above 20% would be absolutely fantastic. Happens very rarely, very, very often it trends towards, you know, below 10%. These are just two examples, but, you know, there are there are many, many more that we can't unpack right now. Even when we look at things like, you know, NFT marketplaces, you look the trading volume represented by air dropper recipients, it always trends towards 0, and ex an exception may be blur where, you know, like top 10 addresses account for however much percent of the trading volume.

Karma 00:59:27 What I'm trying to say is that from the perspective of a company, doing an actually quite risky business because you know that the majority of the liquidity that you are air dropping is not going to contribute to active user base. And of course, you can develop the various strategies that help you increase that retention. You know, maybe instead of just air dropping the talk to users' wallets, you make them fulfill certain missions on chain, or you make them fulfill certain KPIs in game before they can claim their airdrop.

Karma 00:59:58 You can get very, very creative with all those claiming processes, but the truth stands that an airdrop is only know an initial interest event. And I think for us at CTX, it was a very, very conscious decision to go with a community urge regardless because we had a very, very long building period, and for us, the absolute priority was to establish a very small but very in hence faithful community that we wanted to consciously reward.

Karma 01:00:29 So upon RTG, you know, we distributed 1,000,000 of dollars in airdrop, However, the price that we are paying for it is our token slice having to absorb that in liquidity from the community. And I think it's just something that every single project needs to be very, very aware of, and decide whether or not that is this is the right way for us. It was it definitely the right thing. We always knew that we want to reward the early adopters. And then once beta launches later this year, so the beta of ZT X, That is when the token is going to actively be incorporated in the game.

Karma 01:01:05 That's why we wanted to have it released before the beta so we can start working on this, you know, on the back end. And I think for us, it's going to really lead to what we needed. That initial tight need community that feels rewarded and appreciated for the early support. And we found that community, we can't really refine our game get to the point when we start onboarding web 2. So, yeah, I think I think AirDrop's TGEs can be very, very big double edged sword, but they can be navigated, you know, with very high accuracy, depending on your goals.

Legendary 01:01:43 I definitely like how you, describe that initial distribution, the ad drop as an, basically, initial interest event I I see you met a Alchemist with your hand up. And when I get to you, and after that, I would like to also get VGF into that discussion, and hear your thoughts on, the initial token distribution. I have a specific question for you, but let's go to Meta. Okay, miss Yeah.

Meta Alchemist 01:02:12 I was gonna, you know, mention, like, most of the air drops, actually, that I've seen this ecosystem. They work, quiet good, like, for example, Uniswap. I mean, when they, introduce the Uniswap, token. They just made sure that so many people, could use the platform. In our bedroom, they did it in such a way that right now, RBTRUM has one of the biggest, you know, LPs in the whole ecosystem. They draw a lot of people into it.

Meta Alchemist 01:02:46 And, you know, there was, also, you know, many other, air drops that actually failed too. And, like karma touched on great points over there. But one of the most important points is probably how you gonna be able to convert, the people that, you ear drop the tokens into your users. And, you know, it's seed if I, for example, people in 2021, we started, with an air drop too. And, it was, completely an air drop. Like, we didn't raise any funds we didn't have any VCs.

Meta Alchemist 01:03:22 It was like a pure air drop, which is, like, very, very rare in the ecosystem. But, you know, we did a lot of education back then. And, we told, people about how to use our platform, what how it, like, seedify is gonna be beneficial for them and, what kind of elders that they're gonna be driving, from Citi. And we also did a lot quizzes back then. And, you know, people who got the ear drop from, and by not holding any anything, but just, going to the those educations and, taking the quizzes and stuff like that.

Meta Alchemist 01:03:58 You know, in the bull market, they took, about like $18,000 if you if they actually completed all the quizzes, all the air drops, and stuff like that. And we actually did what we promised them. Like, we, told them, okay. We are gonna bring you the best projects in the ecosystem, and, we will be able to, put you into you know, the frontier of 3 gaming. And that really happened. I mean, we, ran from, you know, 0 $350,000,000 market cap in circulating supply.

Meta Alchemist 01:04:32 So it is actually possible, to air drop and make sure that like, you can convert to users. And it's the greatest user acquisition, method for sure because, like, in our case, for example, there was, 30,000 people who joined, with the air dropping, we could keep a lot of them. And a lot of them actually bought more tokens because they wanted to, use them for they got a lot more benefits. But in a nutshell, what I want to say is if you're, doing an air drop, just make sure that, you have the ways the strategy is to convert to users into users.

