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Executive Summary

The article compares Web3 gaming projects to national economies through two categories of the GDP macroeconomic framework, Consumption and Investment. Both Web3 games and countries are marketplaces where the transfer of value happens. Countries measure this value through GDP, therefore we try and analyze what the Consumption and Investment category will look like for blockchain games that make use of a two token economy. Current and future games like Axie Infinity, Pegaxy, and Heroes of Mavia are used as case studies for the analysis.

The Ups and Downs of Blockchain Gaming

2021 saw the rise of Non Fungible Tokens (NFTs) and Play-To-Earn blockchain games where users earn cryptocurrency by playing a game that they got access to from owning a digital asset. Spearheading the revolution for this new blockchain industry is popular blockchain game, Axie Infinity, a videogame that grew over 200 times over the course of the same year (Weisenthal and Alloway, 2021).

This quick rise in 2021 saw the pull of gravity shortly after as the game’s tokens, along with other similar projects, went on a downward trend in 2022. $AXS, Axie Infinity’s native token, is currently trading at a fraction of its all time high price in 2021 (Somraaj, 2022). Though much of it can be attributed to the current bear market the industry is experiencing, Axie Infinity, which relies heavily on marketplace transactions and breeding fees for income, has seen a decline in its user base as it made shifts in its economic model during the year (Kelly, 2022).

Axie Infinity, and many other similar blockchain games, currently have a two token economic model featuring a governance token, $AXS and a utility token, $SLP. The token sinks in the economy mainly focus on breeding, a lever that the team has been adjusting depending on market conditions. While $SLP minting has soared to a point where the token has inflated inside the economy.

Consumption and Investment 

Protocols function similarly to countries in the sense that both are considered marketplaces where value is being transferred. Measuring this value for countries is done through measuring their Gross Domestic Product, which is the market value of all final goods and services produced in a region. Similarly, we can use this calculation to measure the value inside a protocol.

GDP = C + I + G + (Export - Import)

Gross Domestic Product is the sum of Consumption, Investments, Government expenditure, and Net Export. For the purposes of this article, we will focus on two of these four categories in order to differentiate the assets present in protocols, Consumption and Investment. 

Consumption is calculated as the sum of all goods and services consumed by households in the economy. These are the food, groceries, haircuts, spas, and other similar purchases that can happen within a particular region. Investment, on the other hand, is all the assets bought and held by the private sector which will be for future use.

For protocols, some transactions that can be considered part of the consumption category are utility or cosmetic consumables, breeding costs, and maintenance or upgrading of NFTs. Ideally, this category measures all transactions that have to do with utility or cosmetic sinks in the economy. Investments, on the other hand, relate to the NFTs that users buy in order to start accessing the game. Expensive and speculative special NFTs, like land, unused cryptocurrencies within the economy, and single or liquidity provision staked tokens can be classified under the investment category as these are assets users purchase, undertake, or hold for future use.

What Else Did You Miss?

• Two Token Economy

• Case Studies

  • Axie Infinity

  • Pegaxy

  • Heroes Of Mavia

• What does this mean?

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