EP 1: It's A Shihtzu
EP 1: It's A Shihtzu
Economics Design of Planet Zoo
We talked a lot about token economics and economics design. The fact is that none of this is absolutely new.
The most prominent application of economics design is in video games and esports, with their own currency in a simulated economy. The difference in the blockchain world is that it is slightly more real, whatever you define real to be. But there is usually a secondary market in the blockchain world, and that can create quite a bit of uncertainty.
What is Economics Design
In an attempt to simulate an economy, we are also simulating the economics. You have plenty of people making decisions together and interact on a large scale. The goal of economics design is to build a stable and self-sustaining economy, at least in the primary market.
Today is the first episode of this podcast series called Economics Design. In this series, we will be talking about how to design a virtual economy, chat about various case studies and run interview series with designers of virtual economies.
In this first episode, we are looking at the economics design of a simulated world. It is a video game called Planet Zoo. If you love video games that require you to plan and work, you’ll love this.
Introduction to Planet Zoo
This podcast will talk about economics design of digital systems. It can be blockchain token based, frequent flyer digital points based or digital games.
Planet Zoo is a new game by Frontier. As it suggests, it is a world where you build zoos and people will come and visit the zoo. It is a management game on how to design and manage a zoo.
Things that we will cover in this episode:
Economics design of planet zoo, how tokens are used and the design philosophy behind it
How the game uses tokens to encourage actions by players
Discuss both interesting and terrible consequences in the game
Planet Zoo is simple. You have to design a zoo with your limited budget (cash). That is the infrastructure and architecture layer. When that is done, you buy animals to populate the zoo. The animals attract visitors and you earn money.
You can purchase animals on the animal marketplace. To purchase animals, you use a different currency, conservation credits (CC). These are only given by the game itself. There are a few ways to generate CC, and the primary way is to buy animals, breed them and sell them on the marketplace or back to the game. It is also possible to price the animals on the marketplace in cash instead of CC.
This dual-currency economy has led to both interesting and terrible outcomes in the game. Let’s dig into it!
Simple Illustration of the Zoo
Before we start, let’s understand the economics design of planet zoo. Planet zoo does not have a secondary market. This means people can’t buy extra CC with real cash. So it is easier to manage and control the usage and speculation of CC.
Simple illustration
You have 2 currencies in the game, 1) cash ($) and 2) Conservation credits (CC). Do note that CC is a scarce resource and the main medium to acquire new animals from the marketplace.
Earning tokens (CC) via animals
Animal marketplace, to let anyone buy and sell animals from each other (selling with players in the game)
Release animals to the wild (selling back to the game for guaranteed profits)
Breeding and releasing critically endangered species (trade via marketplace)
Earning cash ($) via everything else
Donation: guest's willingness to donate money by having animals in good health and other stats (happy animals = more donation)
Guest education rating
Selling animals (you can breed) on the marketplace
Loans: Borrow money from zoo with interest and pays it back
Zoo admission
Gift shops and food stalls (e.g. selling more umbrella when it rains)
Idea vs Reality
IDEA: New player franchise starts off with barely any CC. The idea was for fledgling zoos to buy a few animals with cash, foster breeding programs for the endangered ones, and release them for CC. Eventually, this would earn them enough to buy the really cool animals, which tended to only be buyable for CC, and with hefty price tags to boot
REALITY: way easier to make money than it was to make CC, and so almost immediately, players stopped selling animals for cash – even with un-endangered creatures, it was always more desirable to sell for CC, as that was the only way of getting the currency besides faffing about using your in-game avatar to visit other zoos.
OUTCOME: nobody is selling for cash has put CC at a massive premium. Those who had got in early on endangered, prestige or hard-to-breed animals are now hoarding them, only selling them for wild sums. Prices have soared, making gorillas, tigers and the rest completely inaccessible to new players, while Pandas have become virtually mythical: beasts that might as well be made from pure diamond. There is also nothing on sale for cash. As the liquidity crisis sets in, these animals become the stock in trade for new zoos, which began breeding them en mass in order to grind enough CC for other more precious animals.
The game tried to make some changes, including inducing fiscal stimulus by pumping cash-sale animals into the game from their own market presence, but it was not enough to change things.
Economics Mechanism Design
Mechanism design here is the rules of the game. We will analyse the mechanism design of Planet Zoo in 3 areas, governance, non-financial incentive and structure.
