The problem with game tokens

Down, down, deeper and down

Sometimes only the previously unthinkable is now thinkable.

Personally I blame Yat Siu.

Even if you don’t take such a maximalism position when it comes to crypto, I’d argue the current creeping memetic has all-but kidnapped Bitcoin, which thanks to the onslaught of MicroStrategy, ETFs, Trump, and talk of strategic BTC reserves etc etc has now fully decoupled from all other crypto.

Reusing an old meme, I guess we get to call everything else shitcoins for real.

That stated, I think the problem for gaming tokens is different.

As I’ve previously argued in My token killed my blockchain game (April 2022):

“As for blockchain game developers, the corollary is be very, very careful about launching a token. Delay it for as long as possible and design it to be as anti-extractive as possible — both in terms of players and investors — because once your token is live, your project’s success is almost totally out of your control.”

The reason this was contentious at the time was that web2 game economies are very complex but some are successful, so the assumption has been that some web3 games could also create well-designed economies that could constrain all the utility and speculative forces imposed on them.

However, I think this has been firmly disproved.

My current conclusion is “once your token is live, your project’s success is certainly out of your control”.

Or to put it another way, if you don’t think every game token is nominally a memecoin, you’re deluding yourself about the strength of game economy design in the face of human greed.

Notably — a la Yat Siu — this isn’t to say that memecoins are a *bad thing* but if you think your token isn’t a memecoin, you’re wrong.

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Another way of looking at this problem for games is their growing irrelevance within broader crypto shitcoins.

Currently, the only gaming tokens ranked in the top 100 crypto are IMX (#67), SAND (#92) and GALA (#93). For the record, KAIA is #102.

Hence it wouldn’t take much for there to be no gaming tokens in the top 100, which would be a first since I started studying the sector in 2018.

The exact numbers are always changing, but currently a drop of 9% in price would take GALA and SAND out of the top 100 — which is where they were until recently, anyhow.

It would take a larger 39% drop to get IMX out of the top 100, but given its recent performance and lack of hit games, it’s certainly not impossible in the coming months.

Note, to get this result, the price of these tokens only has to drop relative to the other tokens around them, not necessarily in absolute terms.

And as for those tokens ranked outside the top 100, I don’t see RON, AXS or MANA catching the vibes again any time soon. It wasn’t that long ago they too were listed within the top 100 cryptos. They dropped out for a reason.

Of course, such a change would be purely symbolic but nevertheless striking, given all the mission statements about games onboarding the next billion people to crypto. It’s not a meme that works like it did back in the days of Axie Infinity.

Yet there is hope.

There are a small number of games that are trying to leverage the power of tokens in a positive way, which means creating a community which uses them but doesn’t care about their price.

This only happens when it’s understood that a token only has immediate transactional value. This means there’s no point having more of such a token than you actually need to transact at any point.

Examples include Axie’s SLP, Soccerverse’s SCV and to an extent Pixels’ PIXEL and Nine Chronicles’ WNCG. Limit Break’s ERC20C standard, with its ability to lock tokens within apps and/or set min/max prices provides another framework of thinking about tokens shorn of speculation.

Of course, the alternative is that this ground zero is where all blockchain game tokens will end up anyway, as constant downward pressure kicks all the speculative energy out of them.

Either way, we’ll eventually get to a place where we can focus on building utility and value bottom-up.

But the days of developers trying to force price top-down are well-and-truly over. That’s what the market is telling us.

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