Play to Earn or Play to Ponzi?

22-06-23 15:17
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Written by: 0x76


Editor's note: "With the two-year bull market The curtain has come to an end, and many concepts and projects that were created and popular in this cycle have gradually cooled down. So, are these once star products really useless? Their success or failure experience will give this What valuable experience has the industry left behind?


In the near future, I plan to use 3 to 4 articles to review and reflect on several key points in this cycle track or business model.”


Since the birth of Axie Infinity’s Play to earn and its derived X to earn model, its ideals and The outside world doubts about its Ponzi scheme. In the past round of bull market, we have also witnessed the rapid explosion and demise of chain game projects adopting the X to earn mode.


So, is the X to earn model really as unsustainable as the token prices of these projects? Is X to earn a great innovation in the Web3 field, or another unsustainable Ponzi scheme? If the X to earn model is finally falsified in this cycle, where is the future of blockchain games?


In this article, we hope to examine the success or failure of the development of blockchain games in detail from the underlying logic.


How to easily distinguish Ponzi projects?


Before we start to formally discuss the Play to earn mode, it is actually necessary to revisit the basic definition of Ponzi.


According to the most extensive consensus formed in the industry at present, the key to distinguishing whether a project is Ponzi is to judge whether it has created new value for the external society, That is, whether there is a "positive externality". If a system does not create positive externalities, then all value is actually a zero-sum game and redistribution within the system, and it will inevitably collapse after a period of time.


But in the field of Web3, because many projects often combine other complex concepts such as currency, consensus mechanism, economic model, etc. identification becomes more difficult.


So, is there an easier way for ordinary users to quickly identify Ponzi projects?


1. Observe whether the system has external income


For One of the simplest means of judging Ponzi is to observe whether it can generate external income.


Because in a normal economic system, most economic organizations that can generate positive externalities will not provide free products and services to the society. Just like you must get paid for working for the company, and merchants must earn income from selling goods to you, a sound market can always reasonably price these positive externalities and facilitate transactions.


So,Identifying whether it has external income is the easiest way to identify whether an economy has positive externalities.


So for a chain game, to judge whether it is a Ponzi, in fact, it does not require us to study the complex game inside the chain game mechanism. Instead, you only need to regard the chain game as a whole and observe whether it can obtain income from the outside.


But what needs to be emphasized here is that if what we want to answer is whether a chain game has externalities, then the object of observation must only be It is the chain game as a whole, not a local internal component of the chain game system.


We can see that the so-called "income" obtained by many blockchain games is actually derived from the fee income of the internal NFT trading market of blockchain games. However, since this type of internal market serves only gamers, which is a typical internal income, it does not generate external value for the entire blockchain game.


It's like although the gaming industry is a typical zero-sum game, bookmakers can still make money. The income they obtain comes entirely from within the gaming industry, so these incomes do not prove that the entire gaming industry has generated value for society.


2. Judging the attributes of participants’ spending funds: investment or consumption


In addition to observing whether the system as a whole has external income, chain game participants can also distinguish the Ponzi degree of a system by judging the attributes of their own capital expenditures.


If most of the participants of a chain game invest funds into the system with a consumption mentality, then these expenditures constitute the main income of the chain game system. This also proves from the side that chain games provide some kind of externality (fun) to encourage people to consume and pay for this externality.


However, if the vast majority of participants in a chain game participate in the game with a speculative mentality, and the main goal is to make profits rather than entertainment, And attach great importance to indicators such as the payback cycle, then this system is closer to a Ponzi scheme.


After all, the ultimate goal of investment-type funds is to make a profit and leave the market. Therefore, when the system does not have enough real income to fill their income gap, the system will inevitably move towards the Ponzi model of borrowing new ones to repay old ones.


So how can we better attract more consumer users into the system?


