The Complex Game Economy of DeFi Kingdoms
Hero prices can be predicted with machine learning methods.There are still considerable fluctuations of sale prices that cannot be explained with carefully built models. This suggests that players themselves do not agree among each other either, although this is improving with time (black curve increasing).With time passing, what is considered valuable changed.
Together, this proves that DFK’s hero market alone is complex enough to reward experienced players. Since it is clearly impossible for a newcomer to know more than what the machine learning algorithm has learned here, these players will sometimes sell under and buy above a fair price, causing fluctuations. On the other hand, the correlations that are exposed here can only come from (experienced or helped) players that do not act randomly. Additionally, the idea of what makes a good hero is changing with time, demanding continuous engagement of the players to remain on top of things.
Figure 6: Temple of Kukulcán, a Mayan pyramid. (Source: Tanja Cotoaga on Unsplash)
The law of conservation of money dictates that not everyone can end up in profit simultaneously from playing a game. Instead, money will ultimately have been moved around between players. What nature are these transfers going to have? Are they predominantly:
Transferred from late players to those who have been in early (a pyramid)
OR
Transferred from unskilled to skilled (… a flat-roofed house)?
Assuming a game that is appealing and successful in the long term, eventually we are going to find ourselves in the second situation. On the other hand, rewarding early birds is necessary to provide initial liquidity for the in-game market makers, and creating demand for the game token may be used to fund development. Thus, there is a need for a transition, and the goal must be to avoid this transition being painful for gamers who are joining in-between.
DeFi Kingdoms’ approach
For the moment, DFK is still attracting new players mostly by promise of profit, such as LP staking rewards paid in JEWEL. Additionally, earlier players hold a large part of the JEWEL supply in locked form since the JEWEL APYs were much higher in the past and JEWEL was cheaper. The locking prevents them from realizing all of their gains for the moment. For a smooth transition to a sustainable game economy, JEWEL being bought by new players must compare to the locked supply during the time the latter is unlocked.
DFK appears to be on track with its efforts. We have illustrated how complex the economy is becoming, and with PvP fights starting, a more complete game will be emerging that rewards players for their experience and time they put in. Meanwhile, the narrative of such a game being developed by an obviously talented team is certainly playing a role in the growth of DFK.
The Future
There are two ways to further ease the transition to a stable economy. The obvious one requires capital from the developer side to fund much of the game development before going public, and potentially to provide initial liquidity for in-game markets. This would reduce the transition phase to an initial turbulent economy before reaching equilibrium, which may come with its own difficulties.
The second path to more stability of the game economy during its growth is once more powered by the metaverse paradigm: to increase the likelihood that early adopters are long-term supporters of the game ecosystem, they could be rewarded with less liquid and less crucial NFT assets instead of the main token. Such assets can be particularly attractive when they promise utility and composability across games. After all, this is a core novel feature NFTs are bringing to the table: their association to a wallet address that serves as a metaverse identity gives them the power to transcend any particular game. Users are incentivised to come up with and build new projects, giving meaning to owning NFTs of popular games.
On the other hand, NFTs do not even necessarily have to be tradable. Their value may be confined to the metaverse, providing benefits and status to the original wallet owner. And while the supply of assets of one particular class would need to be limited, their utility could be tied to sustained user activity such that inactive wallets lead to the permanent deactivation of the utility of the asset.
There are certainly many paths towards a future that is exciting and fair to traditional gamers. Admittedly, novelty implies an increased level of unpredictability which may be seen as a risk. Terra helps to mitigate such uncertainties since costs and asset values remain stable and transparent when denominated in Terra stablecoins, while preserving censorship resistance for a truly open metaverse. Terra welcomes gamers with open arms and is on a mission to help create positive-sum experiences for everyone.