Mechanism Design = Rules of the game
Governance
Decision making in the game are limits and rules governed by code. Both limits on construction and rules in alert form. When it comes to resolutions required, the game relentlessly sends positive messaging to encourage good behaviours.
Non-Financial Incentive
To gain reputation points, there are a few variables like in-game elements, wild-card protestors and allocation of cash ($) given to players.
The elements that affect the reputation points: the number, variety, and welfare of animals in the zoo (Happy and appealing animals contribute to this), conservation rating (Releasing animals to the wild, animal breeding, recycle bins, and renewable energies all contribute to this), Education Rating (This includes education, research, and zoopedia unlock progress), Marketing Campaigns and guest happiness.
The protestors are wild-cards that the game’s code has. They are guests who come to the zoo with negative effect on others. Protesters cannot be removed from the zoo and will only start protesting when they arrive to the animal they are protesting. In some cases, they can cause guests to leave.
Lastly, there is the allocation of cash ($) give to players. The allocation is defined by reputation score, rules of the zoo-goers in code and donation by the status of the animals (bonus allocation). The rules of zoo-goers governed in code includes how well the animals are kept, if the queue is too long, pathway too long, coded behavioural preferences, etc.
Structure
We discuss about 2 types of structures here, bargaining of pricing and community information for information in the “outside world”. In bargaining, the prices are dynamic and can be set by the player. This brings the power of pricing to the player instead of allowing market forces to dictate the prices, unlike the marketplace where animals are traded. For example, when it rains, the player can increase the prices of umbrellas.
With community information, the “outside world” is to simulate real world variables in the virtual world. For example, various economic markets like boom or bust is embedded by code.
Outcome of this model
The outcome is that prices are high because there is no other option to buy fairly-priced animals. In the end, people are only trading warthog, ostrich, indian peafowl. They are the cheapest animals that breeds, and grinding them out in millions is the best method to earn CC and get other animals to play the game.
Failure of this Design
The design philosophy is good, but there were many things that went wrong.
It was easier to make cash than CC. CC has a premium, since animals are sold only with CC. There is nothing on sale for cash. Hence, resulting in rapid inflation for specific animals since they are rare and the currency to pay for them is rare.
A liquidity crisis sets in. Mass-produced offspring of the grindhouses flooded the market, CC values for these species plummeted still further Only the more prominent animals (breed faster and easier) in “for sale” listing, as they were the ones proving most successful in the grinding operations. It is all the same animals. It’s like only having 1 breed of dog in the zoo. It’s a shih-tzu.
Massive breeding of “low prestige”, “unendangered” and “fast-breeding” boiled down to three creatures: the Indian peafowl, arguably the worst animal in the game, plus ostriches and warthogs, which had the added bonus of being happy to cohabit, for more efficient mass breeding. In the end, only 3 species exist. Each animal’s value is lowered. Hence, they need to breed more to afford anything, resulting in a bad cycle. This means the market is dominated by the same creatures and other animals become super expensive.
In the end, the system meant to reward the emulation of real conservation practices has instead created a world where zoos are cynically churning out millions of genetically busted warthogs, into a wilderness where they’re not even endangered.
The other side effect is that making more habitats with cheap animals is much more effective than having less habitats with more expensive animals, this is because even cheap animals can get like $15 donations, and getting that extra $5 with expensive animals is just not worth it.
Improvements
The economics design of Planet Zoo is great, but some improvements can be made. For example, an auction mechanism for the marketplace exchange and to enable swapping of animals like barter trade.
Encode genes into a database when animals breed to provide more information for the players to prevent inbreeding. Inbreeding is another issue in the marketplace as you can purchase more “endangered” animals at a cheaper price, but they are not going to reproduce. We can prevent inbreeding by having additional information to the animal’s identity. This could be in a form of family tree for each animal’s identity or have it in a distributed ledger just to ensure the information is not tampered with.
Other forms of rewards can include carefully curated animals and habitat satisfaction. We can introduce machine and human governance in the non-financial incentive rating. For example, people visiting each other’s zoos and rating them.
Thank you for reading the first episode! Please share if you like it.
Lisa JY Tan is the token economist at Economics Design, focusing on designing virtual economies. Read the research paper here and subscribe on YouTube and Spotify.