The answer is of course to create real value and improve the gameplay of chain game products, rather than to deliberately guide users' mentality. Since the bottom layer of the chain game adopts blockchain technology, the entire game must also be an open economy. Therefore, a well-designed chain game must be able to accept and accommodate various types of users to participate in it. A game cannot assume, and naturally it cannot require users to use its products with a certain mentality, and there is no need to deliberately crowd out certain types of users.


Bitcoin never presupposes the goodness of human nature, but protects the system from malicious participants by designing a reasonable game mechanism. If the economic system of a chain game is too speculative and the consumer demand is too low, then the first thing to reflect on is the design of the game itself, rather than directly shifting the responsibility to the user, which is completely an act of inversion of cause and effect.


Is Ponzi's theory tenable?


The Ponzi economy itself cannot generate value for society, so Ponzi has often been equated with scams in the past. However, the birth of Bitcoin and its skyrocketing price broke the inherent cognition of many people to some extent. What followed was the popularity of the Ponzi theory and the web3 Ponzi special case theory in the industry.


So, are the basic economic laws in the encryption industry really different from the traditional economy? Does the Ponzi structure really have a certain degree of value in the new economic system?


To answer this question, we first need to re-analyze several commonly used arguments of Ponzi theory.


Why is the pension not Ponzi?


Pension is almost an essential part of every modern society and has obvious social value. However, due to the obvious external characteristics of borrowing the new to repay the old at the same time, many people identify it as a Ponzi structure and repeatedly quote it to demonstrate the rationality of the Ponzi structure in some cases.



Then, is it really a huge pension to borrow new ones? Shi scam?


Of course not. Because the greatest significance of the existence of pensions is not to increase investment value, but to stabilize the financial risks brought about by individual life cycles at the social level. Therefore, the essential attribute of pension is insurance, and all insurance products are consumer financial products intentionally designed to improve future certainty.


Just as we do not buy aviation accident insurance to return capital and increase value, the main purpose of pension insurance participants is not to invest and make profits, but to hope to survive without children In the case of support, normal retirement living expenses can also be guaranteed.


Similar to the logic of other insurance products, endowment insurance also transfers risks from the insured to the uninsured, while the capital flow is from the insured (young people) Late comers) flow to out-of-risk (first comers who retire).


We can’t say that pension is a loan to repay the old just because the old people who got out of danger happened to be the first to come, while the young people who didn’t get out of danger happened to be the young people who joined later Ponzi scheme. Pensions and Ponzi are only similar in form, but the underlying logic they follow is completely different.


How to Understand the Externalities of Bitcoin


Entire Encryption The currency market originated from Bitcoin, and the success of Bitcoin itself has subverted the inherent cognition of most people. Indeed, the first impression of Bitcoin to many people is that it is a pure Ponzi scheme. Even if judged according to the simple method of judging Ponzi just listed, Bitcoin seems to be difficult to meet any of the above definitions.


Therefore, Bitcoin has become the best argument for Ponzi theory. Many people believe that since Bitcoin can exist for a long time, it means that the Ponzi scheme may become a bubble that will never burst under certain conditions or a certain "narrative", so that everyone can benefit from it.


If you want to refute this kind of view, you must answer: What are the externalities of Bitcoin?


The externality of Bitcoin cannot simply be understood as external income, but more reflected in the fact that in an absolutely free and open environment, people have nothing to do with property Ownership of disputes, and absolute trust in consensus within the system. It's just that these values have always been extremely missing in Eastern culture.


This may also be one of the reasons why Chinese public chain projects often fail. Because if a public chain project lacks freedom, openness, and trustless things that can generate externalities, then the rest is indeed not too different from the capital market.


As we have seen after the BCH fork, the BCH team’s first thought is not how to improve transparency and openness to promote ecological development, but to find ways to Attack Bitcoin. The underlying logic is still that there is me without you, and you without me, "it is better to pursue the poor with the remaining courage, not to be famous and learn to be the overlord". Although this underlying logic is indeed in line with China's historical experience, in the blockchain world, this kind of thinking makes the only externality of a public chain disappear, and eventually it is getting closer and closer to a pure Ponzi scheme.


