Creating a Stable Token Economy in Play-to-Earn Games the Fables of Fyra Way
How do we define a successful play to earn (P2E Economy)?
Surveying the current crypto, NFT, and P2E landscape, we see myriad terms used to describe success. Some value a rocketing token price while others crave stable and predictable price action. P2E Games tout astronomical growth trajectories as keys to success, while other projects point to strong player retention. Meaningful token utility is often described as the primary contributor to a project reaching its full potential as well. The definition of meaningful token utility yields yet another set of metrics: staking with high returns, access to earning multipliers, or enhancement options used to unlock greater earning potential.
Individuals enter the space with different objectives and goals for their money and time invested in the P2E market. Rather than determining a one-size-fits-all definition for success, we must understand how these attributes contribute to a stable P2E economy that remains relevant beyond the midterm and into the longer time horizons.
Everyone participating in the P2E space, whether a development studio or investor, is searching for a method to monitor token demand adequately and embed appropriate levers to ensure supply and demand equilibrium. Central Banks and governments worldwide maintain stability through interest rates, government spending, tax policies, balance sheet programs, and adjusting the current supply (i.e., printing money). These tactics act as “funnels” that inject currency into circulation and “drains” that remove currency from the overall economy. The five levers have various implementation methods and provide Central Banks and Governments with the adequate tools to control their economies and protect the valuation of their currencies.
P2E firms are fighting an uphill battle due to the infancy of the industry and the fact that a large majority of daily earnings are swapped from native tokens into coins and then fiat at high frequency. Preliminary research conducted by the FoF Team showed that nearly 70% of participants exchanged the tokens they earned into blue-chip, stablecoins, or fiat at least weekly, if not daily. A quick tour of the P2E universe shows that most economic systems have two levers at best and have little control over the supply of tokens in circulation. Even more damaging is that most “drains” are positioned based on the predicted behavior of players and participants. Creating reliable predictions of player behavior has become a fool’s errand. It often leads to a death spiral of massive inflation, reduced player retention, and a negative return on investment for longer horizon holders.
As entrepreneurs and venture capitalists with limited knowledge of the technology and market dynamics flock to the space, there is a propensity to copy economies that have shown short-term success. This is a severely flawed approach due to several factors. While there are numerous P2E games in development, very few have advanced beyond a land or token sale, and even fewer have released full functioning production versions. The “tip of the spear” or examples to follow are economies that have functioned for upwards of a year, not decades or centuries, as most global economies’ fundamentals are based. The lack of historical data and empirical evidence leads to questions; were they successful due to first-mover advantage? Are there flaws hiding in the economic system that are exposed by time, growth, or periods of retrenchment? How will the economy handle black swan events such as a rapid fall in the crypto market?
One common thread between each P2E game franchise is that each community is unique, relatively small (compared to global economies), and highly diverse. The behavioral economic equations and formulas used to predict and govern large-scale economic systems do not apply well in the P2E systems. While perception is most commonly the strongest lever in any economy, perception is supercharged in P2E economies due to the size and efficiency of communication tools. Actions that could right the ship economically can be overridden by opinions shared on a Discord server, which creates a challenge. The diversity we find within the communities throws even more doubt that copying another game’s economic approach is a recipe for success. While similar tactics may be implemented from system to system, the applications and methods of implementation are almost always unique. The economies must be specialized, and the dynamics of each game must be thoroughly understood and modeled before one can develop an economic approach that will be sustainable into longer time horizons.
Creating a Stable Economy in Fables of Fyra: The Awakening
At Fables of Fyra, we have set forth to develop a unique and truly sustainable P2E economy with its foundation in several guiding principles.
The Fables of Fyra system utilizes flexibility to ensure functionality without relying on the predictability or actions of participants. Where other economies have implemented closed-loop demand patterns, Fables of Fyra has created true external demand, expanding economic opportunities for all participating demographics. The Fyra Oyer (2) token system is designed to maintain stability in the play-to-earn token ($CAVE) while creating long-term value in our premium token ($BAAH) through increased utility and sustainable business practices.
To further elaborate on these guiding principles, below is a description of several tactics designed into the economy to achieve the desired results:
- Metered Token Creation
As mentioned previously, adequate adjustments of token supply are critical in maintaining sustainability. The first step in ensuring supply and demand equilibrium is ensuring real-time adjustments in creating or minting play-to-earn tokens. Most commonly, players control token creation, whereas in Fables of Fyra: The Awakening, landowners are the token generators. Land is limited in the ecosystem and therefore provides a course adjustment method for moderating token creation to maintain equilibrium between supply and demand. Furthermore, a token generation multiplier is applied to all land which can be modified to provide fine adjustments to token generation to give an even greater ability to match token generation with token demand.