Legendary 01:05:11 Thank you for for sharing your perspective on, the initial ad drop and also how you did tackle that that, that user retention, part of it. If you, Jeff, I mentioned they wanna come to you, especially from the lens that I know that the the reboot token, the g token will have a high allocation for the existing community and just hear your thoughts on how you, just how you think about that initial token distribution?

vgf.eth 01:05:43 Yeah. So for g g in particular, the total allocation towards existing community or existing token holders was ultimately, I believe, somewhere in the ballpark of 42%. Which by just about any is incredibly high.

vgf.eth 01:06:07 The the reasoning for that was both very complicated and can be distilled very simply of, like, our desire and need to incentivize and reward our existing participants and those that had gotten us this far, but also because with with this token distribution, we have high confidence that, distribution in this way with the asterisk, of the, the distribution and and drip while it is a high allocation towards the community, the circulating supply, is is fairly linear, it it's not a just mass, liquidity event at the onset.

vgf.eth 01:07:03 That enabling our community to have such high incentive, in the in the Gigi and reboot eco system, is we want active participation, whether it be in the, like, people playing the game, battle plan, is, is going to be Pixel Vault's sort of flagship built on reboot, but also in the form of liquidity and rewards provision, eventually in the form of validation as well.

vgf.eth 01:07:36 And so that there there are these different avenues of participation other than just playing the game, and we that the community being active participants, and that is of greater net value than holding, you know, holding back more of that supply of Gigi. And, one thing that we had touched on on the topic of, like, user acquisition reboot as a platform, does also incorporate, affiliate rewards as part of that means of user acquisition.

vgf.eth 01:08:13 Because it does track, the user flow of who is referred on chain so that the avenue in which they are referred does have an immutable on chain stamped part of that, like, on chain transfer of value so that, via content creators or affiliates and things like that, those users can actually incentivize and reward, the creators that may have brought them in ecosystem in the first place.

Legendary 01:08:50 Very interesting. Thank you. Thank you for sharing that perspective. Look, we said we wanted to run a bit longer than than 1 hour. We're approaching the 1 hour 15 mark. So I could continue this conversation for hours and hours, but I wanna be respectful of everyone's time, both everyone in the audience as well as our panelists. So, what we'll do is I wanna hear from you, the quake give you a chance to share your thoughts and and perspective and kinda put a bow on this topic on how you think about that initial token distribution and then we'll start to wrap up the spaces.

THE GWEI | ʌı 01:09:27 Thanks. I'll be brief. Yeah. I I think the initial token distribution, whilst very important, a lot of thought has to go into it. And I think all of the panelists have already very interesting and important, comments about it. I think from our perspective, it goes back to, again, what our intended objectives are within our game. So I as as some contexts, in AI arena, effectively how kind of like 2 versions. They're not different versions of the game as much as they are, almost like segregation of, tiers of players.

THE GWEI | ʌı 01:10:06 So the web 3 version of the game is, focused on competitive players. And over, over time, that those competitive crop will become more and more like, call it professionalized. And so our initial kind of distribution of our assets, whether it's NFTs and tokens. We've been very deliberate over time to try to find, serious players that, could become competitive and could potentially form the initial professional players within our game.

THE GWEI | ʌı 01:10:38 And they will play in on the web 3 rails with this token economy where there is true financial, value at stake so that there is consequence to how they play. Now when you think about the overarching design of a game them. That is a very small group of people. Right? We, you know, we don't intend to, provide this type of to everyone because quite frankly, most players don't care for that.

THE GWEI | ʌı 01:11:07 Most players wanna just come in casually and join the game, the core game loop, and potentially find other ways to get involved in the, community or the economy, but not through kind of serious competition. So from the perspective of our NFT launch as well as our token launch, we've put the competition at the core of how we distribute these assets. So starting with our NFTs, people had to qualify, during our playtest to compete in what's called exclusive access and only those exclusive access players are able to win our NFTs.

THE GWEI | ʌı 01:11:46 And immediately, you you get better alignment where NFTs are starting to end up in the hands of the players to have proven themselves to be playing at a competitive level. Thereby, they're less likely to turn around and just dump your asset on the market because they find utility in the game, and they wanna make use of this asset, in the future when the game goes live. A similar kind of, inspiration is going to underpin our token launch as well.