The above two examples are actually intended to show that there is not much essential difference between the encryption economy and the traditional economy. For Ponzi projects that cannot generate externalities, The final result will still be collapse and return to zero.


However, is there another possibility that a project will increase the number of users through the Ponzi model in the early stage, and rely on it when the number of users reaches a certain scale? Realize the number of users, and then become a normal economy that relies on income to maintain operations?


Is it possible to transform the chain game in Play to earn mode?


First of all, we have to admit that many so-called "chain game" projects in the industry have been funded by the fund team from the very beginning. Manipulating the production, so after they fell into the death spiral, the project party may have already run away, and naturally there is no talk of transformation.


However, we can also see that some projects with a certain long-term vision such as Axie and StepN were born in this cycle. So, is it possible for these teams that relied on Ponzi growth to develop users in the early stage to complete the transformation in the future?


The essence of Ponzi income is liability


We have We know that in chain game projects that rely on the Ponzi model for user growth, the benefits of early users come from the principal invested by later users. So for a chain game team that wants to transform into a non-Ponzi project, the income of these users is essentially the marketing expenses of the system, and the payment of marketing expenses obviously cannot be paid by the last user forever.


So when such a system starts to transform, if you don’t want early users to lose money, then these marketing expenses become transformation liabilities that the system needs to make up for through subsequent income . The higher the income of early users, the heavier the debt burden during the transition period.


Exponential growth and medical runs


We know Ponzi The main advantage of growth is that the number of users can grow exponentially within a certain period of time. But the exponential growth of liabilities is obviously not a good thing for the transformation.


We have all experienced the power of exponential growth during the epidemic. If you want to control the outbreak of the epidemic in a city, the time window to solve the problem may only be the first two weeks. Once you miss it, you will have to pay a huge price to recover it. Many chain games have actually encountered the same problem, that is, when their systems have experienced a "medical run" due to exponential growth, and their public relations and user service capabilities are on the verge of collapse, they have actually missed the time window for transformation.


Another serious problem caused by the exponential growth of liabilities is that the income side cannot keep up with the growth rate of the debt side. In the current normal business model, there are actually very few products that can achieve exponential growth, and a few industries with network effects such as social networking and advertising cannot maintain the momentum of exponential growth for a long time.


So even if the chain game team successfully creates income and begins to transform, it still needs to slow down the growth of the debt side in order to achieve a balance with the income side.


Reducing Increment and Debt Restructuring


So for already Runaway exponentially growing liabilities, is there any other way? In theory there are.


On the one hand, it is to reduce the speed of debt increase as much as possible, that is, to reduce the rate of return, but at the same time, it will also lead to a reduction in the inflow of new users, further aggravating the transition crisis.


On the other hand, it is to reduce the stock, that is, to carry out debt restructuring, so that some users will admit their losses and leave the market. However, this clearing will also cause greater damage to the brand reputation and the number of retained users, while continuing to reduce the attractiveness of the product to new users.


From this point of view, the transformation logic of Ponzi chain games seems feasible, but it is still more difficult to implement in practice, and may not be a truly feasible business route. Of course, we still welcome entrepreneurs to continue exploring in this direction, but don’t use users’ money to try and make mistakes.


Where is the future development direction of chain games?


Although the current chain games all have strong Ponzi attributes (except for a few such as Dark Forest, they still have certain playability ), but I still think that chain games may be one of the earliest application directions in the encryption industry that can break the externalities of the industry.


So, what should be the focus of improvement in the development of chain games in the future?


1. The game must be fun first


Games exist The first value is fun. Therefore, when the product you develop is not fun, please stop calling yourself a game, and you are not qualified to talk about gamefi.


In this cycle, almost all the chain games we have seen are pursuing excessive financialization at the expense of the basics, and relying on Ponzi growth to develop the number of users . However, Ponzi growth is at best a marketing tool, not the ultimate purpose of the game's existence.


