Tokenomics 101: Single-token blockchain games on GameFi
GameFi, being a new business, demands participants to ask many questions before investing in initiatives. Questions about tokenomic models are at the top of the list.
The framework of a project’s economics and value system is tokenomics. Tokenomics, at its most basic level, governs the game’s connection between NFTs and tokens. We’ll look at single-token games and how they structure value in this post. We’ll also show you how to earn from each of these strategies with the least amount of risk.
Three Tokenomics Models for One-Token Games
Single-token All economic functions in GameFi projects are supported by a single token. Crypto Zoon, Playvalkyr, Hashland, and Radio Caca are just a few examples.
To achieve 100% external circulation, this model requires a steady supply of new players to enter or repeat investments from previous participants. The link between the game token and money can further deconstruct the single-token approach.
Model A: USD input + game token output
This concept, in which users buy NFTs with USDT or BNB and play to earn game tokens, was popular during the start of the GameFi boom in 2021. In DeFi yield farming, this strategy is also commonly used. This strategy has the advantage of having a set entry price and earnings that change with the token price.
If the token is on an uptrend, the payback period will shorten as the price rises. Once a positive spiral begins around the project, this strategy can create a powerful FOMO impact. A rug pull will occur in a degen project whenever the token hits a downward trend. However, it multiplies the tokens’ output and consumption, resulting in an irreversible death spiral. In contrast, a solid project must continue to use real money to support the market and broadcast positive news to attract new players.
Most pull-rug ventures follow this model: collect real money and distribute minted tokens to the gamers.
This model has a limited lifespan and is prone to quick first runs. Players are advised to sell tokens when yielding. Sell the token as soon as a downward price trend begins.
Model B: Value-based input USD + output USD
To combat the continual fear of an irreversible falling knife inherent in the first model of single-token games, a newer style of play arose in which the token is always linked to USD value. For example, if the game is expected to generate $100 USDT per day, the number of tokens will fluctuate by the token price. The player receives 100 tokens if the token price is 1 USDT today. The player earns 200 tokens if the token price rises to 0.5 USDT tomorrow.
The players’ costs and rewards are fixed in this paradigm. Because the matching output amount decreases as the token price rises, the return cycle remains steady. In the case of a downward trend, the player’s daily USDT-based returns remain unchanged for a short time. In most cases, Model B imposes a lock-up period. After seven days, the token price may not be 0.5 USDT.
Valkyrio is an excellent example of a Model B project. The game itself isn’t exhilarating, but it immediately drew many new users within two weeks of its launch, and the token price skyrocketed, thanks to the new token mechanism and the GameFi boom.
The income is consistent, and the projects have a longer lifespan. Token prices under this approach are more resistant to rapid increases and decreases. Experts recommend that players yield and hold for a set period before selling when the token price rises. Sell the tokens as soon as you notice a drop in new players.
Input game token + output game token (Model C)
The cost and profitability of Model C tokenomics projects are closely connected with the token price. For example, a game that costs 100 tokens to play returns ten tokens every day. If the token price rises from 1 USDT to 2 USDT, the cost and returns will range from 100 USDT and 10 USDT to 200 USDT and 20 USDT.
Maye Musk Mystery Box (MPB) NFT is managed by it exclusively. This model is exemplified by RACA (Radio Caca). Maye Musk, Elon Musk’s mother, and Changpeng Zhao, the founder of Binance, held an AMA for this initiative, which drew a continuous stream of participants.
🔥 Radio Caca is building an ecosystem of Web3 experiences for our #RACA community🚀
— BSCDaily (@bsc_daily) April 8, 2022
Prices rise as more players join, triggering a FOMO loop. The profits of rising token values favor early participants, who also profit from the high cost of new players. Many projects that use this strategy generate a fortune in days. Token prices are prone to fluctuations. Unless they can maintain a vast user base, many initiatives have a short existence. It is advised to join only when the game is in its early stages and keep an eye on its capacity to attract new users.
While many people categorize games as single or multi-token, GameFi data shows that these classifications are broad. Even among single-token games, there are a variety of tokenomics models, each with its own set of characteristics and risks.