THE GWEI | ʌı 01:12:15 At the heart of it all is going to be a, a massive competition where we are going to kind of invite everyone to participate, and then your allocation of tokens is dependent where you end up in that competition. Now there's gonna be a very low floor in the sense that most people are going to benefit to certain degree some allocation of our tokens, but then it gets really exaggerated at the top to really, really focus, the best player because the bet is once we launch the game on Web 3, those players are gonna come back and they're gonna be focused on this version of the game.

Legendary 01:12:52 Love it. Thank you so much for, sharing that. And I also wanna take that moment to think everyone on the stage to thank our panelists, Meta Alkomist, the Gway VGF. I think it's a very, very difficult topic to navigate. So air drop, questions, TGE questions, use acquisition and retention can be very, very complex. I appreciate you taking the time of course, I wanna thank my cost karma for, co hosting the space with me and sharing your perspectives on CTI Thanks. Thank you to Sanjay. Thank you to Next who's been earlier with us.

Legendary 01:13:29 And thank you, Turban, in the audience, for your patience and being with us, before we wrap up, I wanna do a quick fire round with, meta alchemists, then the gray, then VGF very soft question, to close us off. What is something that players, people in your community, fans, can look forward to over the next coming weeks or months. May I welcome this first?

Meta Alchemist 01:13:56 I mean, they can probably look for, playing other games before seed world is live. That's what we are trying to do right now you know, internal strategies a little bit because there is some more time and, in the meantime, we want to make sure that all our, community can play other games and, we are creating some strategies around that region.

THE GWEI | ʌı 01:14:24 For us, it's our kind of, test net competition that's coming up. We're we're targeting for that to launch January of 2024, so we're a couple months out. Look out for more information that's coming starting in December.

Legendary 01:14:39 So, more info to Thank you so much. VJF, same question to you.

vgf.eth 01:14:46 Well, the testing for battle plan is currently live. Each week, we've been adding new waves of, play testers. So if you have not gotten in on that, I highly recommend doing so. And for what to look forward to, I would say this next, update which is, like, if everyone has kind of been playing god mode up to this point with access to all the brawlers and a bunch of the load outs This next version is gonna be the closest to what it will look like in production where you have to unlock all of those avenues via the in game progression.

vgf.eth 01:15:26 So I'm particularly looking forward to that.

Legendary 01:15:30 Love it. Thank you so much. Carma, I wanna hand it to you for the closing words. I also know it is the spooky season. It is Halloween today. There's been something going on with the ZKX Genesis, home holder. So one of your your closing thoughts and also the Halloween side of things.

Karma 01:15:50 Yeah. Absolutely. So we were, you know, overjoyed today to have airdrop to our community a set of Halloween seemed wearables, happy Halloween to anyone who celebrates. So let me just, you know, dive into this very briefly before we, you know, say goodbye for today. This drop is just a small preview of what's in store for ZTX's future. We are working behind the scene and many more wearables, and to become a powerhouse for digital fashion, including partnerships with well known fashion brands in Ps. And this, of course, necessitates a full in house team of 3 d artists and fashion designers.

Karma 01:16:27 And as we test and prepare ZTX meta for launch later this year, that's going to be our major milestone to look forward to. Instead of just keeping these tests experiments in digital fashion to ourselves, we have brought them to an exquisite level of quality and airdrop them to the community so if you are an owner of ZT X Genesis home, check your wallet and happy Halloween. And if you are a holder of ZT X, please also do not miss the ZT X Staking, which our friends at Sushi And Steer protocol have just launched recently, you know, had to discord if you need help or or, you know, details on that.

Karma 01:17:05 And now pivoting back to the spaces, I also, you know, from the bottom of my heart, thank you for every single speaker day, it's always such a joy to exchange thoughts, exchange, you know, experiences as we all build together in a space. And also thank you to every single one of the listener have given us over an hour of their valuables, you know, time today. Thank you, everybody, and, you know, hear you again next week.

Legendary 01:17:33 Thank you so much and happy Halloween, everyone.

---

*Originally published on [Nylz](https://paragraph.com/@nylz/web3-gaming-tokenomics)*