Pure Play to earn will only lead to Paly to Ponzi. It is extremely difficult to implement the strategy of relying on Ponzi expansion in the early stage and transforming in the later stage, so that there is currently no The project can really run through.


2. We should encourage innovation, but please don’t use users’ money to try and make mistakes


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Whether it is exploring a new game mode or trying a new economic model, it is natural to take great risks, and failure is commonplace. An emerging industry requires countless entrepreneurs to bravely try and make mistakes before they can explore a new business model.


Naturally, we should not laugh at those failed explorers, but the cost of failure should be mainly borne by entrepreneurial teams and venture capital institutions, after all, they bear high risks , also have the opportunity to obtain high returns.


But please stop passing on the cost of trial and error to your own users! ! Some chain game teams earn a lot of transaction fees during the Ponzi growth stage, and at the same time, when the Ponzi model is about to collapse, they blame the greed of the users for the game crash. This is obviously very irresponsible manner.


3. The core logic of chain games should be on the chain


Some projects that claim to be blockchain games, in addition to issuing game tokens and NFT equipment to the chain, the core logic of the rest of the game still needs to be run by a centralized server. Therefore, we can see that the project party can modify the rules of the game at will, increase or decrease the usage scenarios of certain NFT equipment, and even stop the service and run away directly, but users can do nothing about it.


For this kind of game that cannot put the core logic on the chain, it should not be called a blockchain game at all, but just a game developed with the help of blockchain technology. Coin's traditional Web2 game only.


Of course, it is really helpless for many blockchain games to use centralized servers to run game logic. After all, the performance and cost of the public chain at this stage cannot meet the needs of the game. Therefore, the further development of chain games still needs to wait for the gradual improvement of the underlying infrastructure.


But no matter what, Blockchain games in the true sense of the future must not be equivalent to games that issue coins on the blockchain


b>. If the core logic of the game cannot be guaranteed by the characteristics of the blockchain such as trustlessness and non-tampering, then users cannot truly own their own game assets. The so-called user ownership is actually just empty talk.


4. Excessive financialization will destroy the feedback mode of users and teams


If you want to develop a good game product, you must iterate quickly and continue to trial and error in the early stage. During this process, the team needs to get clear feedback on the strength of the gameplay from the market.


However, the natural token incentives of chain games seriously interfere with this feedback loop, so that any adjustments made by the development team to the game will be directly translated into revenue by the market rate change. Under this incentive model, the development team will also unconsciously shift their development direction to the pursuit of profitability, and then evolve into a more pure Ponzi model.


Therefore, for a team that really wants to develop games, excessive financialization and premature token incentives may instead affect the normal development of the project. Properly postponing the financialization process, and implementing token incentives on the premise that the gameplay has been fully verified by the market, may be a chain game development strategy worth rethinking.


5. Openness and composability are the core advantages of blockchain games


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A really fun blockchain game must not simply copy the successful experience of traditional games, but can use the underlying advantages of blockchain technology to make possible achievements beyond traditional games in some aspects. Playful attempt.


As for the comparative advantages of blockchain games over traditional games, I think it is most likely to appear in the openness and composability of games. For example, users can deploy new game logic different from the official game logic on the chain without permission, so that the game community can carry out secondary creations on the same chain game assets. For example, the assets of chain games can be used across games, and show different attributes in different games.


We have seen some beneficial explorations and attempts in these aspects in this cycle, but obviously they have not yet become the focus of the development of the chain game industry.


End


In order to discuss the X2E mode as clearly as possible , the article is indeed written a bit long. But the reason why I have said so much is to hope that our industry can avoid detours, and at the same time, ordinary users will suffer less losses.


Although I do not recognize the pure X2E model, I am still very optimistic about the future development potential of blockchain games, and even blockchain games are what I am most concerned about at present One of the tracks. But the development of everything must conform to the most basic logic or common sense, and chain games are no exception.


Let's put aside our obsession with economic models and start exploring gameplay again.



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