To provide additional clarity to this concept, if demand is significantly outpacing token generation, more lands can be released, such as with the Gold and Silver Land Key Sale. If demand is only slightly outpacing token generation, finer adjustments can be made through modification of the token generation multiplier that is applied to all lands.
On the flip side, if token generation is outpacing demand, several mechanisms can reduce circulating supply. Designed into the generation mechanism is a self-regulating feature that burns 50% of all unmined tokens each day, and additional supply reduction can be made by reducing the token generation multipliers.
2. Variable Token Drains
A key point of failure in most P2E economic systems is the lack of data, leading to an inability to forecast participant behavior accurately. While game designers and in-game economics can promote specific behavior, the volume of promoted behaviors often does not match expectations. To overcome this challenge, the Fyra Oyer system is equipped with adjustable burn mechanisms at nearly every use of $CAVE, allowing the drains to achieve the desired results regardless of the participants’ behaviors.
A major component of the effectivity of the variable token drains is that in times when token circulation is outpacing demand, higher burn percentages can be implemented, and vice versa when token circulation is lower than token demand. The higher burn percentages are possible due to Fables of Fyra’s belief that long-term stability is more profitable than unsustainable short-term gains attributed to low percentage token burns on in-game transactions.
3. Economic Incentive
Economic incentive is often only looked at in terms of Return on Investment (ROI) or economic benefit received from participation in an economy. However, the input side of the economic incentive equation is ignored, creating a fatal flaw in most Play-To-Earn Economies. At Fables of Fyra, the economic incentive formula is viewed as a flywheel in which energy in and energy out must be balanced or momentum is lost, making sustainability unachievable. In the Fyra Oyer ecosystem, painstaking effort has been placed on ensuring that cost of entry, external demand, play-to-earn income, and franchise profitability all work harmoniously to ensure the economic flywheel’s sustainability.
In the Fyra Oyer ecosystem, participants will find costs of entry and economic opportunities for all demographics serviced by the franchise. This includes free-to-play options that allow beginners to participate through crafting and minting items for sale on the marketplace, as well as low-cost entry options for the casual player and their families. For more serious participants, Fables of Fyra has created a tailored offering for scholars and guilds that allow automated settlement of earnings, adjustable rental agreements, and a wide variety of assets for guild managers to purchase and rent. The Fyra Oyer Ecosystem is built to attract mass participation, and the structure of the economic system can accommodate volatility in player participation and overall adoption.
The second part of the equation is the economic incentive for participants to join the Fables of Fyra ecosystem. Creative content and immersive gaming play a role; however, the most persuasive component is the financial incentive gained through participation in the economy. Most P2E economies struggle to create sustainable economic incentive due to their “closed loop” demand structure in which the token generators are also the token consumers. Jamie Thompson and the Vulcanverse created true external demand for their P2E token, $Lava, by creating the Elysium L1 blockchain that burns $Lava with each block. While Fables of Fyra does not require its own L1 blockchain, the ecosystem can repurpose this approach. Through the development of $Cave-reliant games that do not generate the P2E token, such as Odyssey Racing Arena (currently in development), the Fyra Oyer ecosystem creates external demand for the tokens generated by the lands and mined by the participants of Fables of Fyra: The Awakening. Furthermore, the addition of Odyssey Racing Arena also requires items crafted in Fables of Fyra: The Awakening, creating a secondary demand economy for crafted recipes, armor, elixirs, and crops.
The below diagram details the described interactions:
$BAAH Premium Token: Creating value through sustainability and strong business fundamentals
What does success for the Fables of Fyra economy look like for participants, and why has much of the focus above been given to the Play-to-Earn token ($Cave) compared to the premium token ($BAAH)?
Sustainability of the P2E token is what drives robust business fundamentals and results in increased value of the premium token. The flexibility crafted into the economic system behind the P2E token ($CAVE) will allow the system to accommodate the ebbs and flows of the business cycle, leading to long-term relevance and enhanced profitability. Enhanced long-term profitability is far superior to unsustainable short-term cash grabs, as is common in the P2E space, and allows Fables of Fyra to continue evolving with the dynamic web3 market. The focus of the Fables of Fyra franchise on core business fundamentals may not be “sexy,” but it allows sustainable delivery of meaningful utility to $BAAH token holders and improved long-term viability that will far outweigh the short-term offerings of less robust token projects.
Want to hear more? Watch the Fables of Fyra Vulcon 2.0 presentation and join the Discord for continued updates.