How should we build the future of GameFi?

How should we build the future of GameFi?

You’ve seen it before. An incredibly talented game founder teams up with a top-tier studio and promises to create a wonderful gaming experience powered by the most powerful engines in the industry. But then, it happens: He teams up with a dubious shit coin that gets thrown around long before even a morsel of game content drops.

In the not-too-distant past, the mainstream media may have referred to the cryptocurrency bull market fueled by hype, but, with Bored Ape land prices still skyrocketing, we’ll respectfully call it what it is: the run. of the monkey Market volatility aside, Metaverse evangelists continue to claim that Web3 finance will revolutionize the way games are monetized. I say it’s a lie.

Right now the focus is not on the new monetization models. The only thing these token rallies are challenging is the idea of ​​capital formation, not monetization. As tempting as it is, the monkey race has quickly fooled some of our brightest founders into believing that they should raise an insane amount of capital from printed tokens out of thin air, as a flawed substitute for a true monetization strategy.

We are ready for a change of mentality. The fundamental question is this: how can we make the hyper-capitalized, hyper-promoted Web3 metaverse project work for gamers, founders, and investors?

Way 1: The thrill of the game

Everybody does well in a monkey race, financially speaking. From major smart contract platforms to experimental DeFi protocols to the upcoming Axie Infinity copycat, the monkey market beautifully substantiates the idea that there aren’t really any sh*tcoins, but sh*t prices. *gives.

To get a clearer picture, travel with me through the deal pipeline in the heart of cryptocurrency venture capital, where shiny new metaverse projects and games incessantly flood inboxes. Links abound to cinematic trailers, Unreal Engine mockups, and convoluted “token economic diagrams,” parroting their demands to raise millions in simple deals for future tokens to properly prepare their token launch(s) and their launch(es). initial offering of decentralized exchanges.

The game’s release date, you wonder? Maybe it’s a “minigame” planned for the third quarter, or a massive triple-A launch in mid-2023. And what kind of profits will the token have on day one? Well, you can stake for more tokens, and you might even get access to the first ever NFT sale in the game. Sometimes they even announce a utility token with no utility and a governance token with no governance, justifying their existence because the big exchanges agreed to list them within a few months.

How should we build the future of GameFi?

This may seem like an exaggeration, and I wish it was. Yet these are the most worrying realities facing the current landscape of token launches in the midst of a bull market… sorry, mono market. They capture short-term enthusiasm without a sustainable plan for building the future. These releases capture a moment, but not the right perspective and business model needed for the future of the game.

Way #2: Build to last

The GameFi token landscape is incredibly fragmented. Although early liquidity is tempting, a premature token launch has serious risks. The balancing act between creating sticky tokenomics and designing successful games actually offers a narrower focus for project tokens: user engagement and retention, not pure monetization.

How should we build the future of GameFi?

The final optimization problem? Maximize the retention and engagement of additional users for each project token issued, subject to a certain level of existing revenue from Web3 and the user community.

You don’t immediately need your own project token to monetize your app. Tokens are simply forms of exchanges for assets that your virtual world generates and sells. If your Web3 game can’t work with an already liquid and volatile token or worse, a stable one, then your game is in trouble. Retry.

Read:  Big tech and the metaverse: A centralized future?

Instead, raise enough private capital to comfortably make it to the beta launch. In the beta phase, you work with the smart contract platform of your choice to integrate their native token and stablecoin of choice into your game. Start looking at the core game loops and key revenue streams.

Think of yourself as a data scientist. Is there any user behavior that you know is definitely fun, but is still unprofitable? Is it such a valuable loop that maybe a grant can get it going? Is currency volatility something your users avoid? Where do your most engaged users come from? How many are low-paid workers in developing countries? How many are “prosumers” looking for the next hot social hangout? How many are whales that put auctions through the roof?

Ultimately, you should design your token to incentivize users to stay in your world. For example, just like with foreign currencies, you could offer a consumer discount when paid in your own project’s token, but price your digital products in USD. You could also use the risk-tiered treasury strategy, whereby you accept USD (and equivalents), the L1 or L2 of your choice, and your project token. This ensures that you have a large existing audience immediately ready to engage with your world. It also helps protect you during crypto and macro crises, and the surplus can be used to reward investors and users without putting a selling pressure on your token, among other great benefits.

The most important thing you can do as a game founder on Web3 is to stay focused on improving your game. Tokens can’t make your game, but they can break it.

The Right Priorities for a Sustainable GameFi Future

The unique value of gaming apps and metaverses is not the token they put into circulation. The value of the project is created by the revenue that, in the long term, arises from the unique digital assets of the game. When these NFT-based assets are owned, experienced and understood by a community, the value is built and increased – otherwise the community’s unwillingness to sell increases.

How should we build the future of GameFi?

I’m looking forward to the day when this model becomes the status quo, because it means we’ll be closer to the best Web3 games we’ve ever seen. Rather than the market rewarding short-term stock grabs, we will see superior gameplay and tokenomics wrapped in a gaming ecosystem built for the long term.

Engagement, retention, and then monetization. Optimize for those things, in that order. Choose the right path.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, readers should do their own research when making a decision.

The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Alex Ye leads research, investments and economic strategy for Republic Crypto tokens, helping to secure and advance cutting-edge projects for Republic Crypto’s portfolio of advisors. Prior to Republic Crypto, Alex drove fintech and blockchain investing at ZZ Capital, crypto fund research at $7 billion venture fund Top Tier Capital Partners, and endowment at the University of Chicago, his soul. mater.